UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended December 31, 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 1-10641
MILESTONE PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 65-0158204
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
150 E. Palmetto Park Rd. 4th Floor, Boca Raton, FL 33432
- --------------------------------------------------- ----------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (561) 394 - 9533
----------------------
Securities Registered under Section 12(b) of the Exchange Act: None
Securities Registered under Section 12 (g) of the Exchange Act:
Common Stock, par value $.01 per share
(Title of Class)
$.78 Convertible Series A Preferred Stock, par value $.01 per share
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or by any
amendment to this Form 10-K. [x]
The aggregate market value of the voting stock held by non-affiliates of
the Registrant, computed by reference to the average bid and asked price on
March 12, 1999, was approximately $1.25 for the Common Stock and $2.82 for the
$.78 Convertible Series A Preferred Stock.
As of March 12, 1999, 4,943,633 shares of the Registrant's Common Stock
were outstanding and 16,423 shares of the Registrant's $.78 Convertible Series A
Preferred Stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Location in Form 10-K in Which
Document Document is Incorporated
Registrant's 1999 Proxy Statement to be filed Part III
with the Commission no later than April 30, 1999
<PAGE>
TABLE OF CONTENTS
PART I
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . 1
Item 2. Description of Property . . . . . . . . . . . . . . . . . .14
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . .18
Item 4. Submission of Matters to a Vote of Security Holders . . . .19
PART II
Item 5. Market for Registrant's Common Stock and Related
Stockholder Matters . . . . . . . . . . . . . . . . . . . .20
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . .22
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations . .. . . . . . . . . . 23
Item 7A. Quantitative and Qualitative Disclosures about Market Risk 31
Item 8. Financial Statements and Supplementary Disclosure . . . . .31
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure . . . . . . . . . . . .31
PART III
Item 10. Directors and Executive Officers of the Registrant . . . . 32
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . 32
Item 12. Security Ownership of Certain Beneficial Owners
and Management . . . . . . . . . . . . . . . . . . . . . . 32
Item 13. Certain Relationships and Related Transactions . . . . . . 32
PART IV
Item 14. Exhibits, Financial Statement Schedule and Reports
on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . .33
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . .F-1
<PAGE>
PART I
This Annual Report on Form 10-K for the year ended December 31, 1998 filed by
Milestone Properties, Inc. ("Milestone") contains or incorporates by reference
certain forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934
and Milestone intends that such forward-looking statements be subject to the
safe harbors created thereby. Such forward-looking statements involve risks and
uncertainties and include, but are not limited to, statements regarding future
events and its plans, goals and objectives. Such statements are generally
accompanied by words such as "intend," "anticipate," "believe," "estimate,"
"expect" or similar terms. Milestone's actual results may differ materially from
such statements. Factors that could cause or contribute to such differences
include, without limitation, the following: (i) its plans, strategies,
objectives, expectations and intentions are subject to change at any time at its
discretion; (ii) general economic and business conditions, which may, among
other things, affect the demand for retail space or retails goods, the
availability and creditworthiness of prospective tenants, rental terms and the
terms and availability of financing, are subject to change at any time; (iii)
adverse changes in real estate markets including, among other things,
competition with other companies; (iv) adverse changes in the properties
Milestone owns which could require the expenditure of funds to fix or maintain
such properties; (v) the general risks of real estate development and
acquisitions, such as changes in demographics, construction delays, cost
overruns, work stoppages and slowdowns, the cost and availability of skilled
labor and weather conditions; (vi) governmental actions and initiatives, such as
seizures of property, condemnation and construction of alternative roadways;
(vii) environmental and safety conditions and hazards; (viii) the adequacy of
Year 2000 compliance measures; and (ix) other risks and uncertainties indicated
from time to time in Milestone's filings with the Securities and Exchange
Commission and in the documents incorporated herein by reference. Although
Milestone believes that the assumptions underlying its forward-looking
statements are reasonable, any of the assumptions could prove inaccurate and,
therefore, Milestone cannot make any assurances that the results contemplated in
such forward-looking statements will be realized. The inclusion of such
forward-looking information should not be regarded as a representation by
Milestone or any other person that the future events, plans or expectations
contemplated by Milestone will be achieved. Furthermore, past performance is not
necessarily an indicator of future performance.
Item 1. Business.
Introduction
Milestone Properties, Inc., directly and through its wholly owned
subsidiaries, is engaged in the business of owning, acquiring, managing,
developing and investing in commercial real estate and real estate related
assets. Milestone, together with its subsidiaries, is hereinafter referred to as
the "Company." The Company is primarily engaged in the ownership, operation and
management of interests in commercial real estate properties, currently
consisting of (i) 10 properties owned in fee (the "Fee Properties"), (ii) the
ownership of wraparound notes (the "Wraparound Notes") and wraparound mortgages
(the "Wraparound Mortgages" and, together with the Wraparound Notes, the "Wrap
Debt") which are secured by 25 commercial real properties (the "Underlying
Properties" and, together with the Fee Properties, the "Properties") and (iii)
the operation and management of the Properties. The Properties include shopping
centers, strip malls and single tenant properties and
1
<PAGE>
have an aggregate gross leasable area ("GLA") of 2,218,645 square feet, of which
435,386 square feet are in the Fee Properties and 1,783,259 square feet are in
the Underlying Properties. Additional information regarding the Properties is
set forth in Table 1. Summary of Properties and Underlying Debt located in Item
2. Description of Property of this Report.
The Company's objectives are to realize upon, maintain and improve the
value of its real estate holdings and to generate cash flow. To accomplish these
objectives, the Company may (i) continue to manage the Properties, (ii) acquire
additional commercial properties to develop and/or hold for investment, (iii)
expand, improve or redevelop the Properties or properties owned by affiliates of
the Company or third parties through the acquisition and development of adjacent
parcels, (iv) engage in management services for affiliates of the Company and/or
others, (v) invest in real estate backed or related securities, (vi) acquire
related businesses and/or (vii) engage in such other activities or businesses as
are consistent with the Company's overall objectives. In connection with its
activities, the Company may also consider selling one or more of its Fee
Properties and/or financing or refinancing one or more of the Properties or
additional properties acquired by the Company in order to fund its business
activities. In addition, the Company may enter into joint ventures and/or
similar arrangements with developers or owners of shopping centers or other
commercial properties. These ventures may take the form of joint ownership,
participation in general or limited partnerships, or other forms of investment,
and may provide for the payment of preferential distributions, guaranteed
returns and/or fees for services. The Company may also make secured real estate
mortgage loans, including mortgages junior to institutional or other
indebtedness, in connection with the acquisition, development, redevelopment or
improvement of properties, either to affiliated or unaffiliated parties.
The Company's business is operated as a single segment for financial
reporting purposes. For financial information regarding the Company for the
fiscal years ended December 31, 1998, 1997 and 1996, see the Consolidated
Financial Statements of the Company and the notes thereto in Part IV, Item 14.
Exhibits, Financial Statement Schedule and Reports on Form 8-K of this Report.
Background
Milestone was incorporated on November 30, 1989 under the laws of the
State of Delaware. On December 18, 1990, Concord Milestone Income Fund, L.P.
("CMIF") and Concord Milestone Income Fund II, L.P. ("CMIF II") (collectively,
the "Predecessor Partnerships") were merged with and into Milestone (the
"Merger"). In the Merger, Milestone succeeded to the business and operations of
the Predecessor Partnerships and the partnership interests in the Predecessor
Partnerships were converted into shares of Milestone's common stock, par value
$.01 per share (the "Common Stock") and of Milestone's $.78 Convertible Series A
preferred stock, par value $.01 per share (the "Series A Preferred Stock").
2
<PAGE>
In October 1995, the Company entered into various agreements with
affiliates of Concord Assets Group, Inc., a New York corporation ("Concord"),
pursuant to which the Company acquired (the "Acquisition"), for approximately
$700,000 in cash and 2,545,000 shares of Common Stock, certain of the Fee
Properties and certain other properties acquired in fee (which other properties
have since been sold) and certain of the Wrap Debt and certain other wraparound
notes and wraparound mortgages (together, the "Satisfied Wrap Debt") which have
been paid as a result of the sale of the properties securing the Satisfied Wrap
Debt by the owner of the properties. As a result, the Company realized its
interests in the Satisfied Wrap Debt. Concord is owned by two directors and
executive officers of Milestone. The directors and executive officers of Concord
are also directors and executive officers of Milestone. Currently, Concord and
its affiliates beneficially own approximately 70% of the Common Stock and
approximately 28% of the Series A Preferred Stock.
At the close of business on March 5, 1999, Milestone canceled and
retired 2,983,284 shares of its Series A Preferred Stock, representing greater
than 99% of the then outstanding shares of Series A Preferred Stock, pursuant to
the terms of a court approved settlement of a purported class action and
derivative lawsuit brought against Milestone, certain of its past and present
members of its Board of Directors and executive officers, and Concord in
connection with the Acquisition. See Item 3. Legal Proceedings, for a
description of the court approved settlement of the purported class action and
derivative lawsuit.
The Wrap Debt
Certain material terms generally appearing in the Wraparound Notes and
Wraparound Mortgages are described below. Since the provisions of the Wraparound
Notes and Wraparound Mortgages are complex and extensive, and provisions vary
among the Wraparound Notes and Wraparound Mortgages, no attempt has been made to
describe in detail or to summarize all provisions of the Wraparound Notes and
Wraparound Mortgages.
The Wrap Debt was issued to affiliates of Concord by certain limited
partnerships (the "Partnerships") sponsored by Concord. Such affiliates of
Concord were formed for the purposes of (i) acquiring the Underlying Properties,
(ii) selling such properties to the Partnerships in exchange for cash and the
Wrap Debt and (iii) leasing the Underlying Properties back from the Partnerships
pursuant to master leases (the "Master Leases"). The payment of the Wrap Debt is
secured by the Underlying Properties. Certain directors and officers of the
Company are also directors, officers and controlling stockholders of the general
partner of each of the Partnerships (the "General Partners"). In October 1995,
as part of the Acquisition, the Company acquired certain of the Wrap Debt and
became the lessee under the Master Leases.
3
<PAGE>
As the holder of the Wrap Debt, the Company is required to satisfy the
obligations under notes and mortgages held by lenders (typically banks or other
commercial lenders) on each Underlying Property with a priority senior to that
of the Company, including, without limitation, debt owed to the prior owner of
such property under any purchase money notes issued by the Partnerships which
own the respective Underlying Property in connection with the acquisitions of
such respective Underlying Property (all such senior indebtedness being referred
to herein collectively as the "Underlying Debt"). The Partnerships are obligated
to the Company for the Wrap Debt which wraps around and includes the obligation
to pay the Underlying Debt, and is secured by a mortgage on the Underlying
Property. The Wrap Debt is in a second priority position behind the Underlying
Debt and, in some instances, may be in a third priority position overall, behind
a bank or commercial lender and a seller or other second priority lender.
A description of the current balances, interest rates, monthly payments
of principal and interest, prepayment provisions, maturity dates and amount of
any balloon payments with respect to the Underlying Debt is set forth in Table 1
in Item 2. Description of Property.
The Wraparound Notes
The Company is the holder of 40 Wraparound Notes relating to the
Underlying Properties. The maturity dates of the Wraparound Notes ranged from
1998 to 2016. A discussion regarding a Wraparound Note which matured in 1998 and
the Wraparound Notes which are due to mature in 1999 is included at the end of
the section entitled Wraparound Mortgages. Each of the Wraparound Notes is a
non-recourse obligation of the issuing Partnership and includes the obligation
to satisfy the Underlying Debt for the corresponding Underlying Property. The
Underlying Debt associated with an Underlying Property in some instances
consists of multiple notes and mortgages which may have different priorities in
relation to one another, but all of which are superior in right to the
Wraparound Note and the Wraparound Mortgage relating to such Underlying
Property. A Wraparound Note may be prepaid by the Partnership issuing such note
by (i) the payment of the excess of (a) the outstanding balance of such
Wraparound Note, including accrued interest and any discount element over (b)
the then aggregate outstanding balance, including accrued interest, of the
Underlying Debt associated with the particular Underlying Property, and (ii) the
assumption of the borrower's obligations pursuant to the Underlying Debt
associated with the particular Underlying Property. The wraparound mortgagor's
(i.e., the Partnership owning the Underlying Property) source of debt service
payments on the Wraparound Note is the rent it receives as lessor under the
Master Leases. Additionally, any percentage rent payable to the Partnership
pursuant to a Master Lease will be paid to the Company as the holder of the
Wraparound Note on the relevant Underlying Property as partial prepayment under
such Wraparound Note.
A description of the current balances, interest rates, annual debt
service, maturity dates and amounts of any balloon payments with respect to the
Wraparound Notes is set forth in Table 2 in Item 2. Description of Property.
4
<PAGE>
The Wraparound Mortgages
The Company is the holder of 40 Wraparound Mortgages relating to the
Underlying Properties. The maturity dates of the Wraparound Mortgages ranged
from 1998 to 2016. A discussion regarding a Wraparound Mortgage which matured in
1998 and the Wraparound Mortgages which are due to mature in 1999 is included at
the end of this section. The Wraparound Mortgages provide that the Company, as
the wraparound mortgagee, will pay, or cause to be paid, on a non-recourse
basis, all payments required by the Underlying Debt so long as the wraparound
mortgagor (i.e., the Partnership that owns the related Underlying Property)
makes all payments under the Wraparound Notes to the Company. If the Company
fails to make any payment required to be made by it within 30 days after the due
date of such payment, the wraparound mortgagor may make such payment and deduct
the amount of such payment from the next succeeding payments required to be made
under the Wraparound Note. The Partnerships, as wraparound mortgagors, are
obligated under the terms of the Wraparound Mortgages not to perform any act
which would constitute a breach of the underlying mortgage(s) securing the
applicable Underlying Debt.
The Wraparound Mortgages provide that the Partnership, as wraparound
mortgagor of each Underlying Property, will maintain all buildings, equipment
and other improvements on the related Underlying Property. In the event that the
buildings and any other improvements are damaged or destroyed, in whole or in
part, or in the event of a taking of a portion of the premises under the power
of eminent domain, the wraparound mortgagor is required to restore the same as
nearly as possible to the condition they were in immediately prior to the
casualty or taking. Insurance proceeds and condemnation awards will be made
available, subject to the wraparound mortgagee's control and subject to the
rights of the holders of the underlying mortgages, to the extent necessary to
comply with the foregoing. The wraparound mortgagor is required to maintain
property, casualty and public liability insurance on each Underlying Property
and cannot remove improvements or fixtures or structurally alter any building.
Pursuant to the terms of the Wraparound Mortgages, the outstanding
balance of each corresponding Wraparound Note becomes due and payable upon the
occurrence of certain specified events, subject to grace periods and cure
rights, including, without limitation, (i) the failure of the wraparound
mortgagor to make any payment or perform any covenant required under the related
Wraparound Mortgage, (ii) the commencement of any action or proceeding to
foreclose any lien senior to the lien created by such Wraparound Mortgage and
(iii) the Partnerships, as wraparound mortgagors, becoming the debtor in a
bankruptcy or insolvency proceeding. In addition, after any default by the
wraparound mortgagor under a Wraparound Mortgage, the Company, as the wraparound
mortgagee, may exercise certain rights of the wraparound mortgagor with respect
to the management of the related Underlying Property.
5
<PAGE>
The Company, as the wraparound mortgagee, has the right to refinance,
restructure, alter, increase, renew or rearrange the Underlying Debt subject to
certain terms and conditions, including, without limitation, that (i) the
refinanced portion of the Underlying Debt cannot increase the obligations of the
wraparound mortgagor, except in certain limited circumstances and (ii) the rents
payable on the Underlying Properties pursuant to the operating leases (the
"Operating Leases") on the related Underlying Properties should reasonably be
expected to satisfy the debt service obligations on the refinanced portion of
the Underlying Debt. The wraparound mortgagor is required to cooperate in the
execution of documents necessary to effectuate the refinancing, so long as it is
not required to become obligated thereon.
On December 31, 1998, the Wraparound Note on the Underlying Property
located in Quincy, Illinois (the "Quincy Property") matured. The face amount of
the Wraparound Note on the Quincy Property is approximately $4,904,000, such
amount is net of the 1998 principal payment of $728,919 which was paid in
January 1999. The Company, as the holder of the Wraparound Note on the Quincy
Property, is currently seeking payment from the Partnership that issued such
Wraparound Note. On March 1, 1999, the mortgagor of the Underlying Debt on the
Quincy Property sent a demand letter seeking to collect the outstanding balance
of approximately $2,910,000 of the Underlying Debt which had matured in July
1998. In accordance with the terms of the wraparound mortgages, the Underlying
Debt on the Quincy Property must be satisfied prior to the Company receiving
payment from the Partnership on the Wraparound Note on the Quincy Property. See
the discussion regarding the Quincy Property in the section entitled Master
Leases herein.
The maturity dates of the remaining 39 Wraparound Notes and Wraparound
Mortgages range from December 1999 to December 2016, of which 17 Wraparound
Notes and Wraparound Mortgages are due to mature on December 31, 1999 (the
"Maturing Wrap Debt"). The Company, as the holder of the Maturing Wrap Debt,
will seek payment from the applicable Partnership of the respective Maturing
Wrap Debt issued by such Partnership. In order for each such Partnership to make
such payment, one of the following events may occur: (i) the Partnership may
sell the Underlying Property securing the respective Maturing Wrap Debt, (ii)
the Company, as the holder of the Maturing Wrap Debt, may obtain ownership of
the Underlying Property securing the Maturing Wrap Debt in lieu of payment on
the Maturing Wrap Debt via foreclosure sale or (iii) the Company may extend the
Maturing Wrap Debt to a future maturity date upon terms to be determined at that
time.
The Master Leases
Certain material terms generally appearing in the Master Leases are
described below. Since the provisions of the Master Leases are complex and
extensive, and provisions vary among the Master Leases, no attempt has been made
to describe in detail or to summarize all provisions of the Master Leases.
6
<PAGE>
The Company is the master lessee under 25 individual leases on each of
the Underlying Properties. The expiration dates of the Master Leases ranged from
1998 to 2016. A discussion regarding the Master Leases which expired in 1998 and
the Master Leases which are due to expire in 1999 is included at the end of this
section. As the master lessee, the Company leases an entire Underlying Property
(i.e., a shopping center or single tenant commercial property) from the owner of
such Underlying Property and re-leases it under Operating Leases to the
tenant(s) who occupy such property.
The Master Leases were initially entered into by affiliates of Concord,
as tenants, and the Partnerships, as landlords, and are coterminous with the
Wraparound Notes and Wraparound Mortgages. The rent payable by the Company under
each Master Lease for an Underlying Property is approximately the same amount as
the debt service due under each Wraparound Note for such Underlying Property.
The Company is both the holder of each Wrap Debt and the lessee under the Master
Leases relating to the Underlying Properties. Prior to the Acquisition, certain
of Concord's affiliates, as tenants, and certain of the Partnerships, as
lessors, amended the applicable Master Leases pursuant to which, among other
things, the rent payable under such Master Leases was reduced by the amount of
the fees, if any, payable by the lessor to the General Partner. As the master
lessee and the wraparound mortgagee, the Company collects the rents under the
Operating Leases and applies such amounts to the operating expenses of the
Underlying Property and the payment of the Underlying Debt. The obligations of
the Company as master lessee under the Master Leases are guaranteed by Concord.
Such guaranty was not affected by the transfer and assignment of the master
lessee interest in the Master Leases to the Company pursuant to the Acquisition,
and the Company is not obligated to indemnify Concord with respect to such
guaranty. The Master Leases are subject and subordinate to the Underlying Debt.
As between the Company, as lessor, and the operating tenants, as
lessees, the tenants are generally responsible for payment of rents to the
Company and, in some instances, for all or a portion of their pro rata share of
operating expenses and, to a lesser extent, for the maintenance and repair of
the Underlying Property.
Pursuant to the Master Leases, the Company, as master lessee, (i) pays
a fixed base rent to the applicable Partnership, as master lessor, (ii) is
entitled to receive the revenues payable under the Operating Leases and (iii) is
responsible for operating the Underlying Property. The Company is also obligated
to pay percentage rent to the Partnership equal to certain percentages of net
operating income in excess of certain threshold amounts, which are subject to
adjustment.
Each Partnership, as master lessor under the Master Leases, is
responsible for the maintenance, repair and replacement of the physical property
when necessary. The Company, as master lessee, can cause the Partnership, as
master lessor, subject to certain limitations, to borrow additional amounts on a
wraparound basis to finance improvements to the related Underlying Property.
7
<PAGE>
Pursuant to each Master Lease, the Company, as master lessee, is
responsible for compliance with all applicable laws and regulations and is
required to keep the Underlying Property insured at certain minimum levels for
certain specified losses. The Company's management believes that the Properties
are adequately insured. The Master Leases also have termination and assignment
provisions.
The Underlying Debt on the Quincy Property came due in July 1998.
Beginning July 1998, the mortgagor on the Underlying Debt did not demand payment
while the Partnership, which owns the Quincy Property, attempted to sell the
Quincy Property. Although the Underlying Debt on the Quincy Property has not
been satisfied, regular monthly debt payments have been made by the Company
through March 1999. On March 1, 1999, the mortgagor of the Underlying Debt sent
a demand letter seeking to collect the outstanding balance of the Underlying
Debt of approximately $2,910,000. Previously, on December 31, 1998, the Master
Lease on the Quincy Property expired. As a result of such Master Lease
expiration, the Company, as the tenant under such Master Lease, assigned all of
its rights, title and interests in the Quincy Property to Quincy Plaza
Associates, the landlord under such Master Lease and Quincy Plaza Associates
assumed all of the Company's related obligations under such Master Leases.
On December 31, 1998, the Master Lease on the property located in Natchez,
Mississippi (the "Natchez Property") expired. As a result of such Master Lease
expiration, the Company, as the tenant under such Master Lease, assigned all of
its rights, title and interests in the Natchez Property to Quincy II Plaza
Associates, the landlord under such Master Lease and Quincy II Plaza Associates
assumed all of the Company's related obligations under such Master Lease.
The expiration dates of the remaining 23 Master Leases range from
December 1999 to December 2016, of which 15 Master Leases are due to expire on
December 31, 1999 (the "Expiring Master Leases"). As a result of the Expiring
Master Leases, the Company, as the tenant under such Expiring Master Leases, may
(i) assign all of its rights, title and interests in the Underlying Properties
subject to the respective Expiring Master Leases to the applicable Partnership
that is the landlord under the Expiring Master Leases and such Partnership may
assume all of the Company's related obligations under the respective Expiring
Master Leases or (ii) may extend such Expiring Master Leases based upon terms to
be determined at that time.
The amount of annual rents due with respect to each Master Lease and
the termination dates thereof are set forth in Table 2 in Item 2. Description of
Property.
Acquisition and Disposition of Real Estate and Real Estate Related Assets
On November 10, 1998, the Company completed the purchase of Lincoln
Park, a 46,190 square strip mall located in Davie, Florida (Broward
County), from an unrelated third party for $3,840,000. In connection with the
purchase, the Company obtained a $3,219,000 first mortgage loan which bears
interest at a rate of 7.58% per annum. Such first mortgage requires monthly
principal and interest payments of $22,684 based upon a 30 year self liquidating
amortization schedule, with a balloon payment of approximately $2,854,000 due
November 1, 2008. The strip mall is currently 97% occupied by local tenants
who are subject to Operating Leases ranging from one to five years with various
renewal options.
8
<PAGE>
On October 27, 1998, the Company completed the purchase of Pine Crest
Square, a 40,408 square foot strip mall located in Fort Lauderdale, Florida
(Broward County), from an unrelated third party for $3,200,000. In connection
with the purchase, the Company obtained a $2,400,000 first mortgage loan which
bears interest at a rate of 7.0% per annum. Such first mortgage requires monthly
principal and interest payments of $15,967 based upon a 30 year self liquidating
amortization schedule, with a balloon payment of approximately $2,063,000 due
November 11, 2008. The strip mall is currently 97% occupied by local
tenants subject to Operating Leases ranging from one to 19 years with various
renewal options.
On October 13, 1998, the Company completed the purchase of Mandarin
Central, a 63,346 square foot strip mall located in Jacksonville, Florida
(Duval County), from an unrelated third party for $4,650,000. In connection with
the purchase, the Company obtained a $3,950,000 first mortgage loan which bears
interest at a rate of 8.0% per annum. Such first mortgage requires monthly
principal and interest payments of $28,984 based upon a 30 year self liquidating
amortization schedule, with a balloon payment of approximately $3,542,000 due
October 1, 2008. The strip mall is currently 93% occupied by local tenants
subject to Operating Leases ranging from one to 16 years with various renewal
options.
On October 1, 1998, a wraparound note held by the Company on a 285,655
square foot shopping center property located in South Williamson, Kentucky (the
"South Williamson Property") was paid as a result of the sale of the South
Williamson Property by its owner, an affiliate of the Company (i.e., the
Partnership that owned the South Williamson Property), to an unrelated third
party. In connection with the sale of the South Williamson Property, the
Company, as the master lessee on a Master Lease on the South Williamson
Property, canceled such Master Lease. The negotiated sale price of the South
Williamson Property was approximately $14,874,000 which included acquiring the
property subject to the $14,773,655 remaining balance of the underlying mortgage
debt on the South Williamson Property (which represented approximately 21% of
Company's total liabilities at such time). The wraparound note on the South
Williamson Property represented approximately 13% of the Company's total assets
at such time. As a result of the sale of the South Williamson Property, the
payment of the wraparound note and the satisfaction of the underlying mortgage
debt, the Company realized approximately $100,000 in cash and a book gain of
approximately $4,197,000.
On September 21, 1998, a wraparound note held by the Company on a
35,496 square foot shopping center property located in Vestivia Hills, Alabama
(the "Vestivia Hills Property"), was paid as a result of the sale of the
Vestivia Hills Property by its owner, an affiliate of the Company (i.e., the
Partnership that owned the Vestivia Hills Property), to an unrelated third
party. In connection with the sale of the Vestivia Hills Property, the Company,
as the master lessee on a Master Lease on the Vestivia Hills Property, canceled
such Master Lease. The negotiated sale price of the Vestivia Hills Property was
approximately $1,640,000. Of the gross proceeds, $722,638 was used to satisfy
the underlying mortgage debt on the Vestivia Hills Property (which represented
approximately 1% of the Company's total liabilities at such time). The
wraparound note on the Vestivia Hills Property represented approximately 3% of
the Company's total assets at such time. As a result of the sale of the Vestivia
Hills Property, the payment of the wraparound note and the satisfaction of the
underlying mortgage debt, the Company realized net cash proceeds of
approximately $875,000 and a book gain of approximately $338,000.
9
<PAGE>
On September 11, 1998, the Company completed the purchase of Country
Grove Plaza, a 16,642 square foot strip mall located in West Palm Beach,
Florida (Palm Beach County), from an unrelated third party for $1,100,000. In
connection with the purchase, the Company obtained a $880,000 first mortgage
loan which bears interest at a rate of 7.51% per annum. Such first mortgage
requires monthly principal and interest payments of $6,159 based upon a 30 year
self liquidating amortization schedule, with a balloon payment of approximately
$780,150 due September 1, 2008. The strip mall is currently 93% occupied by
local tenants subject to Operating Leases ranging from one to 13 years with
various renewal options.
On July 15, 1998, the Company completed the purchase of Teeca Plaza, a
22,589 square foot strip mall located in Boca Raton, Florida (Palm Beach
County), from an unrelated third party for $2,075,000. In connection with the
purchase, the Company obtained a $1,800,000 first mortgage loan which bears
interest at a rate of 7.39% per annum. Such first mortgage requires monthly
principal and interest payments of $12,450 based upon a 30 year self liquidating
amortization schedule, with a balloon payment of approximately $1,591,000 due
July 1, 2008. The strip mall is currently 100% occupied by local tenants
subject to Operating Leases ranging from three to 26 years with various renewal
options.
On July 7, 1998, the Company completed the sale of its Mountain View
Mall property located in Bend, Oregon (the "Bend Property") to an unrelated
third party for approximately $17,750,000. The Company realized net cash
proceeds from the sale of approximately $319,200 after paying off the balance of
the underlying first mortgage of $17,065,000 (which represented approximately
23% of the Company's total liabilities at such time) and used a portion of the
funds for closing costs and net credits to the buyer. At the time of the sale,
the Bend Property represented approximately 17% of the Company's total assets
with a carrying value, net of accumulated depreciation, of approximately
$16,482,000. As a result of the sale, the Company realized a book gain of
approximately $947,000.
On April 17, 1998, the Company completed the purchase of Orange Park
Shopping Center, a 21,509 square foot strip mall located in Orange Park,
Florida (Clay County), from an unrelated third party for $1,500,000. In
connection with the purchase, the Company obtained a $1,300,000 first mortgage
loan which bears interest at a rate of 7.39% per annum. Such first mortgage
requires monthly principal and interest payments of $8,992 based upon a 30 year
self liquidating amortization schedule, with a balloon payment of approximately
$1,147,600 due April 1, 2008. The strip mall is currently 90% occupied by
local tenants subject to Operating Leases ranging from two to six years with
various renewal options.
On April 1, 1998, the Company completed the purchase of Regency Walk
Shopping Center, a 34,436 square foot strip mall located in Jacksonville,
Florida (Duval County), from an unrelated third party for $2,150,000. In
connection with the purchase, the Company obtained a $1,840,000 first mortgage
loan which bears interest at a rate of 7.87% per annum. Such first mortgage
requires monthly principal and interest payments of $13,335 based upon a 30 year
self liquidating amortization schedule, with a balloon payment of approximately
$1,643,700 due May 1, 2008. The strip mall is currently 72% occupied by
local tenants subject to Operating Leases ranging from two to nine years with
various renewal options.
10
<PAGE>
On February 9, 1998, a wraparound note held by the Company on a 128,864
square foot shopping center property located in Chili, New York (the "Chili
Property"), was assigned to an unrelated third party for $75,000. The Company,
as the master lessee on a Master Lease on the Chili Property, terminated such
Master Lease on April 30, 1996. The assignment of the wraparound note relieved
the Company of its responsibility to make any payments on the underlying
mortgage debt on the Chili Property. As a result of the assignment of the
wraparound note on the Chili Property and the relief of the Company's obligation
to make payment on the underlying mortgage debt, the Company realized net cash
proceeds of approximately $75,000 and a book gain of approximately $82,000.
During 1998, an agreement, (the "SGSC Agreement") was in effect between the
Company and certain of its affiliates, on one hand, and Societe Generale
Securities Corporation ("SGSC") on the other hand, pursuant to which the Company
and some affiliates had retained SGSC to act as financial advisor in connection
with a transaction involving the sale of a number of shopping center properties
owned by such affiliates and two retail properties owned by the Company. The
SGSC Agreement was terminated by the Company and certain of its affiliates, via
written notice on March 29, 1999. Pursuant to the terms of the SGSC Agreement
upon certain dispositions of the properties covered by the SGSC Agreement prior
to March 29, 2000, to persons or entities to whom SGSC had shown such
properties, the Company and or such affiliates would be obligated to pay SGSC a
fee based on the sales price of such properties.
From time to time the Company sells, or may take action to sell,
certain real estate assets which it does not believe to be material to the
overall business or financial condition of the Company.
Effects of Settlement
As a result of, and in connection with, the settlement of the Winston
Actions, the Company expects to disburse cash of approximately $10.5 million,
including payments of the settlement consideration to Series A Preferred
Stockholders, fees of the plaintiff's and defendant's lawyers, court and
Securities and Exchange Commission filing fees, printing costs and other
expenses. Although the expected expenditures of such funds represents a
substantial amount of the Company's cash reserves, the Company believes that it
would have sufficient cash to continue operating in the ordinary course of
business. The Company, however, is considering whether to, and ways it could
raise cash to make additional investments in suitable real estate properties. If
the Company determines to raise additional funds, it may decide to do so through
a public or private sale of debt or equity securities, by conducting rights
offerings, by selling or realizing on assets (including, but not limited to,
sales of its properties and interest in the Wrap Debt), through corporate
borrowings, or by other means. The Company does not currently have any plans
with respect to, and may never decide to do, any of the foregoing. In addition,
the Company has no current understandings or arrangements with respect to
purchasing additional properties.
See Item 3. Legal Proceedings for a description of the settlement of a
purported class action and derivative lawsuit and see Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations,
Liquidity and Capital Resources for a description of the potential rights
offering.
Investment Policy
11
<PAGE>
There are no limitations on the percentage of assets which may be
invested in any one investment or on the type of investments the Company may
make. The Company has no present intention of investing in or acquiring the
securities of other companies for the purpose of exercising control over other
companies. The Company does not currently intend to expand its operations to
include non-real estate related activities, but may do so if the Company's Board
of Directors determines it to be in the best interest of the Company. The
Company's policies towards its investments are not subject to the vote of the
Company's stockholders.
Real Estate Revenue
For the years ended December 31, 1998, 1997 and 1996, no tenant at any
individual property accounted for more than 10% of the Company's total revenue.
However, the total revenue from K- Mart Corporation's nine leases with the
Company accounted for approximately 29%, 32% and 30%, respectively, of the
Company's aggregate rent revenue.
Potential Environmental Risks
Under various federal, state and local environmental laws, ordinances
and regulations, the Company, as a current or previous owner or operator of real
property, may be held liable for the costs of removal or remediation of certain
hazardous or toxic substances, including, without limitations,
asbestos-containing materials, that could be located on, in or under such
property. Such laws and regulations often impose liability whether or not the
owner or operator knew of, or was responsible for, the presence of the hazardous
or toxic substances. The costs of any required remediation or removal of these
substances could be substantial and the Company's liability as an owner or
operator as to any property is generally not limited under such laws and
regulations, and could exceed the property's value and the Company's aggregate
assets. The Company's ability to sell or rent a property, or to borrow using a
property as collateral may be adversely affected by the presence of these
substances or failure to remediate such substances properly. Under these laws
and regulations, the Company, as an owner, operator, or any entity who arranges
for the disposal of hazardous or toxic substances, such as asbestos-containing
materials, at a disposal site, may also be liable for these costs, as well as
certain other costs, including governmental fines and injuries to persons or
properties. To date, the Company, has not incurred any costs of removal or
remediation of such hazardous or toxic substances. However, the presence, with
or without the Company's knowledge, of hazardous or toxic substances at any
property held or operated by the Company, could adversely affect the Company's
business, operating results and financial condition. The Company is not aware of
any environmental conditions at any of the properties that it owns or in which
it has an investment.
13
<PAGE>
Competition
Any rental property that the Company currently owns or that the Company
purchases in the future (whether retail, office, industrial or residential) may
have competition from similar properties in the vicinity in which such property
is located, some which may be substantial. Such competition will generally be
for the retention of existing tenants and for new tenants upon space becoming
vacant. The Company believes that the profitability of each of its properties is
based, in part, upon such properties' geographic location, the operations and
identity of the property's tenants, the performance of the property and leasing
managers, the maintenance and appearance of the property, the ease of access to
the property and the adequacy of property related facilities. The Company also
believes that general economic circumstances and trends may affect the operation
and competitiveness of the property.
Numerous other developers, managers and owners of real estate compete
with the Company for management and leasing revenues, land for development,
properties for acquisition and tenants for properties, many of which may have
greater financial and other resources than the Company and may have operating
development experience greater than the Company's. In addition, retailers at the
operating properties face increasing competition from outlet malls, mail order
catalogues, discount shopping clubs, direct mail and telemarketing operations.
The development of competing properties and renovations and expansions of
existing competing properties could negatively affect the Company by encouraging
shoppers to make their purchases at the newer, expanded or renovated competing
center, attracting more popular tenants or luring tenants away from the
competing operating property. Increased competition could materially and
adversely affect the Company's revenues.
Employees
The Company currently employs 23 people, five of whom are officers. The
Company is party to a management agreement (the "Management Agreement") with
Concord pursuant to which the Company provides management services, assists in
the management of Concord properties and provides certain personnel and office
space and general office services to Concord and for which the Company receives
reimbursements from Concord. The Management Agreement is renewable annually.
Except for services provided by certain employees to Concord pursuant to the
Management Agreement, all of the employees are employed on a full time basis to
provide services to the Company.
Impact of Year 2000
See Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations for a description of the Company's Year 2000
compliance programs and information systems modifications.
14
<PAGE>
Item 2. Description of Property.
The Company's executive offices are located at 150 E. Palmetto Park
Road, 4th Floor, Boca Raton, Florida, 33432 where it leases approximately 8,000
square feet of office space.
The Company is engaged in the ownership and operation of 35 commercial
real estate properties consisting of shopping centers, strip malls and free
standing department stores. The following tables describe and summarize certain
data for each such property. See also Item 1. Business, for a description of
additional terms relating to the Properties and the Company's investment
policies.
Table 1. Summary of Properties and Underlying Debt.
Table 2. Summary of Wraparound Notes.
15
<PAGE>
Table 1. Summary of Properties and Underlying Debt
<TABLE>
<CAPTION>
Monthly
Underlying Interest Payments of
GLA Occupancy Debt at Rate Principal &
Location Property (Sq Ft) Rate (%) 12/31/98 (%) Interest
=================== ============================ ========= ============ ============= ========= =================
<S> <C> <C> <C> <C> <C>
Deland, FL Deland Plaza (1), (6) 68,337 100 $ 837,341 8.875 $ 14,016
Rochester, NY Ridgemont Plaza (1), (6) 84,181 100 1,067,839 9.250 15,992
Pascagoula, MS Gulf Coast Plaza (4) 125,803 79 0 n/a n/a
Janesville, WI Blackhawk Village (4) 88,500 86 907,113 9.00 14,060
110,151 9.00 1,529
Marietta, OH Kmart Corporation (1), (6) 87,543 100 1,900,000 5.75 - (3)
6.70
Mt. Pleasant, PA Kmart Corporation (1), (6) 83,552 100 1,275,000 6.50 - (3)
6.80
No. Canton, OH Kmart Corporation (1), (6) 84,181 100 2,048,714 9.00 21,669
Owensboro, KY Kmart Corporation (1), (6) 68,337 100 1,520,000 6.50 - (3)
6.80
Quincy, IL Harrison Street Plaza (4) 149,954 99 2,910,061 7.75 27,912
Natchez, MS Morgantown Plaza (4) 92,646 100 2,190,454 7.59 15,519
Streetsboro, OH Kmart Corporation (1), (6) 84,800 100 1,285,000 6.35 - (3)
6.70
Dubois, PA Sandy Plaza (1), (4) 34,019 100 1,395,000 7.00 (3)
Franklin Township, Franklin Plaza (1), (4) 31,170 100 1,385,000 6.00 (3)
PA
Clarksville, TN Kmart Corporation (1), (6) 88,100 100 1,450,000 6.00 - (3)
6.80
Montgomery, AL Chisolm Shopping Center (4) 39,075 100 1,212,842 8.75 14,500
Paris, TN Paris Plaza (4) 102,453 98 562,491 13.50 8,859
355,949 9.25 8,467
Savannah, TN Savannah Plaza (4) 46,400 100 273,224 9.50 6,612
- ------------------- ---------------------------- --------- ------------ ------------- --------- -----------------
</TABLE>
Table continues and footnotes appear on the following page.
16
<PAGE>
<TABLE>
<CAPTION>
Balance at
Maturity
Maturity (Assuming no
Location Prepayment Provision Date Prepayment)
=================== ============================== =========== ================
<S> <C> <C> <C>
Deland, FL 1% premium 4/1/03 $ 343,437
Rochester, NY 1% premium 1/1/02 747,266
Pascagoula, MS n/a n/a n/a
Janesville, WI none 7/31/02 540,492
none 8/1/07 0
Marietta, OH None until 2002; then 3% 3/15/07 0
declining 1% annually to par
Mt. Pleasant, PA None until 2001; then 3% 5/1/07 76,197
declining 1% annually to par
No. Canton, OH Pre-payable at a discount 9/30/12 0
Owensboro, KY None until 2001; then 3% 12/1/07 0
declining 1% annually to par
Quincy, IL Pre-payable at par 7/1/98 2,992,016
Natchez, MS None until 2004; then 1% 5/1/08 1,951,900
premium
Streetsboro, OH None until 2001; then 3% 12/1/06 0
declining 1% annually to par
Dubois, PA None until 2004; then 3% 12/1/06 0
declining 1% annually
Franklin Township, None until 2004; then 3% 12/15/07 0
PA declining 1% annually
Clarksville, TN None until 2002; then 3% 10/1/06 0
declining 0.5% annually to par
Montgomery, AL 2% premium 4/1/07 396,073
Paris, TN 1% premium 4/1/08 0
Pre-payable at par 7/1/03 0
Savannah, TN none 1/31/03 0
------------------------------ ----------- ----------------
</TABLE>
Table continues and footnotes appear on the following page.
<PAGE>
Table 1. Summary of Properties and Underlying Debt - continued
<TABLE>
<CAPTION>
Monthly
Underlying Interest Payments of
GLA Occupancy Debt at Rate Principal &
Location Property (Sq Ft) Rate (%) 12/31/98 (%) Interest
=================== ============================ ========= ============ ============= ========= =================
<S> <C> <C> <C> <C> <C>
Danville, IL Holiday Square (4) 50,978 100 402,275 9.625 9,663
Warsaw, VA Richmond Plaza (1), (6) 43,200 100 786,975 13.125 11,373
Southwick, MA Greenwood Plaza (1), (6) 45,000 100 763,629 11.50 9,857 in advance
Walpole, NH Kendiana Plaza (1) , (6) 32,400 100 763,629 11.50 9,857 in advance
Baton Rouge, LA Capitol Heights (4) 52,700 100 1,902,433 12.00 33,583
Sunrise, FL Pine Oak Plaza (2), (5) 16,994 100 1,155,466 7.48 8,095
Jacksonville, FL Regency Walk (2), (5) 34,436 92 1,832,595 7.87 13,335
Orange Park, FL Orange Park (2), (5) 21,509 95 1,294,056 7.39 8,992
Boca Raton, FL Teeca Plaza (2), (5) 22,589 97 1,795,235 7.39 12,450
W. Palm Beach, FL Country Grove Plaza (2), (5) 16,642 96 878,877 7.51 6,159
Jacksonville, FL Mandarin Central (2), (5) 63,346 99 3,947,350 8.00 28,984
Ft. Lauderdale, FL Pine Crest (2), (5) 40,408 97 2,398,033 7.00 15,967
Davie, FL Lincoln Park (2), (5) 46,190 97 3,219,000 7.58 22,684
Palatka, FL Walmart Corporation (1), (6) 91,840 100 1,129,963 12.00 17,247
Columbus, NE Cottonwood Plaza (1), (6) 64,890 100 1,316,675 12.00 17,201
61,528 9.50 697
Hamilton, NY Alexander Plaza (1), (6) 43,200 100 792,415 13.125 11,373
Zanesville, OH Sunrise Shopping Center (2), 130,072 55 850,193 9.50 14,295
(4)
Blackstone, VA Family Dollar (2), (4) 43,200 21 0 n/a n/a
- ------------------- ---------------------------- --------- ------------ ------------- --------- -----------------
</TABLE>
Table continues and footnotes appear on the following page.
<PAGE>
<TABLE>
<CAPTION>
Balance at
Maturity
Maturity (Assuming no
Location Prepayment Provision Date Prepayment)
=================== ============================== =========== ================
<S> <C> <C>
Danville, IL 1% premium 9/1/02 64,250
Warsaw, VA 4% in 1999, declining 1% 10/1/09 0
annually to a 2% minimum
Southwick, MA 1% premium 9/1/09 0
Walpole, NH 1% premium 9/1/09 0
Baton Rouge, LA 2% premium 12/1/05 0
Sunrise, FL none 5/1/08 1,027,700
Jacksonville, FL none 5/1/08 1,643,700
Orange Park, FL none 4/1/08 1,147,600
Boca Raton, FL none 7/1/08 1,591,000
W. Palm Beach, FL none 9/1/08 780,150
Jacksonville, FL none 10/1/08 3,542,000
Ft. Lauderdale, FL none 11/11/08 2,063,000
Davie, FL 5% premium 11/1/08 2,854,000
Palatka, FL 2% premium 11/1/07 0
Columbus, NE none 9/1/10 9,274
none 7/1/11 0
Hamilton, NY 5% in 1999 declining 1% 12/1/09 0
annually to a 2% minimum
Zanesville, OH none 5/31/99 1,170,645
Blackstone, VA n/a n/a n/a
- ------------------- ------------------------------ ----------- ----------------
</TABLE>
(1) Annual real estate taxes are the responsibility of the tenant.
(2) Represents a Fee Property.
(3) Principal and interest are paid semi annually in accordance with the
respective bond documents.
(4) Represents a shopping center.
(5) Represents a strip mall.
(6) Represents a free standing department store.
<PAGE>
Table 2. Summary of Wraparound Notes at December 31, 1998
<TABLE>
<CAPTION>
Carrying Annual Balance at
Interest Amount of Face Amount Payments of Final Maturity
Rate Wraparound of Wraparound Principal & Maturity (Assuming no
Location (%) Notes Notes Interest Date Prepayment)
================= ========== ============= ================ ================= ============= ================
<S> <C> <C> <C> <C> <C> <C>
Deland, FL 9.70 $ 1,400,000 $ 1,917,696 $ 207,550 12/31/99 $ 1,890,301
Rochester, NY 9.70 1,469,375 1,750,529 220,906 12/31/14 0
10.00 130,625 183,567 0 12/31/14 910,735
Pascagoula, MS 9.75 1,190,217 2,035,284 246,507 12/31/16 0
12.00 175,125 187,335 23,759 12/31/16 187,335
11.00 34,658 39,742 0 12/31/16 285,255
11.00 68,428 72,328 0 12/31/16 519,150
Janesville, WI 10.25 1,400,001 2,138,975 268,502 12/31/15 0
11.00 15,000 16,584 0 12/31/15 106,688
Marietta, OH 8.32 2,894,642 3,101,392 371,533 12/31/14 0
11.00 20,000 28,548 0 12/31/14 160,313
Mt Pleasant, PA 9.18 2,287,405 2,498,786 290,345 12/31/15 0
11.00 12,626 14,478 0 12/31/14 83,481
No Canton, OH 9.11 2,146,933 2,813,466 333,272 12/31/14 0
11.00 26,575 37,589 0 12/31/14 216,478
11.00 25,650 32,385 0 12/31/14 186,725
Owensboro, KY 10.00 2,738,751 2,739,304 337,955 13/31/15 0
11.00 25,410 27,217 0 12/31/15 175,092
Quincy, IL 10.00 1,885,774 5,633,307 920,890 12/31/98 4,904,387
Natchez, MS 10.00 1,228,505 3,479,370 516,210 05/01/08 3,097,127
Streetsboro, OH 9.68 1,748,954 2,254,317 276,986 12/31/14 0
11.00 21,447 29,643 0 12/31/14 176,200
11.00 19,600 24,746 0 12/01/14 142,686
11.00 10,000 11,345 0 12/01/14 65,418
Sandy, PA 10.00 1,164,620 2,740,202 475,498 12/31/99 1,996,828
Franklin, PA 10.00 1,164,620 2,740,202 475,498 12/31/99 1,996,828
Clarksville, TN 9.75 1,326,879 3,379,184 554,822 12/31/99 2,497,383
Montgomery, 9.75 875,000 2,185,302 295,516 12/31/99 2,032,563
AL
Savannah, TN 9.88 430,001 1,157,445 197,500 12/31/99 993,627
Danville, IL 9.75 800,001 1,764,370 275,730 12/31/99 1,562,991
Warsaw, VA 9.75 1,017,030 1,373,947 175,974 12/31/99 1,298,565
Southwick, MA 9.75 816,275 1,368,587 196,750 12/31/99 1,248,385
Paris, TN 10.00 1,347,733 3,160,401 555,860 12/31/99 2,686,998
11.00 51,016 74,163 0 12/31/99 80,814
Walpole, NH 9.75 954,564 1,368,587 196,750 12/31/99 1,248,385
Baton Rouge, 9.75 3,832,052 4,294,990 630,350 12/31/99 3,890,656
LA
Palatka, FL 9.75 1,607,290 2,288,453 407,745 12/31/99 1,921,922
11.00 24,650 27,687 0 12/31/99 30,891
Columbus, NE 9.75 2,111,331 2,376,262 309,207 12/31/99 2,235,677
Hamilton, NY 9.75 1,031,024 1,435,266 210,745 12/31/99 1,300,000
- ----------------- ---------- ------------- ---------------- ----------------- ------------- ----------------
</TABLE>
19
Table continues the following page.
<PAGE>
<TABLE>
<CAPTION>
Annual
Master Master
Lease Lease
Location Payment Termination
================= ============= ==============
<S> <C> <C>
Deland, FL $ 207,550 12/31/99
Rochester, NY 220,906 12/31/14
0 n/a
Pascagoula, MS 270,266 12/31/17
0 n/a
0 n/a
0 n/a
Janesville, WI 268,502 12/31/15
0 n/a
Marietta, OH 371,533 12/31/14
0 n/a
Mt Pleasant, PA 290,345 12/31/15
0 n/a
No Canton, OH 333,272 12/31/14
0 n/a
0 n/a
Owensboro, KY 337,955 12/31/15
0 n/a
Quincy, IL 920,890 12/31/98
Natchez, MS 516,210 12/31/98
Streetsboro, OH 276,986 12/31/14
0 n/a
0 n/a
0 n/a
Sandy, PA 475,498 12/31/99
Franklin, PA 475,498 12/31/99
Clarksville, TN 554,822 12/31/99
Montgomery, 295,516 12/31/99
AL
Savannah, TN 197,500 12/31/99
Danville, IL 275,730 12/31/99
Warsaw, VA 175,974 12/31/99
Southwick, MA 196,750 12/31/99
Paris, TN 555,860 12/31/99
0 n/a
Walpole, NH 196,750 12/31/99
Baton Rouge, 630,350 12/31/99
LA
Palatka, FL 407,745 12/31/99
0 n/a
Columbus, NE 309,207 12/31/99
Hamilton, NY 210,745 12/31/99
- ----------------- ------------- --------------
</TABLE>
<PAGE>
Item 3. Legal Proceedings.
During 1996 Milestone, certain past and present members of its Board of
Directors, executive officers, and Concord were named as defendants in a
purported class action and derivative lawsuit (the "Winston Actions") commenced
in the Court of Chancery of the State of Delaware (the "Delaware Court"). In the
actions, the plaintiff, a Series A Preferred Stockholder purporting to bring the
action on behalf of himself, all other Series A Preferred Stockholders and
derivatively on behalf of Milestone, alleged that in connection with the
Acquisition and certain related transactions (collectively, the "Transactions"),
Milestone and its directors engaged in self-dealing, violated federal securities
laws and an injunction against such violations and breached their fiduciary
duties to the Series A Preferred Stockholders. The plaintiff claimed, among
other things, that, as a result of the Transactions, Milestone would not have
sufficient funds to pay dividends on the Series A Preferred Stock and that the
properties which were not transferred to UPI in the Transfer were grossly
inferior to the properties that were transferred to UPI.
On August 5, 1998, the counsel for the named plaintiff in the Winston
Actions and the counsel for the defendants entered into a Stipulation and
Agreement of Settlement (the "Winston Settlement Agreement") which memorialized
the terms of a settlement (the "Winston Settlement") of the Winston Actions. On
January 28, 1999, the Delaware Court approved the Winston Settlement Agreement,
which approval became final effective as of the close of business on March 5,
1999. At such time, (i) the shares of Series A Preferred Stock owned by each
Series A Preferred Stockholder who was eligible to participate in the Winston
Settlement and who did not properly opt out of the Winston Settlement and who
owned shares of Series A Preferred Stock as of the close of business on March 5,
1999 were canceled and represented only the right of such Series A Preferred
Stockholder to receive $3.00 in cash from the Company in exchange for each such
share; (ii) the holders of shares of the Series A Preferred Stock between
October 23, 1995 and the close of business on March 5, 1999, other than Series A
Preferred Stockholders who properly opted out of the Winston Settlement
Agreement or who were precluded from participating in the Winston Settlement,
released any and all claims they may have had against the Company and the other
named defendants in connection with the Transactions; (iii) Milestone's
stockholders other than Series A Preferred Stockholders who were eligible to
participate in the Winston Settlement and who properly opted out of the Winston
Settlement released all derivative claims in connection with the Transactions;
and (iv) the Winston Actions were dismissed. In connection with the Winston
Actions, the Company retained counsel for all of the defendants (including,
without limitation, Leonard S. Mandor, Robert A. Mandor, Harvey Jacobson,
Gregory McMahon and Geoffrey Aaronson (each of whom is a director and/or officer
of the Company)) and assumed responsibility for the payment of all legal fees
incurred by such persons in connection with the Winston Actions and the Winston
Settlement (subject to the insurance coverage litigation described below).
The foregoing description of the Winston Settlement and the Winston
Settlement Agreement
20
<PAGE>
is qualified in its entirety by reference to the Winston Settlement Agreement, a
copy of which was filed by the Company with the Commission on August 14, 1998 as
Exhibit 10.01 to Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 1998.
The Company maintains a directors and officers insurance and company
reimbursement policy (the "National Policy") issued by National Union Fire
Insurance Company of Pittsburgh, PA ("National Union") with a $2,000,000 limit
and an excess directors and officers liability and company reimbursement policy
(the "Stonewall Policy") issued by Stonewall Surplus Lines Insurance Company,
now known as American Dynasty Surplus Lines Insurance Company ("Stonewall"),
with a $2,000,000 limit. The Company believes that the amounts that it has to
pay pursuant to the Winston Settlement and in connection with the Winston
Actions are covered losses under both the National Union Policy and the
Stonewall Policy. In addition, the Company believes that the legal fees and
other expenses incurred by the Company and the other defendants in connection
with the Winston Actions are also covered losses under the National Union Policy
and the Stonewall Policy. In connection with a previous proposed settlement of
the Winston Actions which was never consummated, National Union and Stonewall
both refused to contribute to such proposed settlement, asserting that such
proposed settlement did not encompass any covered loss (as defined in the
National Policy and the Stonewall Policy, respectively). On January 29, 1998,
the Company commenced a lawsuit in the United States District Court for the
Southern District of New York against National Union and Stonewall in connection
with such refusal to contribute to such proposed settlement. In the complaint,
the plaintiffs alleged that National Union and Stonewall wrongfully failed to
contribute to the proposed settlement and sought reimbursement from National
Union and Stonewall up to the limits of their respective policies. National
Union and Stonewall both answered the complaint and denied liability. As a
result of the termination of the previously proposed settlement, the Company on
one hand, and Stonewall and National Union, on the other hand, agreed to dismiss
such action without prejudice and such action was dismissed on May 29, 1998 by
the United States District Court for the Southern District of New York. The
Company gave both National Union and Stonewall notice of the Winston Settlement
and provided each of them with a copy of the Winston Settlement Agreement on
August 12, 1998. National Union and Stonewall reviewed the Winston Settlement
Agreement and separately informed the Company that their basic position, denying
coverage, had not changed. On February 12, 1999, the Company commenced a lawsuit
in the Circuit Court for the Fifteenth Judicial Circuit in and for Palm Beach
County, Florida against both National Union and Stonewall alleging, among other
things, that National Union and Stonewall have wrongfully refused to contribute
to the Winston Settlement and seeking reimbursement from National Union
and Stonewall up to the limits of their respective policies. The initial
complaint in the new lawsuit was served on each of National Union and Stonewall
on February 12, 1999 and on March 17, 1999 the Company filed an amended
complaint, which, among other things, added the other defendants to the Winston
Actions as plaintiffs. National Union and Stonewall have until March 29, 1999 to
answer the amended complaint. In connection with this action, the Company has
retained counsel for all of the plaintiffs and is assuming responsibility for
the payment of all legal fees incurred by such persons in connection with this
action. At this time, the Company is not in a position to render an opinion as
to the outcome of this action.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of the security holders, through the
solicitation of
21
<PAGE>
proxies or otherwise, during the fourth quarter of the fiscal year ended
December 31, 1998.
PART II
Item 5. Market for Registrant's Common Stock and Related Stockholder Matters.
The Common Stock and the Series A Preferred Stock traded on the New
York Stock Exchange (the "NYSE") under symbols "MPI" and "MPI PRA",
respectively, from January 29, 1991 through July 3, 1998. The NYSE suspended
trading in shares of the Common Stock and Series A Preferred Stock prior to the
market opening on July 6, 1998 because it had determined that Milestone had
fallen below certain of the NYSE's continued listing criteria relating to net
income and market value of publicly held shares of the Common Stock and Series A
Preferred Stock. The Company has learned that on or about July 6, 1998, a market
began to be made for shares of the Common Stock and Series A Preferred Stock on
the Over-The-Counter (the "OTC") Bulletin Board with the ticker symbols"MPRP"and
"MPRPP", respectively. The NYSE subsequently applied to the Securities and
Exchange Commission (the "Commission") to delist the Common Stock and Series A
Preferred Stock and, on September 10, 1998, the Commission issued an order
granting the NYSE's application to delist the Common Stock and Series A
Preferred Stock. Effective as of the opening of the trading session on September
11, 1998, the Common Stock and Series A Preferred Stock were de-listed from the
NYSE.
The following tables set forth the high and low sales prices for the
Common Stock and the Series A Preferred Stock, as reported on the NYSE, for each
quarterly period for the 1997 fiscal year and the 1998 fiscal year (January 1,
1998 through July 3, 1998). In addition, the table also sets forth the high and
low bid quotations for the Common Stock and the Series A Preferred Stock, as
reported on the OTC Bulletin Board, for the period from July 6, 1998 through
December 31, 1998. The high and low bid quotations for the Common Stock and
Series A Preferred Stock represent prices between broker-dealers, and do not
include retail mark-ups or mark-downs or any commission to the broker-dealer and
may not represent actual transactions.
<TABLE>
<CAPTION>
Common Stock High Low
======================================================================= ============= =============
1998
<S> <C> <C>
First Quarter $ 1- 13/16 $ 5/8
Second Quarter 1- 13/16 11/16
Third Quarter
NYSE (July 1, 1998 through July 3, 1998) 3/4 11/16
OTC Bulletin Board (July 6, 1998 through September 30, 1998) 1- 1/2 7/16
Fourth Quarter 7/8 3/4
1997
First Quarter 7/8 9/16
Second Quarter 9/16 7/16
Third Quarter 9/16 7/16
Fourth Quarter 11/16 1/2
</TABLE>
<TABLE>
<CAPTION>
Series A Preferred Stock High Low
======================================================================= ============== =============
1998
<S> <C> <C>
First Quarter $ 1- 3/4 $ 1- 1/4
Second Quarter 1- 3/8 1- 5/16
Third Quarter
NYSE (July 1, 1998 through July 3, 1998) 1- 1/2 1- 7/16
OTC Bulletin Board (July 6, 1998 through September 30, 1998) 2- 1/2 7/8
Fourth Quarter 2- 1/2 2
1997
- ----
First Quarter 7/8 5/8
Second Quarter 11/16 1/2
Third Quarter 1- 5/16 7/16
Fourth Quarter 1- 5/16 1- 3/16
</TABLE>
<PAGE>
On March 12, 1999, the average bid and asked price of the Common Stock
was $1.25 and the average bid and asked price of the Series A Preferred Stock
was $2.82. On March 12, 1999, there were approximately 1,853 record holders of
the Common Stock and six record holders of the Series A Preferred Stock.
At the close of business on March 5, 1999, Milestone canceled and
retired 2,983,284 shares of Series A Preferred Stock, representing more than 99%
of the then outstanding shares of Series A Preferred Stock, pursuant to the
terms of the Winston Settlement. See Item 3. Legal Proceedings for a description
of the Winston Settlement.
Dividend Policy
Common Stock
Milestone has never declared any cash dividends on its Common Stock and
has no present intention to declare or pay cash dividends on the Common Stock in
the foreseeable future. While there are no restrictions on Milestone's ability
to declare dividends, except for the preference of the Series A Preferred Stock
(discussed below), the Company anticipates that in the future earnings will be
retained to finance the Company's operations. Any decision as to the future
declaration of dividends on the Common Stock will depend on the results of
operations and the financial condition of the Company and such other factors as
Milestone's Board of Directors, in its discretion, deems relevant. See Item 7.
Management's Discussion and Analysis of Financial Condition and Results
of Operation - Liquidity and Capital Resources.
24
<PAGE>
Series A Preferred Stock
Milestone's Board of Directors determined not to declare any dividends
on the Series A Preferred Stock during the years ended December 31, 1998, 1997
and 1996. The last dividend declared by Milestone was for the quarter ended
December 31, 1995 and was paid on February 15, 1996 at $0.195 per share of
Series A Preferred Stock.
Since September 30, 1995, holders of the Series A Preferred Stock have
not been entitled to receive dividends on a cumulative basis. Pursuant to the
Certificate of Designations of the Series A Preferred Stock, after such date, no
cash dividend may be paid on the Common Stock unless full dividends of $0.195 on
all outstanding shares of Series A Preferred Stock for the then current
quarterly dividend period are declared and either paid or sufficient sums for
the payment thereof are set apart. As a result of Milestone's Board Directors'
determination not to declare a dividend for the quarter ended June 30, 1997,
which was the sixth consecutive quarter for which no dividend was declared, the
number of persons entitled to serve as directors on Milestone's Board of
Directors has been increased by one, and the holders of the Series A Preferred
Stock, who are otherwise entitled to elect one member of the Board of Directors,
became entitled to elect a second member of the Board of Directors to fill such
newly created directorship. Any decision as to the future payment of dividends
on the Series A Preferred Stock will depend on the results of operations and the
financial condition of the Company and such other factors as Milestone's Board
of Directors, in its discretion, deems relevant. See Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operation -
Liquidity and Capital Resources.
Item 6. Selected Financial Data.
(Amounts in thousands, except per share information)
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
================================================== ============== ============= ============= ============= =============
<S> <C> <C> <C> <C> <C>
Total revenues $ 25,515 $ 30,092 $ 33,722 $ 25,768 $ 19,404
Total expenses 32,693 34,244 35,843 26,261 16,951
Loss before income taxes (7,178) (4,152) (2,121) (493) 2,453
Provision (benefit) for income taxes 1,253 (721) 366 317 1,161
Net (loss) income (8,431) (3,431) (2,487) (810) 1,292
Distributions on preferred stock 0 0 0 (2,732) (2,772)
------------ ---------- ----------- -------- --------
Loss attributable to common stockholders $ (8,431) $ (3,431) $ (2,487) $ (3,542) $ (1,480)
========= ========= ========= ========= =========
Loss per common share $ (1.99) $ (0.82) $ (0.65) $ (2.13) $ (1.28)
======== ========== ========== ========== ==========
Weighted average common shares outstanding 4,235 4,207 3,846 1,665 1,160
========= ========= ========= ========= ========
Total assets $ 86,922 $ 112,223 $ 182,095 $ 198,413 $ 137,785
======== ========= ========= ========= =========
Mortgages and notes payable $ 47,977 $ 67,740 $ 71,563 $ 79,278 $ 47,105
======== ========== ========== ========== ==========
- -------------------------------------------------- -------------- ------------- ------------- ------------- -------------
</TABLE>
25
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Certain statements made in this report may constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act. See Item 1.
Business.
The following discussion and analysis should be read in conjunction
with the Consolidated Financial Statements of the Company and the notes thereto
appearing in Item 14 of this report.
The Company is engaged in the business of owning, acquiring, managing,
developing and investing in commercial real estate and real estate related
assets.
Recent Developments
The settlement of the Winston Actions became effective at the close of
business on March 5, 1999. At such time, pursuant to the terms of the Winston
Settlement, Milestone canceled and retired 2,983,284 shares of Series A
Preferred Stock, representing more than 99% of the then outstanding shares of
Series A Preferred Stock. See Item 3. Legal Proceedings for a description of the
Winston Settlement and Liquidity and Capital Resources within this section for a
discussion of the costs associated with the Winston Settlement.
Effective as of the opening of the trading session on September 10,
1998, the Common Stock and Series A Preferred Stock were delisted from the NYSE.
See Item 5. Market for Registrant's Common Stock and Related Stockholder
Matters.
Acquisition and Disposition of Real Estate and Real Estate Related Assets
During 1998, the Company purchased, as fee owner, seven commercial real
estate properties located in the state of Florida for approximately $18,500,000
(the "Purchases"). In connection with the Purchases, the Company obtained
approximately $15,400,000 of first mortgage loans which bear interest at rates
ranging from 7.0% to 8.0%. The properties acquired in the Purchases represent
approximately 56% of the GLA of the Fee Properties.
During 1998, approximately $14,800,000 of wraparound notes held by the
Company were satisfied as a result of the sales(the "Sales") of the underlying
properties by their owners which are affiliates of the Company (i.e. the
Partnerships which owned the underlying properties). As a result of the Sales,
the Company was no longer obligated to make payment on approxiamately
$17,000,000 of underlying debt.
On July 7, 1998, the Company sold approximately $16,500,000 of
commercial real estate, net of accumulated depreciation, located in the state of
Oregon (the "Sale"). In connection with the Sale, the Company satisfied the
balance of the first mortgage loan of approximately $17,065,000 (which
represented approximately 23% of the Company's total liabilities at the time of
sale).
26
<PAGE>
Results of Operations
Calendar Year 1998 Compared to Calendar Year 1997
For the year ended December 31, 1998, the Company reported a net loss
of $8,431,112, or $1.99 per common share, on total revenues of $25,515,391.
These results include a nonrecurring charge of approximately $7,084,000 related
to the settlement of the Winston Actions. See Part I-Item 3. Legal Proceedings
for a description of the settlement. For the year ended December 31, 1997, the
Company reported a net loss of $3,430,731 on total revenues of $30,091,911, or
$0.82 per common share. The 1997 results included a charge of approximately
$2,590,000 related to the fair value adjustment of the wraparound notes.
Total revenues for the year ended December 31, 1998 were $25,515,391,
as compared to $30,091,911, for the year ended December 31, 1997, a decrease of
$4,576,520, or 15%, due to the following:
Rent decreased $532,575, or 5%, in 1998 compared to 1997. This decrease
is primarily due to the net of: (1) property sales, as previously described,
which caused a decrease in rent revenue of approximately $1,539,000 which is
offset by (2) the property purchases, as previously described, which caused an
increase in rent revenue of approximately $1,006,000.
Interest income decreased $5,164,478, or 39%, for the year ended December
31, 1998 compared to the year ended December 31, 1997. This decrease is
primarily due to: (1) the sale, by the Company, of all four of its remaining
mortgage backed securities during 1997 which caused a decrease in interest
income of approximately $3,655,000 and (2) a decrease of approximately
$1,436,000 in interest income as a result of the Company receiving payment on
wraparound notes, as previously described, held by the Company as a result of
the sales of the underlying properties by its owners.
For the year ended December 31, 1998 the Company had gains on the sale
of real estate and real estate related assets of $5,617,844 as compared to gains
on the sale of real estate and real estate related assets of $316,061 for the
year ended December 31, 1997.
During the year ended December 31, 1998, the Company did not have any
available-for-sale securities or U.S. Treasury Notes. All of the
available-for-sale securities and U.S. Treasury Notes were sold during 1997 as a
result of the Company selling all four of its remaining mortgage backed
securities during 1997 which resulted in a net gain of approximately $3,195,000
for the year ended December 31, 1997 and no such gain for the year ended
December 31, 1998.
Total operating expenses for the year ended December 31, 1998 were
$19,221,231, as compared to $21,686,805, for the year ended December 31, 1997, a
decrease of $2,465,574, or 11%, due to the following:
Master lease expense decreased $1,427,752, or 10%, due to a decrease in
the number of properties leased by the Company as a result of the sale of some
of the underlying properties by their owners.
27
<PAGE>
Salaries, general and administrative expenses decreased $1,080,948, or
27% primarily due to (1) a decrease in salary expense of approximately $999,000
as the result of a decrease in bonuses for several executive officers of the
Company for the year ended December 31, 1998 and (2) a decrease in rental
expense of approximately $563,000 for the corporate offices for the year ended
December 31, 1998 compared to the same period in 1997.
Professional fees increased $352,161, or 38% due primarily to fees
associated with the Winston Actions and the Winston Settlement. See Part I-Item
3. Legal Proceedings for a description of the Winston Actions and the Winston
Settlement.
Interest expense for the year ended December 31, 1998 was $5,474,451, a
decrease of $3,645,103 or 40%, from $9,119,554 for the year ended December 31,
1997. Such decrease was primarily due to: (1) a decrease in interest expense of
approximately $2,365,000 due to U.S. Treasury Note(s) short positions which were
closed simultaneously with the disposition during 1997, by the Company, of all
four of the remaining mortgage backed securities then held by the Company and
(2) a net decrease in interest expense of approximately $1,063,000 on the
underlying debt as a result of the property sales, as previously described,
which were offset by the property purchases, as previously described, during
1998.
Depreciation and amortization for the year ended December 31, 1998 was
$913,527, an increase of $66,142 or 8%, from $847,385 for the year ended
December 31, 1997. Such increase was primarily due to property purchases, as
previously described, and property improvements during 1998 which is offset by
property dispositions, as previously described.
Calendar Year 1997 Compared to Calendar Year 1996
The Company recognized a net loss of $3,430,731 for the year ended
December 31, 1997 as compared to a net loss of $2,486,974 for the same period in
1996 due to the following factors:
Revenues for 1997 were $30,091,911, a decrease of $3,630,531 or 11%,
from $33,722,442 for 1996. Such decrease was primarily due to the net of: (1) a
decrease in interest income of $4,299,059 resulting primarily from (a) a
decrease in interest income of approximately $994,000 due to a decrease in the
number wraparound notes held by the Company to 28 for the year ended December
31, 1997 from 30 for the same period in 1996 and (b) a decrease in interest
income of approximately $3,196,900 due to the sale by the Company of all four of
its mortgage backed securities; (2) a decrease in rental income of $1,102,272
resulting from a decrease in the number of properties leased by the Company to
28 for the year ended December 31, 1997 from 30 for the same period in 1996; (3)
an unrealized holding loss on U.S. Treasury Notes sold short of $316,887 for
1997 compared to an unrealized holding gain of $1,217,186 for 1996 and (4) a
gain on the sale of available- for-securities of $3,511,560 for 1997 compared to
a loss on the sale of available-for-sale securities of $350,699 for 1996.
28
<PAGE>
Operating expenses for the year ended December 31, 1997 were
$21,686,805, a decrease of $1,221,207 or 5%, from $22,908,012 for the year ended
December 31, 1996. Such decrease was primarily due to the net of: (1) a decrease
in master lease expense of $1,221,258 due to a decrease in the number of
properties leased by the Company to 28 for the year ended December 31, 1997 from
30 for the same period in 1996; (2) a decrease in property expenses of $299,971
due to the decrease in the number of properties leased by the Company; (3) a
decrease in professional fees of $139,627 due to non-recurring transaction costs
associated with the disposition of real estate related assets in 1996 and (4) an
increase in salaries, general and administrative expenses of $416,800 due to an
increase in bonuses for several executive officers of the Company.
Interest expense for the year ended December 31, 1997 was $9,119,554, a
decrease of $2,842,226 or 24%, from $11,961,780 for the year ended December 31,
1996. Such decrease was primarily due to a decrease in financing arrangements
related to the disposition during 1997 by the Company of all four of the
mortgage backed securities then held by the Company resulting in a decrease in
interest expense of approximately $2,560,800.
Depreciation and amortization for the year ended December 31, 1997 was
$847,385, an increase of $63,984 or 8%, from $783,401 for the year ended
December 31, 1996. Such increase was primarily due to approximately $1,253,000
of property improvement purchases made during 1996.
Valuation allowance, which is a reduction in the carrying value of the
Wraparound Notes, for the year ended December 31, 1997 was $2,590,132, an
increase of $2,400,279 from $189,853 for the year ended December 31, 1996. The
value of the underlying collateral was determined by internal analysis and
independent appraisals.
Cash Flows
For the year ended December 31, 1998, cash used in operating activities
was $6,567,933, cash provided by investing activities was $24,721,432 and cash
used in financing activities was $19,762,435. The primary uses and provision of
these funds was a direct result of the property purchases and sales, as
previously described, by the Company during 1998, as well as the payments
received by the Company on its wraparound notes, as previously described, as a
result of the sale of the related underlying property, by its owner, an
affiliate of the Company (i.e., the Partnership that owned the underlying
property).
For the year ended December 31, 1997 net cash used in operating
activities of $6,073,949 included (1) a net loss of $3,430,731, (2) adjustments
of $1,172,247 for non-cash items and (3) a net change in operating assets and
liabilities of $1,470,971, compared to net cash used in operating activities of
$2,783,859 for the year ended December 31, 1996, which included (1) a net loss
of $2,486,974, (2) adjustments of $728,499 for non-cash items and (3) a net
change in operating assets and liabilities of $431,614.
29
<PAGE>
For the year ended December 31, 1997 net cash provided by investing
activities of $47,421,221 included (1) proceeds from principal payments on loans
receivable and wraparound notes of $4,750,010, (2) the investment in wraparound
notes of $81,934, (3) purchase of building, land and leasehold improvements of
$1,363,153, (4) proceeds from the sale of real estate related assets of
$5,258,708, (5) proceeds from the sale of available-for-sale securities of
$36,360,354, (6) proceeds from the redemption of investments in preferred stock
of $1,730,833, (7) proceeds from the redemption of reverse repurchase agreements
of $35,035,636 and (8) purchase of U.S. Treasury Notes of $34,269,233, compared
to net cash provided by investing activities of $14,021,098 for the year ended
December 31, 1996, which included (1) proceeds from principal repayments of
$4,817,864 on loans receivable and wraparound notes, (2) the investment in
wraparound notes of $45,550, (3) purchase of leasehold improvements of $213,186,
(4) proceeds from the sale of real estate related assets of $4,325,177, (5)
proceeds from the sale of available-for-sale securities of $23,201,402, (6)
proceeds from the redemption of investments of $2,541,667, (7) purchase of
$20,142,060 of available-for-sale securities, (8) proceeds from U.S. Treasury
Notes sold short of $13,989,844, (9) proceeds from the redemption of reverse
repurchase agreements of $9,203,125, (10) purchase of U.S. Treasury Notes of
$9,143,750 and (11) purchase of reverse repurchase agreements of $14,513,435.
For the year ended December 31, 1997 net cash used in financing
activities of $31,053,874 included (1) principal payments on mortgages and notes
payable of $6,685,652, (2) principal payments on loans payable of $23,829,335,
(3) amounts paid on U.S. Treasury Notes payable of $316,887 and (4) amounts in
restricted cash of $222,000, compared to net cash used in financing activities
of $10,657,906 for the year ended December 31, 1996, which included (1)
distributions of $666,622 to Series A Preferred Stock holders, (2) principal
repayments of $7,586,850 on mortgages and notes payable, (3) proceeds of
$14,522,045 from loans payable, (4) principal payments of $18,143,665 on loans
payable and (5) proceeds of $1,217,186 received on U.S. Treasury Notes payable.
Liquidity and Capital Resources
The Company, as the holder of 44,550 shares of Series C Redeemable
Preferred Shares of Kranzco Realty Trust, a Maryland real estate investment
trust ("Kranzco") as of December 31, 1998, received from the redemption of such
shares, in one installment on January 29, 1999, an aggregate amount of cash
equal to approximately $445,500, plus interest at the rate of 8% per annum on
the applicable outstanding balance of such shares. Such redemption payment
liquidated the Company's holdings of the Kranzco Series C Redeemable Preferred
Shares, and accordingly, the Company is not entitled to future redemption
payments on such shares.
The Underlying Debt on the Quincy Property came due in July 1998.
Beginning July 1998, the mortgagor on the Underlying Debt did not demand payment
while the Partnership, which owns the Quincy Property, attempted to sell the
Quincy Property. Although the Underlying Debt on the Quincy Property has not
been satisfied, regular monthly debt payments have been made by the Company
through March 1999. On March 1, 1999, the mortgagor of the Underlying Debt sent
a demand letter seeking to collect the outstanding balance of the Underlying
Debt of approximately $2,910,000.
30
<PAGE>
The Underlying Debt of approximately $850,000 on the Fee Property
located in Zanesville, Ohio (the "Zanesville Property") came due in October 1998
and the mortgagor on the Underlying Debt extended the balance due to May 1999.
The Company is currently seeking to refinance the Zanesville Property.
The Company's existing borrowings and the encumbrances on the
properties securing those borrowings may inhibit or result in increased costs to
the Company in connection with its ability to incur future indebtedness and/or
raise substantial equity capital in the marketplace.
The Company has invested available funds in secure, short-term,
interest bearing investments. The Company believes that its levels of working
capital, liquidity and funds from operations are sufficient to support present
operations and make any payments required by the Winston Settlement.
As a result of, and in connection with, the settlement of the Winston
Actions, the Company expects to disburse cash of approximately $10.5 million,
including payments of the settlement consideration to Series A Preferred
Stockholders, fees of the plaintiff's and defendant's lawyers, court and
Securities and Exchange Commission filing fees, printing costs and other
expenses. Although the expected expenditures of such funds represents a
substantial amount of the Company's cash reserves, the Company believes that it
would have sufficient cash to continue operating in the ordinary course of
business. The Company, however, is considering whether to, and ways it could
raise cash to make additional investments in suitable real estate properties. If
the Company determines to raise additional funds, it may decide to do so through
a public or private sale of debt or equity securities, by conducting rights
offerings, by selling or realizing on assets (including, but not limited to,
sales of its properties and interest in the Wrap Debt), through corporate
borrowings, or by other means. The Company does not currently have any plans
with respect to, and may never decide to do, any of the foregoing. In addition,
the Company has no current understandings or arrangements with respect to
purchasing additional properties.
Other than described herein, management is not aware of any other
trends, events, commitments or uncertainties that will, or are likely to,
materially impact the Company's liquidity.
Impact of Year 2000
The Year 2000 problem arises from the historic use of only two digits
(rather than four) for the designation of a year in date information within
computer programs. If not corrected, any of the Company's equipment or software
programs that perform time sensitive calculations may incorrectly identify the
year 2000 and beyond or not function after December 31, 1999. This could result
in miscalculations or a major failure of certain systems. The Company may also
be vulnerable to the Year 2000 problems of its tenants, financial institutions
or other service vendors and/or other companies with which it conducts business
(e.g., utility companies, etc).
31
<PAGE>
Early in calendar year 1998, the Company developed and initiated a Year
2000 compliance program, including information systems modifications, in an
effort to ensure that its business is not interrupted by the Year 2000 problem.
The Company's Year 2000 compliance program is broken into the following
components:
Renovating internal systems and applications and ensuring compliance of
peripheral third party systems. The Company's internal systems and applications
include the accounting system, the lease asset management system and the
operating system (AS 400). The Company uses a number of third party package
systems to supplement its internally developed programs. From time to time, the
Company updates the accounting system and the operating system with upgrades it
receives from the software manufacturers. The software manufacturers have
informed the Company that they will continue to provide all updates necessary
for such systems to be Year 2000 compliant. These software manufacturers have
informed the Company that they anticipate all such upgrades will be provided to
the Company by June 1999. The Company anticipates that it will then be able to
implement by June 1999 such upgrades assuming such upgrades are received by June
1999. The lease asset management system is currently being updated to be Year
2000 compliant by the Company using in-house technology. The Company anticipates
that this upgrade to the lease asset management system to be completed by
September 1999.
Ensuring Year 2000 compliance by external companies that conduct
business with the Company. The Company has contacted all of its major tenants,
which remit rent and other payments to the Company, and the financial
institutions, which process the rental and other payments from major tenants on
behalf of the Company, to inquire about their Year 2000 compliance. The Company
has not received responses from all those contacted, but those who have
responded have not indicated any problems at this time. For those financial
institutions which process payroll electronically, which debits the Company's
bank account and credits the employees' bank accounts, the Company will be
conducting tests to determine Year 2000 compliance. These tests are expected to
be completed by September 1999. If such financial institutions are not Year 2000
compliant by December 31, 1999, it is possible that employees will not receive
direct deposit pay, or the correct amount of such pay, or that the Company's
bank accounts will be debited incorrect amounts of money.
Implementing standards and conducting testing in an effort to ensure
that the Company's existing and future systems are Year 2000 compliant. All new
systems, whether hardware or software, are tested before implementation in an
effort to ensure Year 2000 compliance.
The Company believes that the total cost of its Year 2000 compliance
program will not exceed $50,000. To date, the Company has incurred approximately
$10,000 of such expenses which includes hardware and software purchases and
upgrades. The Company does not anticipate that the costs of any required
modifications to its information technology or embedded technology systems will
have a material adverse effect on its financial position, results of operations
or liquidity, although there can be no assurances that this will be the case.
32
<PAGE>
Although the Company believes it will have its own systems compliant
prior to September 1999, there can be no assurances that it will be able to do
so nor can there be any assurances that, even if the Company completes timely
its Year 2000 compliance program, the systems, when actually implemented in
full, will work properly independently or in conjunction with the systems of any
third party systems. In addition, the Company would continue to bear the risk of
a material adverse affect, if any, if its third party systems do not
appropriately address their own Year 2000 compliance issues. The Company's
current estimates of the impact of the Year 2000 problem on its operations and
financial results do not include costs and time that may be incurred as a result
of other companies' failure to become Year 2000 compliant on a timely basis,
which costs could be material. There can be no assurance that such other
companies will achieve Year 2000 compliance or that any conversions by such
companies to become Year 2000 compliant will be compatible with the Company's
computer and operating systems. The inability of the Company or any of its
material third parties to become Year 2000 compliant in a timely manner could
have a material adverse effect on the Company's financial condition or results
of operations.
In the event that the Company or material third parties fail to
complete their Year 2000 compliance programs successfully and on time, the
Company's ability to operate its business, service tenants, bill, collect its
revenue in a timely manner, pay debts and communicate generally could be
adversely affected. Although there can be no assurance that the conversion of
the Company's systems will be successful or that the Company's key third-party
relationships will have successful conversion programs, management does not
expect that any such failure would have a material adverse effect on the
financial position, results of operations or liquidity of the Company, although
there can be no assurances that this will be the case.
The Company has day-to-day operational contingency plans, and
management is in the process of updating these plans for possible Year 2000
specific operational requirements. If the Company's major tenants, financial
institutions or third party systems are not Year 2000 compliant, it may have to
arrange for alternative sources of services in the fall of 1999 in preparation
for the Year 2000. The Company does not have any other contingency plans with
respect to other problems that could arise in its business as a result of the
Year 2000 problem. Any of these could have a material adverse effect on the
Company's financial condition or results of operations.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
At December 31, 1998, the Company was not invested in any market risk
sensitive instruments held for either trading purposes or for purposes other
than trading. As a result, the Company is not subject to interest rate risk,
foreign currency exchange rate risk, commodity price risk, or other relevant
market risks, such as equity price risk.
Item 8. Financial Statements and Supplementary Disclosure.
The Company's Consolidated Financial Statements and the notes thereto
appear in Item 14 of this report.
33
<PAGE>
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.
On October 28, 1998, the Company terminated its relationship with the
accounting firm of Deloitte & Touche LLP as independent auditor of the Company's
financial statements. The termination of the relationship with Deloitte & Touche
LLP was not the result of any disagreements between the Company and Deloitte &
Touche LLP on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure. On November 2, 1998, the
Company retained the accounting firm of Ahearn, Jasco + Company, P.A. as its new
independent auditor to audit the Company's financial statements for the fiscal
year ending December 31, 1998. The decision to change accounting firms as the
Company's independent auditor to audit the Company's financial statements was
approved by the Audit Committee of the Company's Board of Directors on October
27, 1998.
For further information regarding the termination of the relationship
with of Deloitte & Touche LLP and the retention of Ahearn, Jasco + Company, P.A.
as the Company's independent auditor, see the Current Report on Form 8-K filed
by the Company with the Commission on November 4, 1998.
34
<PAGE>
PART III
Certain information required by Part III is omitted from this report
since the Company plans to file with the Securities and Exchange Commission a
definitive proxy statement for its 1999 Annual Meeting of Stockholders (the
"Proxy Statement") no later than 120 days after the end of the fiscal year
covered by this report, and certain information included therein is incorporated
herein by reference.
Item 10. Directors and Executive Officers of the Registrant.
The information regarding the Company's directors required by this Item
is incorporated by reference to the section in the Proxy Statement entitled
"Election of Directors."
The information regarding the Company's executive officers required by
this Item is incorporated by reference to the sections in the Proxy Statement
entitled "Election of Directors" and "Executive Officers."
The information regarding compliance with Section 16(a) of the
Securities Exchange Act of 1934 by the directors, executive officers and
beneficial owners of more than 10% of the Common Stock or the Series A Preferred
Stock required by this Item is incorporated by reference to the section in the
Proxy Statement entitled "Section 16(a) Beneficial Ownership Reporting
Compliance."
Item 11. Executive Compensation.
The information regarding compensation of directors and executive
officers of the Company required by this Item is incorporated by reference to
the section in the Proxy Statement entitled "Executive Compensation" and
"Compensation of Directors."
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information regarding security ownership of certain beneficial
owners and management required by this Item is incorporated by reference to the
section in the Proxy Statement entitled "Security Ownership of Certain
Beneficial Owners and Management."
Item 13. Certain Relationships and Related Transactions.
The information regarding certain relationships and related
transactions required by this Item is incorporated by reference to the sections
in the Proxy Statement entitled "Compensation Committee Interlocks and Insider
Participation" and "Certain Relationships and Related Transactions."
35
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K.
(a)(1) Financial Statements and Financial Statement Schedule.
The following consolidated financial statements of the Company are filed as part
of this report:
Page
Independent Auditor's Report of Ahearn, Jasco + Company, P.A. F-1
Independent Auditor's Report of Deloitte & Touche, LLP F-2
Consolidated Balance Sheets - December 31, 1998 and 1997 F-3
Consolidated Statements of Revenues and Expenses -
Years Ended December 31, 1998, 1997 and 1996 F-4
Consolidated Statements of Comprehensive Loss -
Years Ended December 31, 1997 and 1996 F-5
Consolidated Statements of Stockholders' Equity -
Years Ended December 31, 1998, 1997 and 1996 F-6
Consolidated Statements of Cash Flows -
Years Ended December 31, 1998, 1997 and 1996 F-7
Notes to Consolidated Financial Statements F-9
(a)(2) Financial Statement Schedule.
Schedule III Real Estate and Accumulated Depreciation S-1
This financial statement schedule of the Company for each of the
years ended December 31, 1998, 1997 and 1996 is filed as part of
this Form 10-K and should be read in conjunction with the
Consolidated Financial Statements, and related notes thereto, of
the Company. All other financial statement schedules have been
omitted because the required information is not present or not
present in amounts sufficient to require submission of the
schedule or because the information required is included in the
consolidated financial statements or notes thereto.
(a)(3) Exhibits.
The exhibits to this report are listed below:
36
<PAGE>
Exhibit Description
3.1 Certificate of Amendment to Certificate of Incorporation of the
Company, filed on December 18, 1990 (incorporated by reference to Exhibit 3.1 to
the Company's Form 10- K filed with the Commission on March 29, 1991).
4.1 Certificate of Designations of $.78 Convertible Series A Preferred
Stock of the Company, filed on December 18, 1990 (incorporated by reference to
Exhibit 4.1 to the Company's Form 10-K filed with the Commission on March 29,
1991).
4.2 Certificate of Amendment to Certificate of Designations of $.78
Convertible Series A Preferred Stock of the Company filed on June 9, 1994
(incorporated by reference to Exhibit 4.5 to the Company's Form 10-QSB filed
with the Commission on August 15, 1994).
4.3 Specimen form of Common Stock Certificate (incorporated by reference to
Exhibit 4.2 to the Company's Form 10-K filed with the Commission on March 29,
1991).
4.4 Specimen form of $.78 Convertible Series A Preferred Stock Certificate
(incorporated by reference to Exhibit 4.3 to the Company's Form 10-K filed with
the Commission on March 29, 1991).
4.5 Rights Agreement, dated as of March 31, 1993, between the Company and
The Bank of New York, as Rights Agent (incorporated by reference to Exhibit 1 to
the Company's Form 8-A filed with the Commission on March 31, 1993).
10.1 Amended indemnification agreement between the Company and related
parties (incorporated by reference to Exhibit 19.2 to the Company's Form 10-Q
filed with the Commission on May 14, 1992).
10.2 Second amended and restated management and reimbursement agreement
between the Company and Concord (incorporated by reference to Exhibit 19.3 to
the Company's Form 10-KSB filed with the Commission on March 30, 1993).
10.3 Purchase money promissory note purchase money mortgage and security
agreement with The Benderson 85-1 Trust for the Tonawanda, New York, property
(incorporated by referenced to Exhibit 10.33 to the Company's Form 10-QSB filed
with the Commission on August 14, 1993).
10.4 1993 Employee Stock Option Plan (incorporated by reference to Exhibit
10.2 to the Company's Form 10-KSB filed with the Commission on March 31, 1994).
10.5 1993 Non-Employee Director Stock Option Plan (incorporated by
reference to Exhibit 10.21 to the Company's Form 10-KSB filed with the
Commission on March 31, 1994).
37
<PAGE>
Exhibit Description
10.6 Property Management Agreement, dated November 20, 1995, between the
Company and Milestone Property Management , Inc. (incorporated by reference to
Exhibit 10.31 to the Company's Form 10-KSB filed with the Commission on March
30, 1996).
10.7 Stipulation and Agreement of Settlement dated August 5, 1998, by and
among John Winston and Leonard S. Mandor, Robert A. Mandor, Joan LeVine, Harvey
Jacobson, Gregory McMahon, Geoffrey S. Aaronson, Milestone Properties, Inc. and
Concord Assets Group, Inc. (incorporated by reference to Exhibit 10.01 to the
Company's Form 8-K filed with the Commission on August 14, 1998).
10.8 Third Amendedment of Management Agreement dated January 1, 1998
between the Company and Concord (filed herewith).
10.9 Employment Agreement dated January 1, 1999, entered into between the
Company and Leonard S. Mandor (filed herewith).
10.10 Employment Agreement dated January 1, 1999, entered into between the
Company and Robert A. Mandor (filed herewith).
10.11 Employment Agreement dated January 1, 1999, entered into between the
Company and Harvey Shore (filed herewith).
10.12 Employment Agreement dated January 1, 1999, entered into between the
Company and Joseph P. Otto (filed herewith).
10.13 Employment Agreement dated January 1, 1999, entered into between the
Company and Patrick S. Kirse (filed herewith).
10.14 Description of Management Incentive Plan (filed herewith)
10.15 Description of Long Term Incentive Plan (filed herewith)
21 Subsidiaries of the Company.
27 Financial Data Schedule Article 5 included for Electronic Data
Gathering, Analysis and Retrieval (EDGAR) purposed only. This Schedule contains
financial information extracted from the consolidated balance sheet and
consolidated statements of revenues and expenses and is qualified in its
entirety by reference to such financial statements.
(b) Reports on Form 8-K.
On October 16, 1998, a Current Report on Form 8-K was filed with
the Commission reporting the sale of the South Williamson
property located in South Williamson, Kentucky.
On November 4, 1998, a Current Report on Form 8-K was filed with
the Commission reporting changes in the Company's certifying
accountant.
38
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
MILESTONE PROPERTIES, INC.
By /s/ Leonard S. Mandor
-----------------------
Leonard S. Mandor
Chairman of the Board and
Chief Executive Officer
Date: March 25, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
Signature and Title Date
/s/ Leonard S. Mandor March 25, 1999
- ---------------------
Leonard S. Mandor
Chairman of the Board and Chief Executive Officer
/s/ Robert A. Mandor March 25, 1999
- --------------------
Robert A. Mandor
President, Chief Financial Officer and Director
/s/ Joseph P. Otto March 25, 1999
- ------------------
Joseph P. Otto
Vice President and Director
/s/ Patrick S. Kirse March 25, 1999
- --------------------
Patrick S. Kirse
Vice President of Accounting
(Principal Accounting Officer)
/s/ Geoffrey Aaronson March 25, 1999
- -----------------------
Geoffrey Aaronson
Director
/s/ Harvey Jacobson March 25, 1999
- ----------------------
Harvey Jacobson
Director
/s/ Gregory McMahon March 25, 1999
- ---------------------
Gregory McMahon
Director
<PAGE>
INDEPENDENT AUDITORS' REPORT
Milestone Properties, Inc.:
We have audited the accompanying consolidated balance sheet of Milestone
Properties, Inc. and subsidiaries (the "Company") as of December 31, 1998, and
the related consolidated statements of revenues and expenses, stockholders'
equity and cash flows for the year then ended. Our audit also included the
financial statement schedule of real estate and accumulated depreciation. These
consolidated financial statements and the financial statement schedule of real
estate and accumulated depreciation are the responsibility of the Company's
management. Our responsibility is to express an opinion on the consolidated
financial statements and the financial statement schedule of real estate and
accumulated depreciation based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall consolidated
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Milestone Properties, Inc. and subsidiaries at December 31, 1998, and the
results of their operations and their cash flows for the year then ended in
conformity with generally accepted accounting principles. Also, in our opinion,
the financial statement schedule of real estate and accumulated depreciation,
when considered in relation to the basic financial statements, presents fairly,
in all material respects, the information set forth herein.
/s/ Ahearn, Jasco + Company, P.A.
Pompano Beach, Florida
March 12, 1999
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
Milestone Properties, Inc.:
We have audited the accompanying consolidated balance sheet of Milestone
Properties, Inc. and subsidiaries (the "Company") as of December 31, 1997 and
the related consolidated statements of revenues and expenses, comprehensive
loss, stockholders' equity and cash flows for the years ended December 31, 1997
and 1996. Our audits also included the information pertaining to 1997 and 1996
contained in the financial statement schedule of real estate and accumulated
depreciation. These consolidated financial statements and financial statement
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on the consolidated financial statements and financial
statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the consolidated financial position of Milestone Properties,
Inc. and subsidiaries at December 31, 1997 and the results of their operations
and their cash flows for the years ended December 31, 1997 and 1996 in
conformity with generally accepted accounting principles. Also, in our opinion,
the information pertaining to 1997 and 1996 contained in such financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.
/s/ Deloitte & Touche, LLP
New York, New York
March 20, 1998
F-2
<PAGE>
MILESTONE PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997
ASSETS
Current Assets:
<S> <C> <C>
Cash and cash equivalents $ 11,826,301 $ 13,435,237
Restricted cash 222,000 222,000
Loans receivable 1,444,442 1,512,744
Accounts receivable 812,555 1,265,625
Accrued interest receivable 5,185,432 8,465,528
Due from related party 843,085 391,851
Prepaid expenses and other 1,200,978 1,034,613
---------- ----------
Total current assets 21,534,793 26,327,598
Property, improvements and equipment, net 21,517,884 19,610,060
Wraparound notes, net 39,529,787 59,402,931
Deferred income tax asset, net 2,994,070 4,058,358
Investments in preferred stock 445,500 2,228,600
Management contract rights, net 193,600 290,926
Goodwill and other, net 706,562 304,639
-------- -------
Total assets $ 86,922,196 $ 112,223,112
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities:
Accounts payable and accrued expenses $ 2,466,590 $ 2,015,942
Accrued litigation payable 9,692,454 0
Accrued interest payable 306,846 259,116
Master lease payable 8,933,202 13,637,564
Current portion of mortgages and notes payable 5,782,950 38,456,766
Income taxes payable 2,836,496 2,822,119
--------- ---------
Total current liabilities 30,018,538 57,191,507
Mortgages and notes payable 42,194,179 29,282,798
---------- ----------
Total liabilities 72,212,717 86,474,305
---------- ----------
Commitments and Contingencies
Stockholders' equity:
Common stock ($.01 par value, 10,000,000 shares authorized, 4,943,633 and
4,905,959 issued and outstanding in 1998 and 1997, respectively;
692,591 shares in treasury) 49,436 49,060
Preferred stock (Series A $.01 par value, $10 liquidation
preference, 10,000,000 shares authorized, 2,999,707
and 3,033,995 shares issued and outstanding in 1998
and 1997, respectively) 29,997 30,341
Additional paid in surplus 45,497,180 48,105,428
Accumulated deficit (27,426,716) (18,995,604)
Shares held in treasury - at cost (3,440,418) (3,440,418)
----------- -----------
Total stockholders' equity 14,709,479 25,748,807
---------- ----------
Total liabilities and stockholders' equity $ 86,922,196 $ 112,223,112
=============== ===============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
F-3
<PAGE>
MILESTONE PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF REVENUES AND EXPENSES
For the Years Ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997 December 31, 1996
----------------- ----------------- -----------------
REVENUES
<S> <C> <C> <C>
Rent $ 9,747,973 $ 10,280,548 $ 11,382,820
Interest income 8,191,371 13,355,849 17,654,908
Revenue from management company operations 457,546 512,303 976,983
Tenant reimbursements 1,002,691 1,261,217 1,184,462
Management and reimbursement income 83,091 407,286 835,811
Percentage rent 414,875 450,423 266,653
Amortization of discount - available-for-sale
securities 0 313,551 294,079
Unrealized (loss) gain on treasury notes
sold short 0 (316,887) 1,217,186
Gain on sale of real estate and real estate
related assets 5,617,844 316,061 260,239
Gain (loss) on sale of available-for-sale securities 0 3,511,560 (350,699)
----------- ---------- ---------
Total revenues 25,515,391 30,091,911 33,722,442
---------- ----------- -----------
EXPENSES
Master lease expense 12,359,713 13,787,465 15,008,723
Interest expense 5,474,451 9,119,554 11,961,780
Depreciation and amortization 913,527 847,385 783,401
Valuation allowance on wraparound notes 0 2,590,132 189,853
Salaries, general and administrative 2,873,482 3,955,434 3,538,634
Property expenses 1,682,791 1,718,346 2,018,249
Expenses for management company operations 1,031,690 1,304,166 1,281,317
Professional fees 1,273,555 921,394 1,061,021
Settlement fees 7,084,238 0 0
---------- ----------------- ----------------
Total expenses 32,693,447 34,243,876 35,842,978
----------- ----------- -----------
Loss before income taxes (7,178,056) (4,151,965) (2,120,536)
Provision (benefit) for income taxes 1,253,056 (721,234) 366,438
---------- --------- --------
Net loss attributable to common stockholders $ (8,431,112) $ (3,430,731) $ (2,486,974)
============== ============== ==============
Loss per common share, basic and diluted $ (1.99) $ (0.82) $ (0.65)
================== ================== ==================
Weighted average common shares outstanding 4,235,245 4,206,550 3,845,546
============== ============= ==============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
F-4
<PAGE>
MILESTONE PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
For the Years Ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1996
----------------- -----------------
<S> <C> <C>
Net loss attributable to common stockholders $ (3,430,731) $ (2,486,974)
----------- ------------
Other comprehensive loss, net of tax:
Unrealized gain (loss) on securities:
Unrealized gain (loss) arising during period
[net of tax provision (benefit) of $1,404,624
and $(568,030) in 1997 and 1996, respectively] 3,511,560 (1,420,077)
Less: Reclassification adjustment for (gain)
loss included in net income [net of tax provision
(benefit) of $1,404,624 and $(140,280) in
1997 and 1996, respectively] (3,511,560) 350,699
----------- -------
Other comprehensive loss 0 (1,069,378)
---------------- -----------
Comprehensive loss $ (3,430,731) $ (3,556,352)
============ ============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
F-5
<PAGE>
MILESTONE PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the Years Ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
Common Stock Preferred Stock Treasury Stock
Shares Cost Shares Cost Shares Cost
========================================= =========== =========== =========== =========== =========== =============
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995 4,483,427 $44,835 3,418,555 $34,186 (692,591) $(3,440,418)
Conversion of preferred stock into common stock 259,728 2,598 (236,371) (2,364)
Net loss for the year ended December 31, 1996
Unrealized holding loss - available-for-sale
securities
----------- ----------- ----------- ----------- ----------- -------------
Balance, December 31, 1996 4,743,155 47,433 3,182,184 31,822 (692,591) (3,440,418)
----------- ----------- ----------- ----------- ----------- -------------
Conversion of preferred stock into common stock 162,804 1,627 (148,189) (1,481)
Net loss for the year ended December 31, 1997
Realization of unrealized holding loss - available-
for-sale securities
----------- ----------- ----------- ----------- ----------- -------------
Balance, December 31, 1997 4,905,959 49,060 3,033,995 30,341 (692,591) (3,440,418)
----------- ----------- ----------- ----------- ----------- -------------
Conversion of preferred stock into common stock 37,674 376 (34,288) (344)
Reserve for preferred stock settlement repurchase
Net loss for the year ended December 31, 1998
----------- ----------- ----------- ----------- ----------- -------------
Balance, December 31, 1998 4,943,633 $ 49,436 2,999,707 $ 29,997 (692,591) $(3,440,418)
=========== =========== =========== =========== =========== =============
</TABLE>
<TABLE>
<CAPTION>
Additional Unrealized holding
paid in gain (loss) on Accumulated Stockholders'
Surplus available-for-sale deficit equity
========================================= =============== ================== ============== ==============
<S> <C> <C> <C> <C>
Balance, December 31, 1995 $ 48,105,809 $848,982 $(13,077,899) $32,515,495
Conversion of preferred stock into common stock (234) 0
Net loss for the year ended December 31, 1996 (2,486,974) (2,486,974)
Unrealized holding loss - available-for-sale
securities (1,069,378) (1,069,378)
--------------- ------------------ -------------- --------------
Balance, December 31, 1996 48,105,575 (220,396) (15,564,873) 28,959,143
--------------- ------------------ -------------- --------------
Conversion of preferred stock into common stock (146) 0
Net loss for the year ended December 31, 1997 (3,430,731) (3,430,731)
Realization of unrealized holding loss - available-
for-sale securities 220,396 220,396
--------------- ------------------ -------------- --------------
Balance, December 31, 1997 48,105,428 0 (18,995,604) 25,748,807
--------------- ------------------ -------------- --------------
Conversion of preferred stock into common stock (32) 0
Reserve for preferred stock settlement repurchase (2,608,216) (2,608,216)
Net loss for the year ended December 31, 1998 (8,431,112) (8,431,112)
--------------- ------------------ -------------- --------------
$ 45,497,180 $ 0 $(27,426,716) $14,709,479
Balance, December 31, 1998 =============== ================== ============== ==============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
F-6
<PAGE>
MILESTONE PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997 December 31, 1996
----------------- ----------------- -----------------
CASH FLOW FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net loss $ (8,431,112) $ (3,430,731) $ (2,486,974)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 913,527 847,385 783,401
Deferred taxes 1,064,288 (785,479) (280,948)
Litigation and settlement fees 7,084,238 0 0
Valuation allowance on wraparound notes 0 2,590,132 189,853
Unrealized loss (gain) on treasury notes sold short 0 316,887 (1,217,186)
Amortization of discount - available-for-sale securities 0 (313,551) (294,079)
Realized (gain) loss on sale of available-for-sale securities 0 (3,511,560) 350,699
Gain on sale of real estate related assets (5,617,844) (316,061) (260,239)
Changes in operating assets and liabilities
Decrease in accounts receivable 453,070 94,996 26,743
Increase (decrease) in due from related party (451,234) 207,242 (442,959)
Decrease in accrued interest receivable 3,280,096 1,181,358 1,751,144
(Increase) decrease in prepaid expenses and other (671,355) (760,071) 59,044
Increase (decrease) in accrued expenses 450,648 (15,571) 196,295
Increase (decrease) in accrued interest payable 47,730 (880,825) 194,390
Decrease in master lease payable (4,704,362) (807,787) (1,347,380)
(Decrease) increase in income taxes payable 14,377 (428,625) 75,913
Decrease in due to related party 0 (61,688) (81,576)
--------------- ------------- ------------
Net cash used in operating activities (6,567,933) (6,073,949) (2,783,859)
----------- ----------- -----------
CASH FLOW FROM INVESTING ACTIVITIES
Principal repayments on loans receivable 68,302 171,841 53,460
Principal repayments on wraparound notes 5,190,630 4,578,169 4,764,404
Investment in wraparound notes (108,838) (81,934) (45,550)
Purchase of building and land (18,515,000) (1,100,000) 0
Purchase of leasehold improvements (484,209) (263,153) (213,186)
Proceeds from realization of real estate related assets 19,407,819 5,258,708 4,325,177
Proceeds from the sale of real estate assets 17,379,628 0 0
Proceeds from sale of available-for-sale securities 0 36,360,354 23,201,402
Proceeds from redemption of investments in preferred stock 1,783,100 1,730,833 2,541,667
Purchase of available-for-sale securities 0 0 (20,142,060)
Proceeds from treasury notes sold short 0 0 13,989,844
Proceeds from redemption of reverse repurchase agreements 0 35,035,636 9,203,125
Purchase of treasury notes 0 (34,269,233) (9,143,750)
Purchase of reverse repurchase agreements 0 0 (14,513,435)
-------------------- ------------------- ------------
Net cash provided by investing activities 24,721,432 47,421,221 14,021,098
------------ ------------ ------------
</TABLE>
F-7
<PAGE>
MILESTONE PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(continued)
For the Years Ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997 December 31, 1996
----------------- ----------------- -----------------
CASH FLOW FROM FINANCING ACTIVITIES
<S> <C> <C> <C>
Distributions paid to preferred stockholders 0 0 (666,622)
Proceeds from mortgages and notes payable 18,749,000 0 0
Principal payments on mortgages and notes payable (38,511,435) (6,685,652) (7,586,850)
Proceeds from loans payable 0 0 14,522,045
Principal payments on loans payable 0 (23,829,335) (18,143,665)
Amounts (paid) received on treasury notes payable 0 (316,887) 1,217,186
Amounts in restricted cash 0 (222,000) 0
------------------ --------------- -------------------
Net cash used in financing activities (19,762,435) (31,053,874) (10,657,906)
------------ ------------ ------------
NET (DECREASE) INCREASE IN
CASH AND CASH EQUIVALENTS (1,608,936) 10,293,398 579,333
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 13,435,237 3,141,839 2,562,506
---------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 11,826,301 $ 13,435,237 $ 3,141,839
============= ============= ==============
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION
Cash paid during the period for interest $ 5,426,721 $ 10,000,379 $ 11,767,390
============== ============= =============
Cash paid during the period for income taxes $ 174,396 $ 854,429 $ 451,986
=============== =============== ===============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
F-8
<PAGE>
MILESTONE PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Basis of Presentation
Milestone Properties, Inc. ("Milestone"), directly and through its wholly owned
subsidiaries, is engaged in the business of owning, acquiring, managing,
developing and investing in commercial real estate and real estate related
assets. Milestone, together with its subsidiaries, is hereinafter referred to as
the "Company". Milestone was incorporated on November 30, 1989 under the laws of
the state of Delaware. On December 18, 1990, the Concord Milestone Income Fund,
L.P. ("CMIF") and Concord Milestone Income Fund II, L.P. ("CMIF II")
(collectively, the "Predecessor Partnerships") were merged with and into the
Company (the "Merger"). In the Merger, the Company succeeded to the business and
operations of the Predecessor Partnerships and the partnership interest in the
Predecessor Partnerships were converted into shares of Milestone's common stock,
par value $.01 per share (the "Common Stock"), and Milestone's $.78 Convertible
Series A preferred stock, par value $.01 per share (the "Series A Preferred
Stock"), having a $10 liquidation preference.
In October 1995, the Company entered into various agreements with affiliates of
Concord Assets Group, Inc., a New York Corporation ("Concord"), pursuant to
which the Company acquired (the "Acquisition") certain real estate related
assets for approximately $700,000 in cash and approximately 2,545,000 share of
Common Stock. The Acquisition was treated in a manner similar to a pooling of
interests, and therefore the assets and liabilities have been transferred at the
historical cost basis of Concord.
In October 1995, the Company also completed the transfer (the "Transfer") of 16
of its retail properties (the "UPI Properties") to its then wholly-owned
subsidiary Union Properties Investors, Inc. ("UPI"). UPI was then re-capitalized
and spun-off in November 1995 when the Company distributed all of the
outstanding shares of common stock of UPI to the Company's Common Stockholders
(the "Distribution"). On February 27, 1997, UPI was merged (the "UPI Merger")
into a wholly-owned subsidiary of Kranzco Realty Trust, a Maryland real estate
investment trust ("Kranzco"). In connection with the UPI Merger, UPI terminated
its property management and management services agreements with the Company.
2. Summary of Significant Accounting Policies
Business
The Company is primarily engaged in a single business industry, commercial real
estate, which involves the ownership, operation and management of 35 interests
in commercial real estate properties consisting of (i)10 fee interests (the "Fee
Properties") and (ii) wraparound notes (the "Wraparound Notes") and wraparound
mortgages (the "Wraparound Mortgages" and, together with the Wraparound Notes,
the "Wrap Debt") which are secured by 25 commercial real properties (the
"Underlying Properties" and, together with the Fee Properties, the
"Properties"). The Company is also the master lessee (the "Master Lessee") under
individual leases (the "Master Leases") on each of the Underlying Properties.
The Properties are located in 15 states through the United States. The Company
also invests directly in real estate and real estate related assets.
F-9
<PAGE>
Principles of Consolidation
The consolidated financial statements include the accounts of Milestone
Properties, Inc. and its subsidiaries. Inter-company accounts and transactions
have been eliminated in the consolidated financial statements.
Basis of Accounting, Fiscal Year
The Company's records are maintained on an accrual basis of accounting for both
financial and tax reporting purposes. The Company's fiscal year is the calendar
year.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with a maturity of
three months or less to be cash equivalents. The carrying value of these
investments approximates fair market value. The Company has restricted cash of
$222,000 at December 31, 1998, as a compensating balance for a Letter of Credit
related to a guarantee of performance associated with the lease of office space
for the Company's corporate offices. Restricted cash is held in an interest
bearing account and becomes available for general operating purposes of the
Company on December 31, 2000. Currently, no amounts are outstanding on the
Letter of Credit.
Available-for-Sale Securities
Gains and losses relating to available-for-sale securities are excluded from
earning and reported as a separate component of stockholders' equity, net of tax
effect, until such amounts are generally realized through the sale or redemption
of the securities. Realized gains and losses are determined based on the
specific identification method. At December 31, 1998 and 1997 there were no
gains or losses associated with the available-for-sale securities that were
excluded from earnings and reported as a separate component of stockholders'
equity.
For the year ended December 31, 1998 there were no components of Comprehensive
Income as defined by Financial Accounting Standards Board Statement of Financial
Accounting Standards No. 130 "Reporting Comprehensive Income" ("SFAS No. 130").
As a result, no comprehensive income statement has been presented.
F-10
<PAGE>
Property, Improvements and Equipment and Related Depreciation and Amortization
Properties are stated at cost, less depreciation computed on a straight-line
basis over their estimated useful lives of 26.5 - 50 years. The allocation of
costs between land and depreciable assets are based upon estimates made by
management. Building improvements and equipment are stated at cost and
depreciated on a straight-line basis using an estimated useful life of five
years. Leasehold improvements and leasing commissions are amortized on a
straight-line basis over the lesser of the estimated useful life or the
remaining term of the Master Lease.
Investment in Wraparound Notes
The Company assesses at least annually the probability that the amounts
collectible under the contractual terms of each Wraparound Note will equal or
exceed the carrying amount of such Wraparound Note. When management believes
that a Wraparound Note has been impaired, the Company measures impairment based
on the estimated fair value of the underlying collateral, using internal
analysis and independent appraisals when necessary. For the years ended December
31, 1998, 1997 and 1996, the Company provided a valuation allowance of $0,
$2,590,132 and $189,853, respectively.
The Company reviews each of its property investments for possible impairment at
least annually, and more frequently if circumstances warrant. Impairment is
determined to exist when estimated amounts recoverable through future cash flows
from operations on an un-discounted basis is less than the property's carrying
value. If a property is determined to be impaired, it is written down to its
estimated fair value to the extent that the carrying amount exceeds the fair
value of the property. No write downs for impairment of property investments
were recorded in 1998, 1997 and 1996.
The determination of impairment is based, not only upon future cash flows, which
rely upon estimates and assumptions including expense growth, occupancy and
rental rates, but also upon market capitalization and discount rates as well as
other market indicators. The Company believes that the estimates and assumptions
used are appropriate in evaluating the carrying amount of the Company's
Wraparound Notes and Properties. However, changes in market conditions and
circumstances may occur in the near term which would cause these estimates and
assumptions to change, which, in turn, could cause the amounts ultimately
realized upon the sale or other disposition of the Wraparound Notes and
Properties to differ materially from their carrying value. Such changes may also
require future write-downs.
Management Contract Rights and Goodwill
Management contract rights and goodwill are being amortized over a period of
approximately seven years. The amortization for the management contract rights
has been accelerated for those agreements that are terminated prior to the
expiration of the initial lease term.
F-11
<PAGE>
Capital Structure
In February 1997, the Financial Accounting Standards Board issued SFAS No. 129,
"Disclosure of Information about Capital Structure" which establishes standards
for disclosing information about an entity's capital structure. SFAS No. 129 was
effective for financial statement periods ending after December 15, 1997. SFAS
No. 129 will not have any material effect on current or prior period financial
statement display presented by the Company. The new standard continues the
previous requirements to disclose certain information about an entity's capital
structure as prescribed by Accounting Principles Board Opinion No. 15 ("APB
15"), "Earnings per Share".
Income Taxes
The Company accounts for income taxes in accordance with the SFAS No. 109,
"Accounting for Income Taxes" which requires the recognition of deferred tax
assets and liabilities at currently enacted tax rates for the expected future
tax benefits or consequences of events that have been included in the financial
statements and tax returns. Deferred taxes are provided for the temporary
differences between the tax basis of the assets and liabilities and the amounts
reported in the financial statements. A valuation allowance is recognized, if
necessary, to reduce the net deferred tax asset to an amount that is more likely
than not to be realized.
Loss per Common Share
The Company has adopted SFAS No. 128, "Earnings per Share" which requires
companies with complex capital structures or common stock equivalents to present
both basic and diluted earnings per share ("EPS") on the face of the income
statement. Basic EPS is calculated as income available to common stockholders
divided by the weighted average number of common shares outstanding during the
period. Diluted EPS is calculated using the "if converted" method for
convertible securities and the treasury stock method for options and warrants as
previously prescribed by APB No. 15, "Earnings per Share." The adoption of SFAS
No. 128 did not have an impact on the Company's reported results.
Basic and diluted earnings per share are based on the same weighted average
number of shares of common stock and common stock equivalents outstanding, which
were 4,235,245, 4,206,550 and 3,845,546 for the years ended December 31, 1998,
1997 and 1996, respectively. Convertible Series A Preferred Stock amounts have
been excluded from the weighted average shares for 1998, 1997 and 1996 as
inclusion would be anti-dilutive. Options to purchase 313,700 shares of common
stock in 1998 and 1997 and 176,000 in 1996, were outstanding at each year end
but were not included in the computation of diluted earnings per share as
inclusion would be anti-dilutive.
F-12
<PAGE>
Reclassifications
Certain prior year amounts have been reclassified to conform with the 1998
financial presentation.
3. Acquisition and Disposition of Real Estate and Real Estate Related Assets
On November 10, 1998, the Company completed the purchase of Lincoln Park, a
46,190 square foot strip mall located in Davie, Florida (Broward County),
from an unrelated third party for $3,840,000. In connection with the purchase,
the Company obtained a $3,219,000 first mortgage loan which bears interest at a
rate of 7.58% per annum. Such first mortgage requires monthly principal and
interest payments of $22,684 based upon a 30 year self liquidating amortization
schedule, with a balloon payment of approximately $2,854,000 due November 1,
2008. The strip mall is currently 97% occupied by local tenants who are
subject to operating leases ranging from one to five years with various renewal
options.
On October 27, 1998, the Company completed the purchase of Pine Crest Square, a
40,408 square foot strip mall located in Fort Lauderdale, Florida (Broward
County), from an unrelated third party for $3,200,000. In connection with the
purchase, the Company obtained a $2,400,000 first mortgage loan which bears
interest at a rate of 7.0% per annum. Such first mortgage requires monthly
principal and interest payments of $15,967 based upon a 30 year self liquidating
amortization schedule, with a balloon payment of approximately $2,063,000 due
November 11, 2008. The strip mall is currently 97% occupied by local
tenants subject to operating leases ranging from one to 19 years with various
renewal options.
On October 13, 1998, the Company completed the purchase of Mandarin Central, a
63,346 square foot strip mall located in Jacksonville, Florida (Duval
County), from an unrelated third party for $4,650,000. In connection with the
purchase, the Company obtained a $3,950,000 first mortgage loan which bears
interest at a rate of 8.0% per annum. Such first mortgage requires monthly
principal and interest payments of $28,984 based upon a 30 year self liquidating
amortization schedule, with a balloon payment of approximately $3,542,000 due
October 1, 2008. The strip mall is currently 93% occupied by local tenants
subject to operating leases ranging from one to 16 years with various renewal
options.
On October 1, 1998, a wraparound note held by the Company on a 285,655 square
foot shopping center property located in South Williamson, Kentucky (the "South
Williamson Property"), was paid as a result of the sale of the South Williamson
Property by its owner, an affiliate of the Company (i.e., the Partnership that
owned the South Williamson Property), to an unrelated third party. In connection
with the sale of the South Williamson Property, the Company, as the Master
Lessee on a Master Lease on the South Williamson Property, canceled such Master
Lease. The negotiated sales price of the South Williamson Property was
approximately $14,874,000 which included acquiring the property subject to the
$14,773,655 remaining balance of the underlying mortgage debt on the South
Williamson Property (which represented approximately 21% of Company's total
liabilities at such time). The wraparound note on the South Williamson Property
represented approximately 13% of the Company's total assets at such time. As a
result of the sale of the South Williamson Property, the payment of the
wraparound note and the satisfaction of the underlying mortgage debt, the
Company realized approximately $100,000 in cash and a book gain of approximately
$4,197,000.
F-13
<PAGE>
On September 21, 1998, a wraparound note held by the Company on a 35,496 square
foot shopping center property located in Vestivia Hills, Alabama (the "Vestivia
Hills Property"), was paid as a result of the sale of the Vestivia Hills
Property by its owner, an affiliate of the Company (i.e., the Partnership that
owned the Vestivia Hills Property), to an unrelated third party. In connection
with the sale of the Vestivia Hills Property, the Company, as the Master Lessee
on a Master Lease on the Vestivia Hills Property, canceled such Master Lease.
The negotiated sale price of the Vestivia Hills Property was approximately
$1,640,000. Of the gross proceeds, $722,638 was used to satisfy the underlying
mortgage debt on the Vestivia Hills Property (which represented approximately 1%
of the Company's total liabilities at such time). The wraparound note on the
Vestivia Hills Property represented approximately 3% of the Company's total
assets at such time. As a result of the sale of the Vestivia Hills Property, the
payment of the wraparound note and the satisfaction of the underlying mortgage
debt, the Company realized net cash proceeds of approximately $875,000 and a
book gain of approximately $338,000.
On September 11, 1998, the Company completed the purchase of Country Grove
Plaza, a 16,642 square foot strip mall located in West Palm Beach, Florida
(Palm Beach County), from an unrelated third party for $1,100,000. In connection
with the purchase, the Company obtained a $880,000 first mortgage loan which
bears interest at a rate of 7.51% per annum. Such first mortgage requires
monthly principal and interest payments of $6,159 based upon a 30 year self
liquidating amortization schedule, with a balloon payment of approximately
$780,150 due September 1, 2008. The strip mall is currently 93% occupied by
local tenants subject to operating leases ranging from one to 13 years with
various renewal options.
On July 15, 1998, the Company completed the purchase of Teeca Plaza, a 22,589
square foot strip mall located in Boca Raton, Florida (Palm Beach County),
from an unrelated third party for $2,075,000. In connection with the purchase,
the Company obtained a $1,800,000 first mortgage loan which bears interest at a
rate of 7.39% per annum. Such first mortgage requires monthly principal and
interest payments of $12,450 based upon a 30 year self liquidating amortization
schedule, with a balloon payment of approximately $1,591,000 due July 1, 2008.
The strip mall is currently 100% occupied by local tenants subject to
operating leases ranging from three to 26 years with various renewal options.
On July 7, 1998, the Company completed the sale of its Mountain View Mall
property located in Bend, Oregon (the "Bend Property") to an unrelated third
party for approximately $17,750,000. The Company realized cash net proceeds from
the sale of approximately $319,200, after paying off the balance of the
underlying first mortgage of $17,065,000 (which represented approximately 23% of
the Company's total liabilities at such time) and used a portion of the funds
for closing costs and net credits to the buyer. At the time of the sale, the
Bend Property represented approximately 17% of the Company's total assets with a
carrying value, net of accumulated depreciation, of approximately $16,482,000.
As a result of the sale, the Company realized a book gain of approximately
$947,000.
F-14
<PAGE>
On April 17, 1998, the Company completed the purchase of Orange Park Shopping
Center, a 21,509 square foot strip mall located in Orange Park, Florida
(Clay County), from an unrelated third party for $1,500,000. In connection with
the purchase, the Company obtained a $1,300,000 first mortgage loan which bears
interest at a rate of 7.39% per annum. Such first mortgage requires monthly
principal and interest payments of $8,992 based upon a 30 year self liquidating
amortization schedule, with a balloon payment of approximately $1,147,600 due
April 1, 2008. The strip mall is currently 90% occupied by local tenants
subject to operating leases ranging from two to six years with various renewal
options.
On April 1, 1998, the Company completed the purchase of Regency Walk Shopping
Center, a 34,436 square foot strip mall located in Jacksonville, Florida
(Duval County), from an unrelated third party for $2,150,000. In connection with
the purchase, the Company obtained a $1,840,000 first mortgage loan which bears
interest at a rate of 7.87% per annum. Such first mortgage requires monthly
principal and interest payments of $13,335 based upon a 30 year self liquidating
amortization schedule, with a balloon payment of approximately $1,643,700 due
May 1, 2008. The strip mall is currently 72% occupied by local tenants
subject to operating leases ranging from two to nine years with various renewal
options.
On February 9, 1998, a wraparound note held by the Company on a 128,864 square
foot shopping center property located in Chili, New York (the "Chili Property"),
was assigned to an unrelated third party for $75,000. The Company, as the master
lessee on a Master Lease on the Chili Property, terminated such Master Lease on
April 30, 1996. The assignment of the wraparound note relieved the Company of
its responsibility to make any payments on the underlying mortgage debt on the
Chili Property. As a result of the assignment of the wraparound note on the
Chili Property and the relief of the Company's obligation to the underlying
mortgage debt, the Company realized net cash proceeds of approximately $75,000
and a book gain of approximately $82,000.
On October 30, 1997, a wraparound note held by the Company on a 87,436 square
foot shopping center property located in Marion, Ohio (the "Marion Property"),
was paid as a result of the sale of the Marion Property by its owner, an
affiliate of the Company (i.e., the partnership that owned the Marion Property),
to an unrelated third party. In connection with the sale of the Marion Property,
the Company, as the Master Lessee on a Master Lease on the Marion Property,
canceled such Master Lease. The negotiated sales price of the Marion Property
was approximately $2,750,000. Of the gross proceeds, $1,770,298 was used to
satisfy the underlying mortgage debt on the Marion Property (which represented
approximately 3% of the Company's total liabilities at such time). The
wraparound note on the Marion Property represented approximately 4% of the
Company's total assets at such time. As a result of the sale of the Marion
Property, the payment of the wraparound note and the satisfaction of the
underlying mortgage debt, the Company realized net cash proceeds of
approximately $986,000 and a book gain of approximately $200,000.
F-15
<PAGE>
On September 24, 1997, the Company completed the purchase of Pine Oak Plaza, a
16,994 square foot strip mall located in Sunrise, Florida (Broward County),
from an unrelated third party for $1,100,000 in cash. On May 1, 1998, the
Company secured a $1,160,000 first mortgage loan which bears interest at a rate
of 7.48% per annum. Such first mortgage loan requires monthly principal and
interest payments of $8,095 based upon a 30 year self liquidating amortization
schedule, with a balloon payment of approximately $1,027,700 due May 1, 2008.
The strip mall is currently 100% occupied by local tenants who are subject
to operating leases ranging from three to 13 years with various renewal options.
As of April, 1996, the Company terminated, by written notice, the Master Lease
associated with the 56,908 square foot shopping center located in Prattville,
Alabama (the "Prattville Property"). In July 1996, the Underlying Debt of
$2,325,000 associated with the Prattville Property came due, and the mortgagor
extended the balance due to December 1996. Although the Underlying Debt
associated with the Prattville Property had not been paid off, regular monthly
debt payments had been made by the Company through February 1997. On March 3,
1997, the mortgagor stated its intention to commence foreclosure proceedings.
June 12, 1997, a wraparound note held by the Company on the Prattville Property
was paid as a result of the foreclosure sale, of the Prattville Property, by the
bank (the holder of the underlying mortgage debt) to an unrelated third party.
As a result of the foreclosure sale by the bank of the Prattville Property, the
payment of the wraparound note and the satisfaction of the underlying mortgage
debt, the Company realized a book gain of approximately $120,000.
As of December 31, 1998 and 1997, the Company did not have any related CMBSs
("CMBSs"), Loans Payable, U.S. Treasury Notes sold short or reverse repurchase
agreements.
From August 1994 to November 1997, the Company bought and subsequently sold
various issues of mortgage loan securitizations which were backed by mortgage
loans on commercial and multi-family dwellings. To facilitate the purchase of
such CMBSs, short term borrowing arrangements ("Loans Payable") were entered
into with the brokers from which CMBSs were purchased. The Company engaged in a
variety of interest rate management techniques in order to attempt to manage the
effective maturity and/or interest rate risks associated with the CMBSs. Such
techniques included selling short U.S. Treasury Notes which were collateralized
by reverse repurchase agreements.
On November 10, 1997, the Company sold its remaining ownership of the CMBSs
consisting of a Nomura Series 1996-MDV B2 certificate (the "MDV Certificate"), a
DLJ 1994-MF11 B2 certificate (the "B2 Certificates"), and a DLJ 1994-MF11 B3
certificate (the "B3 Certificate") (the MDV Certificate, the B2 Certificate and
the B3 Certificate may be referred to collectively herein as the "Certificates")
and repaid the associated Loans Payable. At the time of the sale of the
Certificates, the Company had outstanding U.S. Treasury Note short positions
totaling $25,500,000 associated with the Certificates. In connection with the
sale of the Certificates, the Company closed all such remaining U.S. Treasury
Note short positions. As a result of the sale, the Company realized a book gain
of approximately $3,500,000.
F-16
<PAGE>
On January 23, 1997, the Company sold its ownership of the CMBSs consisting of
the Nomura Series 1994-MD1 B3A (the "MD1 Certificate") and repaid the associated
Loan Payable. At the time of the sale of the MD1 Certificate, the Company had
outstanding U.S. Treasury Note short positions totaling $10,000,000 associated
with the MD1 Certificate. In connection with the sale of the MD1 Certificate,
the Company closed $9,500,000 of U.S. Treasury Note short positions. As a result
of the sale, the Company realized a book loss of approximately $1,100,000.
The Company had $32,314,853 of CMBSs and $23,829,335 of associated Loans Payable
as of December 31, 1996. Additionally, the Company has $33,952,346 of U.S.
Treasury Notes sold short and $34,718,749 of associated reverse repurchase
agreements as of December 31, 1996.
From time to time the Company sells, or may take action to sell, certain real
estate assets which it does not believe to be material to the overall business
or financial condition of the Company.
4. Property, Improvements and Equipment
Property, improvements and equipment at December 31, 1998 and 1997 consisted of
the following:
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997
============================================ ======================== ========================
<S> <C> <C>
Land $ 1,961,500 $ 1,140,000
Building 20,978,628 24,181,311
Leasehold improvements and equipment 1,015,162 692,609
--------- -------
Total, at cost 23,955,290 26,013,920
Less: Accumulated depreciation (2,437,406) (6,403,860)
--------- ---------
Total, net $ 21,517,884 $ 19,610,060
============== ==============
- -------------------------------------------- ------------------------ ------------------------
</TABLE>
5. Investment in Wraparound Notes
Investment in Wraparound Notes represents notes due from limited partnerships
(the "Partnerships") which has previously been syndicated by Concord and certain
of its affiliates. Certain directors and officers of the Company are also
directors, officers and controlling stockholders of the general partner of each
of the Partnerships. The syndication of a Partnership by Concord typically
involved the sale of a property (the "Concord Property") owned by Concord to the
Partnership for cash and certain non-recourse promissory notes (the "Wraparound
Notes"), payment of which was secured by the Underlying Property. The related
Wraparound Notes were subordinate to the Underlying Property Mortgage Debt (the
"Underlying Debt") of the Concord Property. Concord then Master Leases the
Concord Property back from the Partnership for a fixed annual rental fee which
entitled Concord to all rents under the tenant operating leases. Concord was
required to satisfy all other landlord obligations. Pursuant to the Acquisition,
the Company acquired 35 Wraparound Notes, assumed the Underlying Debt and was
assigned the interest in the Master Lease. The Partnerships are obligated to
make fixed payments of principal and interest on certain Wraparound Notes. Such
payments approximate the Master Lease obligations. The payments received by the
Company are used to make the Master Lease payments to the Partnerships.
F-17
<PAGE>
Upon the sale of an Underlying Property, proceeds are initially applied to
satisfy the Underlying Debt, and the balance, to the extent proceeds are
available, is divided between a preferred return to the Partnership's limited
partners and then repayment of the Wraparound Note.
Each of the Wraparound Notes gives the Company a lien on the Underlying Property
as well as the Partnership's interest in the Master Lease. The Wraparound Notes
are subordinate to the Underlying Debt. The Wraparound Notes have maturities
ranging from 1998 to 2016. The scheduled principal receipts of the Wraparound
Notes are as follows (dollar amounts in thousands):
Year Ending December 31st:
=====================================
1999 $ 3,766
2000 20,535
2001 380
2002 418
2003 460
Thereafter (a) 13,971
------
Total $ 39,530
==========
- ------------------ -----------------
a - Excludes $11,202 of the original issue discount.
The following schedule depicts Wraparound Notes which are subordinate to the
Underlying Debt on such properties:
<TABLE>
<CAPTION>
Face Amount of
Interest Final Maturity Mortgage Carrying Amount of Interest Due
Location Closing Date Rate (%) Date Loans Mortgage Loans and Accrued
===================== ============= =========== ============== =============== ==== ===================== ===============
<S> <C> <C> <C> <C> <C> <C>
Deland, FL 10/23/95 9.70 12/31/99 $1,917,696 $1,400,000 $194,513
Rochester, NY 10/23/95 9.70 12/31/14 1,750,529 1,469,375 192,191
10.00 12/31/14 183,567 130,625 0
Pascagoula, MS 10/23/95 9.75 12/31/16 2,035,284 1,190,217 207,549
10/23/95 12.00 12/31/16 187,335 175,125 0
10/01/97 11.00 12/31/16 39,742 34,658 0
01/10/98 11.00 12/31/16 72,328 68,428 0
Janesville, WI 10/23/95 10.25 12/31/15 2,138,975 1,400,001 229,907
02/11/98 11.00 12/31/15 16,584 15,000 0
Marietta, OH 10/23/95 8.32 12/31/14 3,101,392 2,894,642 301,640
10/23/95 11.00 12/31/14 28,548 20,000 0
Mt. Pleasant, PA 10/23/95 9.18 12/31/15 2,498,786 2,287,405 239,245
10/01/97 11.00 12/31/14 14,478 12,626 0
No. Canton, OH 10/23/95 9.11 12/31/14 2,813,466 2,146,933 267,240
10/23/95 11.00 12/31/14 37,589 26,575 0
10/15/96 11.00 12/01/14 32,385 25,650 0
Owensboro, KY 10/23/95 10.00 12/31/15 2,739,304 2,738,751 287,091
4/15/98 11.00 12/31/15 27,217 25,410 0
Quincy, IL 10/23/95 10.00 12/31/98 5,633,307 a 1,885,774 191,973
Natchez, MS 10/23/95 10.00 05/01/08 3,479,370 a 1,228,505 133,969
</TABLE>
F-18
<PAGE>
<TABLE>
<CAPTION>
Face Amount of
Interest Final Maturity Mortgage Carrying Amount of Interest Due
Location Closing Date Rate (%) Date Loans Mortgage Loans and Accrued
===================== ============= =========== ============== =============== ==== ===================== ===============
<S> <C> <C> <C> <C> <C> <C>
Streetsboro, OH 10/23/95 9.68 12/31/14 2,254,317 1,748,954 228,135
10/23/95 11.0 12/31/14 29,643 21,447 0
10/15/96 11.00 12/01/14 24,746 19,600 0
11/07/97 11.00 12/31/14 11,345 10,000 0
Sandy, PA 10/23/95 10.00 12/31/99 2,740,202 a 1,164,620 122,012
Franklin, PA 10/23/95 10.00 12/31/99 2,740,202 a 1,164,620 122,012
Clarksville, TN 10/23/95 9.75 12/31/99 3,379,184 a 1,326,879 135,311
Montgomery, AL 10/23/95 9.75 12/31/99 2,185,302 875,000 222,855
Paris, TN 10/23/95 10.00 12/31/99 3,160,401 1,347,733 330,938
10/23/95 11.00 12/31/99 74,163 51,016 0
Savannah, TN 10/23/95 9.88 12/31/99 1,157,445 430,001 119,619
Danville, IL 10/23/95 9.75 12/31/99 1,764,370 800,001 179,923
Warsaw, VA 10/23/95 9.75 12/31/99 1,373,947 1,017,030 140,115
Southwick, MA 10/23/95 9.75 12/31/99 1,368,587 816,275 139,564
Walpole, NH 10/23/95 9.75 12/31/99 1,368,587 954,564 139,564
Baton Rouge, LA 10/23/95 9.75 12/31/99 4,294,990 3,832,052 437,994
Palatka, FL 10/23/95 9.75 12/31/99 2,288,453 1,607,290 233,379
12/09/98 11.00 12/31/99 27,687 24,650 0
Columbus, NE 10/23/95 9.75 12/31/99 2,376,262 2,111,331 242,328
Hamilton, NY 10/23/95 9.75 12/31/99 1,435,266 1,031,024 146,365
--------- --------- -------
Totals $62,802,981 $39,529,787 $5,185,432
========== ========== =========
- --------------------- ------------- ----------- -------------- --------------- ---- --------------------- ---------------
</TABLE>
a - Includes discount elements totaling in aggregate $11,202,305.
The following schedule represents a roll forward of Wraparound Notes for the
years ended December 31, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
=================================================== ========================== =========================
<S> <C> <C>
Beginning balance $ 59,402,931 $ 71,431,945
Investment in wraparound notes 108,838 81,934
Principal repayments (5,190,630) (4,578,169)
Notes satisfied from property sales (14,791,352) (4,942,647)
Valuation allowance 0 (2,590,132)
---------------- ----------
Ending balance $ 39,529,787 $ 59,402,931
============= ==============
- --------------------------------------------------- -------------------------- -------------------------
</TABLE>
At December 31, 1998 and 1997 the Wraparound Notes had a valuation allowance of
$0 and $2,590,132, respectively. The aggregate carrying value of the Wraparound
Notes adjusted by the valuation allowance is $0 and $12,160,890, respectively.
F-19
<PAGE>
Included in the Wraparound Notes carrying amount is $6,769,960, which represent
the non-discount portion, and $11,202,305, which represents the discount
portion, of certain original issue discount mortgage notes (the "Discount
Notes"). The carrying value of the Wraparound Notes exclude such discount
portion of the Discount Notes. The Partnerships are obligated to make fixed
payments on the non-discount portion of the Discount Notes and are not obligated
to make any principal payments on the discount portion of the Discount Notes.
The Company does not recognize income from the discount portion of the Discount
Notes due to uncertainty regarding the realization of such amounts.
On December 31, 1998 the Wraparound Note on the Underlying Property located in
Quincy, Illinois, (the "Quincy Property") matured. The face amount of the
Wraparound Note on the Quincy Property is approximately $4,904,000, such figure
accounts for the 1998 principal payment of $728,919 which was made in January
1999. The Company, as the holder of the Wraparound Note on the Quincy Property
is currently seeking payment from the Partnership that issued such Wraparound
Note. On March 1, 1999, the mortgagor of the Underlying Debt sent a demand
letter to collect the outstanding balance of approximately $2,910,000 of the
Underlying Debt which had matured in July 1998. In accordance with the terms of
the wraparound mortgages, the Underlying Debt must be satisfied prior to the
Company receiving payment from the Partnership on the Wraparound Note on the
Quincy Property. See the discussion regarding the Quincy Property in the
footnote entitled Leases herein.
The maturity dates of the remaining 39 Wraparound Notes and Wraparound Mortgages
range from December 1999 to December 2016, of which 17 Wraparound Notes and
Wraparound Mortgages are due to mature on December 31, 1999, (the "Maturing Wrap
Debt"). The Company, as the holder of the Maturing Wrap Debt will seek payment
from each Partnership that issued the respective Maturing Wrap Debt. In order
for each such Partnership to make payment, one of the following events may
occur; (i) the Partnership may sell the Underlying Property securing the
respective Maturing Wrap Debt, (ii) the Company, as the holder of a Maturing
Wrap Debt, may obtain ownership of the Underlying Property securing the Maturing
Wrap Debt in lieu of payment on the Maturing Wrap Debt via foreclosure or (iii)
the Company may extend the Maturing Wrap Debt to a future maturity date upon
terms to be determined at that time. See the discussion regarding the Maturing
Wrap Debt in the footnote entitled Leases herein.
6. Investments
On February 27, 1997, UPI was merged (the "UPI Merger") into a wholly owned
subsidiary of Kranzco Realty Trust, a Maryland real estate investment trust
("Kranzco"). In connection with the UPI Merger, the 356,400 shares of UPI
Preferred Stock which the Company owned as of the date of the UPI Merger were
converted into 356,400 shares of Kranzco's Series C Cumulative Redeemable
Preferred Shares (the "Kranzco Series C Shares"). The Company believes that the
terms of the Kranzco Series C Shares are similar to the terms of the UPI
Preferred Stock, because the Kranzco Series C Shares (i) have the same
redemption price and liquidation preference and price ($10 per share) as the UPI
Preferred Stock, (ii) pay cumulative dividends at the rate paid on the UPI
Preferred Stock as of the date of the UPI Merger (8%), and (iii) are required to
be redeemed ratable on a quarterly basis over a two year period from the date of
the UPI Merger, as compared to the UPI Preferred Stock, which was not required
to be redeemed until the year 2002 (although UPI could, at its option, redeem
shares of UPI Preferred Stock at any time).
F-20
<PAGE>
The Company, as the holder of 44,550 shares of Kranzco Series C Redeemable
Preferred Shares as of December 31, 1998, is entitled to receive from the
redemption of such shares, in one installment, an aggregate amount of cash equal
to approximately $445,500, plus interest at the rate of 8% per annum on the
applicable outstanding balance of such shares. Such final redemption payment
liquidated the Company's holdings of Kranzco Series C Redeemable Preferred
Shares, and accordingly, the Company is not entitled to future redemption
payments on such shares.
7. Leases
As Lessor
The Properties have a gross leaseable area of approximately 2,218,645 and
2,642,048 square feet of which approximately 96% and 94% was leased as of
December 31, 1998 and 1997, respectively.
Minimum base rental income under tenant lease agreements relating to the
Properties having remaining lease terms ranging from one to 33 years at December
31, 1998 is as follows (dollars amounts in thousands):
Year Ending December 31st:
====================================
1999 $ 8,258
2000 6,597
2001 5,307
2002 4,276
2003 3,495
Thereafter 8,658
-----
Total $ 36,591
========
- ----------------- ------------------
For the years ended December 31, 1998, 1997 and 1996, no tenant at any
individual property accounted for more than 10% of the Company's total revenue.
However, the total revenue from K- mart Corporation's nine leases with the
Company accounted for approximately 29%, 32% and 30%, respectively, of the
Company's aggregate rent revenue.
As Lessee
Minimum rental expense under the Master Leases, having original lease terms
ranging from 1998 to 2016, at December 31, 1998 is as follows (dollar amounts in
thousands):
Year Ending December 31st:
====================================
1999 $ 7,535
2000 2,370
2001 2,370
2002 2,370
2003 2,370
Thereafter 28,546
------
Total $ 45,561
========
- ----------------- ------------------
Although the Company's lease payments are not contingent upon receiving rent
from the Properties, such payments are expected to be made from such receipts
and the receipt of interest and principal payments from the Wraparound Notes.
<PAGE>
On December 31, 1998, the Master Lease on the property located in Quincy,
Illinois (the "Quincy Property") expired. As a result of such Master Lease
expiration, the Company, as the tenant under such Master Lease, assigned all of
its rights, title and interests in the Quincy Property to Quincy Plaza
Associates, the landlord under such Master Lease and Quincy Plaza Associates
assumed all of the Company's related obligations under such Master Lease.
On December 31, 1998, the Master Lease on the property located in Natchez,
Mississippi (the "Natchez Property") expired. As a result of such Master Lease
expiration, the Company, as the tenant under such Master Lease, assigned all of
its rights, title and interests in the Natchez Property to Quincy II Plaza
Associates, the landlord under such Master Lease and Quincy II Plaza Associates,
assumed all of the Company's related obligations under such Master Lease.
The expiration dates of the remaining 23 Master Leases range from December 1999
to December 2016, of which 15 Master Leases are due to expire on December 31,
1999, (the "Expiring Master Leases"). As a result of the Expiring Master Leases,
the Company, as the tenant under such Expiring Master Leases, may (i) assign all
of its rights, title and interests in the Underlying Properties subject to the
respective Expiring Master Leases to the Partnership, that is the landlord under
the Expiring Master Leases and such Partnership may assume all of the Company's
related obligations under the respective Expiring Master Leases or (ii) may
extend such Expiring Master Leases.
8. Mortgages and Notes Payable
The mortgages and notes payable are non-recourse to the Company and are
collateralized by the Properties. The scheduled principal payments of the
mortgages and notes payable at December 31, 1998 are as follows (dollar amounts
in thousands):
Year Ending December 31st:
====================================
1999 $ 5,783
2000 2,268
2001 2,493
2002 3,872
2003 2,773
Thereafter 30,788
------
Total $ 47,977
========
- ----------------- ------------------
The interest rates on the mortgages and notes payable range from 5.75% to 13.5%.
The mortgage and notes payable and related terms at December 31, 1998 for the
Properties are summarized as follows (dollar amounts in thousands, except as
noted):
F-21
<PAGE>
<TABLE>
<CAPTION>
Principal Monthly Payment
Balance at Interest Provisions (Actual Maturity
Location 12/31/98 Rate (%) Dollars) Date (2)
==================== ============== =============== ================== =============
<S> <C> <C> <C> <C>
Deland, FL $837 8.875 $14,016 4/1/03
Rochester, NY 1,068 9.250 15,992 1/1/02
Janesville, WI 907 9.00 14,060 7/31/02
110 9.00 1,529 8/1/07
Marietta, OH 1,900 5.75 - 6.70 (1) 3/15/07
Mt. Pleasant, PA 1,275 6.50 - 6.80 (1) 5/1/07
No. Canton, OH 2,049 9.00 21,669 9/30/12
Owensboro, KY 1,520 6.50 - 6.80 (1) 12/1/07
Quincy, IL 2,910 7.75 27,912 7/1/98
Natchez, MS 2,191 7.59 15,519 5/1/08
Streetsboro, OH 1,285 6.35 - 6.70 (1) 12/1/06
Sandy, PA 1,395 7.00 (1) 12/1/06
Franklin, PA 1,385 6.00 (1) 12/15/07
Clarksville, TN 1,450 6.00 -6.80 (1) 10/1/06
Montgomery, AL 1,213 8.75 14,500 4/1/07
Paris, TN 563 13.50 8,859 4/1/08
356 9.25 8,467 7/1/03
Savannah, TN 273 9.50 6,612 1/31/03
Danville, IL 402 9.625 9,663 9/1/02
Warsaw, VA 787 13.125 11,373 10/1/09
Southwick, MA 764 11.50 9,857 9/1/09
Walpole, NH 764 11.50 9,857 9/1/09
Baton Rouge, LA 1,902 12.00 33,583 12/1/05
Sunrise, FL 1,155 7.48 8,095 5/1/08
Jacksonville, FL 1,833 7.87 13,335 5/1/08
Orange Park, FL 1,294 7.39 8,992 4/1/08
Boca Raton, FL 1,795 7.39 12,450 7/1/08
West Palm Beach, FL 879 7.51 6,159 9/1/08
Jacksonville, FL 3,947 8.00 28,984 10/1/08
Ft. Lauderdale, FL 2,398 7.00 15,967 11/11/08
Davie, FL 3,219 7.58 22,684 11/1/08
Palatka, FL 1,130 12.00 17,247 11/1/07
Columbus, NE 1,317 12.00 17,201 9/1/10
62 9.50 697 7/1/11
Hamilton, NY 792 13.125 11,373 12/1/09
Zanesville, OH 850 9.50 14,295 5/31/99
---
Total $47,977
- -------------------- -------------- --------------- ------------------ -------------
</TABLE>
F-22
<PAGE>
(1) Principal and interest are paid semi annually in accordance with the
bond documents.
(2) Certain mortgages and notes contain various terms regarding
prepayment penalties.
The following schedule represents a reconciliation of the mortgages and notes
payable for the years ended December 31, 1998 and 1997:
1998 1997
==================================== ================== ==================
Balance at January 1st $ 67,739,564 $ 74,425,216
Principal repayments (38,511,435) (6,685,652)
Proceeds from loans 18,749,000 0
---------- -------------------
Balance at December 31st $ 47,977,129 $ 67,739,564
============ ==============
- ------------------------------------ ------------------ ------------------
9. Capital Stock
The authorized capital stock of the Company consists of 10,000,000 shares of
Common Stock and 10,000,000 shares of Series A Preferred Stock.
The shares of Common Stock are entitled to one vote per share. The Series A
Preferred Stock has limited voting rights. The Series A Preferred Stock has a
$10.00 liquidation preference and has a preferential right to receive a
quarterly dividend of $0.195 per share before dividends can be paid on the
Common Stock.
On December 21, 1995, the conversion ratio for the Series A Preferred Stock was
adjusted to provide for the receipt of one share of Common Stock upon the
conversion of .91 shares of Series A Preferred Stock. Previously, the conversion
ratio was 1.6 shares of Series A Preferred Stock for one share of Common Stock.
The new conversion ratio, which was effective as of November 1, 1995, was
determined pursuant to the Certificate of Designations for the Series A
Preferred Stock, which required the adjustment to be made in connection with the
Distribution.
After September 30, 1995, holders of the Series A Preferred Stock having a
liquidation preference of $10.00 per share, were no longer entitled to receive
dividends on a cumulative basis. Pursuant to the Certificate of Designations of
the Series A Preferred Stock, after such date, no cash dividend may be paid on
the Common Stock unless full dividends of $0.195 per share on all outstanding
shares of Series A Preferred Stock for the then current quarterly dividend
period are declared and either paid or sufficient sums for the payment thereof
are set apart. As a result of Milestone's Board of Directors' determination not
to declare a dividend for the quarter ended June 30, 1997, which was the sixth
consecutive quarter for which no dividend was declared, the number of persons
entitled to serve as directors on Milestone's Board of Directors was increased
by one, and the holders of the Series A Preferred Stock, who, at that date, only
elected one member of the Board of Directors, were entitled to elect a second
member of the Board of Directors to fill such newly created directorship. Any
decision as to the future payment of dividends on the Series A Preferred Stock
will depend on the results of operations and the financial condition of the
Company and such other factors as Milestone's Board of Directors, in its
discretion, deems relevant.
F-23
<PAGE>
Milestone's Board of Directors determined not declare any dividends on the
Series A Preferred Stock for the years ended December 31, 1998 and 1997. The
last dividend declared by the Company was for the quarter ended December 31,
1995 and was paid on February 15, 1996 at $0.195 per share of Series A Preferred
Stock.
In May 1994, the Common Stockholders approved the adoption of the 1993 Employee
Stock Option Plan (the "Employee Stock Option Plan"). The total number of shares
of Common Stock which may be issued pursuant to the exercise of options granted
under the Employee Stock Option Plan is 300,000. The Compensation Committee of
the Board of Directors (the "Compensation Committee") made initial grants in
December 1993 under such plan totaling 146,000 options (the "Initial Grant")
which are exercisable for 146,000 shares of Common Stock at a per option
exercise price of $4.75. In June 1997, the Compensation Committee canceled the
Original Issue and reissued 146,000 options which are exercisable for 146,000
share of Common Stock at a per option exercise price of $0.50. At the same time,
the Compensation Committee granted 154,000 option which are exercisable for
154,000 shares of Common Stock at a per option exercise price of $0.50. Options
granted under the Employee Stock Option Plan expire on the tenth anniversary of
the date of their grant, or upon termination of the grantee's employment with
the Company. During the years ended December 31, 1998, 1997 and 1996, zero,
23,800 and zero such options were canceled upon resignation of an employee,
respectively.
In May 1994, the Common Stockholders also approved the adoption of the 1993
Non-Employee Director Stock Option Plan (the "Non-Employee Director Stock Option
Plan"). Options granted under such plan expire on the tenth anniversary of the
date of their grant, or upon the grantee's removal or resignation from the Board
of Directors. The exercise price for each option granted under the Non-Employee
Director Stock Option Plan is determined be averaging the high and low trading
prices of the Common Stock as reported on either the New York Stock Exchange
(through September 10, 1998) or the Over-The-Counter Bulletin Board (effective
September 11, 1998) on the date of such options. Under the Non-Employee Director
Stock Option Plan, the Company granted 2,500 options to each non-employee
director in each of 1993 (upon adoption of the plan), 1994, 1995, 1996 and 1997,
at a per option exercise price of $4.75, $4.375, $1.375, $1.6875 and $0.50,
respectively. As of December 31, 1998, all of the non-employee director options
granted in 1993 though 1996 are exercisable and one half of the options granted
in 1997 are exercisable. Pursuant to such plan, each non-employee director was
granted 2,500 options upon adoption of such plan in 1994 and is granted 2,500
options at each annual meeting of the stockholders of the Company. No options
were granted to the non-employee directors in 1998 due to the fact that an
annual meeting of the stockholders of the Company was not held in 1998. The
impact on earnings of the fair value of the options granted to has been deemed
insignificant.
F-24
<PAGE>
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock Based
Compensation" ("SFAS" No. 123"). SFAS No. 123 requires expanded disclosure of
stock based compensation arrangements with employees, and encourages, but does
not require compensation cost be measured based on the fair value of the equity
instrument awarded. Companies are permitted to continue to apply Accounting
Principles Board Opinion No. 25 ("APB 25"), which recognizes compensation cost
based on the intrinsic value of the equity instrument awarded. The Company will
continue to apply APB 25 to its stock based compensation awards. Accordingly, no
compensation costs related to employee options have been recognized in the
consolidated financial statements of the Company.
No options were exercised and no options were granted during the years ended
December 31, 1998. The pro form disclosure provisions of SFAS No. 123 for the
year ended December 31, 1998, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
============================ ================= ====================== ================== ======================
<S> <C> <C> <C>
Net Loss As Reported $ (8,431,112) $ (3,430,731) $ (2,486,974)
Pro Forma (8,460,946) (3,443,748) (2,486,974)
Loss per Common Share As Reported $ (1.99) $ (0.82) $ (0.65)
Pro Forma (1.93) (0.79) (0.65)
- ---------------------------- ----------------- ---------------------- ------------------ ----------------------
</TABLE>
For the purposes of providing pro forma disclosures, the fair value of options
granted in 1997 were estimated using the Black Scholes options pricing model
with the following weighted average assumption; (i) a risk free interest rate of
5.06%, (ii) an expected life of one year, (iii) volatility of 52.20% and (iv) no
dividends. The estimated fair value compensation cost of the related options was
amortized to expense over the options' vesting period.
Certain information relating to the options under the Employee Stock Option Plan
and the Non- Employee Director Stock Option Plan during the years ended December
31, 1998, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
============================== ================================ ==============================
Number Weighted Number Weighted Number Weighted
of Average of Average of Average
Options Exercise Price Options Exercise Price Options Exercise Price
================================= =========== ================= ============= ================== =========== =================
<S> <C> <C> <C> <C> <C> <C>
Outstanding at January 1st 313,700 $ 0.74 176,000 $ 4.46 168,500 $ 4.58
Granted 0 n/a 307,500 0.50 7,500 1.6875
Exercised 0 n/a 0 n/a 0 n/a
Forfeited 0 n/a (169,800) 4.15 0 n/a
----------- --------- -----------
Outstanding at December 31st 313,700 $ 0.74 313,700 $ 0.74 176,000 $ 4.46
======= ======= =======
Options exercised at December 31st 0 0 0
- --------------------------------- ----------- ----------------- ------------- ------------------ ----------- -----------------
</TABLE>
F-25
<PAGE>
10. Income Taxes
The provision for income taxes for the years ended December 31, 1998, 1997 and
1996 are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
=============================================== ================== ================= ================
Current Tax:
<S> <C> <C> <C>
Federal $ 0 $ 0 $ 524,317
State and Other 188,768 64,245 123,069
------- ------ -------
Total Current Tax 188,768 64,245 647,386
Deferred Tax:
Federal 904,645 (667,657) (11,894)
State and Other 159,643 (117,822) (269,054)
------- --------- ---------
Total Deferred Tax 1,064,288 (785,479) (280,948)
--------- --------- ---------
Total provision (benefit) for income taxes $ 1,253,056 $ (721,234) $ 366,438
=========== ============= =============
- ----------------------------------------------- ------------------ ----------------- ----------------
</TABLE>
Temporary differences between the amount reported in the consolidated financial
statements and the tax basis of assets and liabilities results in deferred
taxes. There was a change in the valuation allowance for deferred tax assets of
$4,953,862 and $(340,576) for the years ended December 31, 1998 and 1997,
respectively. Realization of the deferred tax asset is dependent, in part, on
generating sufficient taxable income in the future. Although such realization is
not assured, the Company believes that it is more likely than not that the
deferred tax asset not allowanced will be recognized. Should estimates of future
taxable income be reduced the deferred tax asset valuation allowance would be
adjusted accordingly. The Company has a tax net operating loss carry forward of
approximately $13,905,000 at December 31, 1998. Deferred tax assets and
liabilities at December 31, 1998, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
============================================================== ================= ================= =================
Deferred Tax Assets:
<S> <C> <C> <C>
Acquisition Costs $ 880,345 $ 1,025,222 $ 1,078,538
Unrealized holding loss on U.S. Treasury Notes, sold short 0 0 517,553
Principal amortization on Wraparound Notes 1,408,957 2,000,385 2,210,868
Unrealized holding loss on Available-for-Sale securities 0 0 146,531
Allowance on Wraparound Notes 1,380,811 1,380,811 344,758
Net Operating Loss Carryforward 4,953,862 0 0
Other 613,697 880,897 421,409
------- ------- -------
Gross Deferred Tax Assets 9,237,672 5,287,315 4,719,657
Less: Valuation Allowance (5,968,862) (1,015,000) (1,355,576)
----------- ----------- -----------
Deferred Tax Asset, net of valuation allowance 3,268,810 4,272,315 3,364,081
--------- --------- ---------
Deferred Tax Liabilities:
Accelerated depreciation 274,740 213,957 91,208
------- ------- ------
Gross deferred tax liabilities 274,740 213,957 91,208
------- ------- ------
Net deferred tax asset $ 2,994,070 $ 4,058,358 $ 3,272,873
========== ========== ==========
- -------------------------------------------------------------- ----------------- ----------------- -----------------
</TABLE>
F-26
<PAGE>
The provision (benefit) for income tax differs from the amount obtained by
applying the statutory federal income tax rate to pre-tax losses for the
following reasons:
<TABLE>
<CAPTION>
1998 1997 1996
========================================================================= ============ =========== ===========
<S> <C> <C> <C>
Amount computed on pre-tax income (35.0)% (35.0)% (35.0)%
Increase (decrease) in taxes:
From State and other taxes net of Federal tax benefit 4.6 2.1 (5.2)
Valuation allowance 60.4 15.5 55.9
Basis difference on asset dispositions (10.6) 0.0 0.0
Deferred tax adjustments (1.8) 0.0 0.0
Other (0.3) 0.0 0.0
Total 17.3% (17.4)% 17.3%
======= ======= =======
- ------------------------------------------------------------------------- ------------ ----------- -----------
</TABLE>
11. Fair Value of Financial Instruments
The following estimated fair values were determined by the Company using
available market information and valuation methodologies considered appropriate
by management. However, considerable judgement is necessary to interpret and
apply market data to develop specific fair value estimates for given financial
instruments, and the use of different market assumptions and/or estimation
methodologies could have a material effect on reported fair value amounts.
Accordingly, the estimates presented herein are not necessarily indicative of
the amounts that could be realized upon disposition of the Company's financial
instruments.
Cash and cash equivalents, accounts and loan receivables and accounts payable
and accrued expenses are reflected in the consolidated balance sheets at amounts
considered by management to reasonably approximate fair value due to their short
term nature. The Company estimates the fair value of its long term fixed rate
mortgage loans generally using discounted cash flow analysis based on the
Company's current borrowing rates for similar types of debt. At December 31,
1998 and 1997, the carrying value of the notes and mortgages payable and the
fair value of such instruments was not considered to be significantly different.
The fair value of the Wraparound Notes has been estimated by management based on
the estimated fair value of the Underlying Properties. At December 31, 1998 and
1997, the fair value of the Wraparound Notes was estimated to be $62,802,981 and
$65,997,009, compared to a carrying value amount of $39,529,787 and $59,402,931,
respectively.
For the investment in Kranzco Series C Cumulative Redeemable Preferred Shares
the estimate fair value, which approximates carrying amount, is based on the
applicable mandatory redemption price and the dividend interest rates and is
evaluated using interest rates currently offered on like securities with similar
remaining maturities.
F-27
<PAGE>
The fair value estimates presented herein are based on information available as
of December 31, 1998 and 1997. Although management is not aware of any factors
that would significantly affect the estimated fair value amounts, a
comprehensive re-evaluation has not been performed for purposes of these
financial statement disclosures and current estimates of fair value may differ
significantly from the amount presented herein.
12. Related Party Transactions
The Company is party to a management agreement (the "Management Agreement") with
Concord pursuant to which the Company provides management services, assists in
the management of Concord properties, provides certain personnel and office
space and general office services to Concord which the Company receives
reimbursements from Concord. The Management Agreement is renewable annually. For
the years ended December 31, 1998, 1997 and 1996 reimbursed expenses to the
Company were $215,684, $338,394 and $420,743, respectively.
As of December 31, 1998 and 1997, the Company had recorded receivables from
Concord of $598,765 and $391,851, respectively. Such receivables consist of
management fees due to the Company and expenses for general office services as
well as salary reimbursements.
Concord is wholly owned by Leonard S. Mandor and Robert A. Mandor, both of whom
are executive officers and directors of Concord and the Company, and both of
whom may be deemed to beneficially own more than a majority of the voting stock
of the Company.
Concord beneficially owns 2,901,098 shares of Common Stock at December 31, 1998
and 1997. The wholly owned subsidiaries of Concord own 2,698,765 shares and the
two limited partnerships, which are the sole general partners of the wholly
owned subsidiaries of Concord, own 202,333 shares at December 31, 1998 and 1997.
In addition, the Company received property management fees of $132,388, $107,725
and $107,007 during 1998, 1997 and 1996, respectively, from a partnership whose
general partner is an affiliate of the Company.
In connection with the UPI Merger, UPI terminated its property management and
management services agreements with the Company. The Company does not expect the
termination of these agreements to have a materially adverse effect on the
operations or financial condition of the Company. The aggregate annual fee paid
by UPI to the Company under these agreements for the years ended December 31,
1998, 1997 and 1996 were $0, $108,588 and $1,235,831, respectively.
F-28
<PAGE>
13. Commitments and Contingent Liabilities
The Company's office facility in Boca Raton, Florida is subject to a
noncancellable five year operating lease agreement commencing January 1, 1998
and expiring December 31, 2002. Aggregate annual rental payments for the year
ended December 31, 1998, 1997 and 1996 for the Company were $176,374, $758,193
and $752,344, respectively. Future minimum annual payments under the
noncancellable operating lease agreement, as of December 31, 1998, are as
follows:
Year Ending December 31st:
=====================================
1999 183,479
2000 190,805
2001 198,421
2002 206,358
-------
Total $ 779,063
=========
- ------------------ -----------------
Under a long term incentive bonus plan, the Company has accrued zero and
$669,460 for bonuses to be paid to certain officers relating to the years ended
December 31, 1998 and 1997, respectively. The Company has accrued performance
related bonuses to certain executive officers in the amount of $486,041 and
$426,870 for the years ended December 31, 1998 and 1997, respectively.
The Company has accrued for litigation expenses and settlement fees relating to
a class action and derivative lawsuit brought against the Company. Such
settlement requires, among other things, (i) the payment of $3.00 in cash in
exchange for each eligible share of Series A Preferred Stock required to be
surrendered as of the close of business on March 5, 1999 and (ii) the plaintiffs
attorney fees not to exceed $750,000. See note 14. Legal Proceedings for
additional information regarding the class action and derivative lawsuit.
Under various federal, state and local environmental laws, ordinances and
regulations, the Company, as a current or previous owner or operator of real
property, may be held liable for the costs of removal or remediation of certain
hazardous or toxic substances, including, without limitations,
asbestos-containing materials, that could be located on, in or under such
property. Such laws and regulations often impose liability whether or not the
owner or operator knew of, or was responsible for, the presence of the hazardous
or toxic substances. The costs of any required remediation or removal of these
substances could be substantial and the Company's liability as an owner or
operator as to any property is generally not limited under such laws and
regulations, and could exceed the property's value and the Company's aggregate
assets. The Company's ability to sell or rent a property, or to borrow using a
property as collateral may be adversely affected by the presence of these
substances or failure to remediate such substances properly. Under these laws
and regulations, the Company, as an owner, operator, or any entity who arranges
for the disposal of hazardous or toxic substances, such as asbestos-containing
materials, at a disposal site, may also be liable for these costs, as well as
certain other costs, including governmental fines and injuries to persons or
properties. To date, the Company, has not incurred any costs of removal or
remediation of such hazardous or toxic substances. However, the presence, with
or without the Company's knowledge, of hazardous or toxic substances at any
property held or operated by the Company, could adversely affect the Company's
business, operating results and financial condition. The Company is not aware
F-29
<PAGE>
of any environmental conditions at any of the properties that it owns or in
which it has an investment.
14. Legal Proceedings
During 1996 Milestone, certain past and present members of its Board of
Directors, executive officers, and Concord were named as defendants in a
purported class action and derivative lawsuit (the "Winston Actions") commenced
in the Court of Chancery of the State of Delaware (the "Delaware Court"). In the
actions, the plaintiff, a Series A Preferred Stockholder purporting to bring the
action on behalf of himself, all other Series A Preferred Stockholders and
derivatively on behalf of Milestone, alleged that in connection with the
Acquisition and certain related transactions (collectively, the "Transactions"),
Milestone and its directors engaged in self-dealing, violated federal securities
laws and an injunction against such violations and breached their fiduciary
duties to the Series A Preferred Stockholders. The plaintiff claimed, among
other things, that, as a result of the Transactions, Milestone would not have
sufficient funds to pay dividends on the Series A Preferred Stock and that the
properties which were not transferred to UPI in the Transfer were grossly
inferior to the properties that were transferred to UPI.
On August 5, 1998, the counsel for the named plaintiff in the Winston
Actions and the counsel for the defendants entered into a Stipulation and
Agreement of Settlement (the "Winston Settlement Agreement") which memorialized
the terms of a settlement (the "Winston Settlement") of the Winston Actions. On
January 28, 1999, the Delaware Court approved the Winston Settlement Agreement,
which approval became final effective as of the close of business on March 5,
1999. At such time, (i) the shares of Series A Preferred Stock owned by each
Series A Preferred Stockholder who was eligible to participate in the Winston
Settlement and who did not properly opt out of the Winston Settlement and who
owned shares of Series A Preferred Stock as of the close of business on March 5,
1999 were canceled and represented only the right of such Series A Preferred
Stockholder to receive $3.00 in cash from the Company in exchange for each such
share; (ii) the holders of shares of the Series A Preferred Stock between
October 23, 1995 and the close of business on March 5, 1999, other than Series A
Preferred Stockholders who properly opted out of the Winston Settlement
Agreement or who were precluded from participating in the Winston Settlement,
released any and all claims they may have had against the Company and the other
named defendants in connection with the Transactions; (iii) Milestone's
stockholders other than Series A Preferred Stockholders who were eligible to
participate in the Winston Settlement and who properly opted out of the Winston
Settlement released all derivative claims in connection with the Transactions;
and (iv) the Winston Actions were dismissed. In connection with the Winston
Actions, the Company retained counsel for all of the defendants (including,
without limitation, Leonard S. Mandor, Robert A. Mandor, Harvey Jacobson,
Gregory McMahon and Geoffrey Aaronson (each of whom is a director and/or officer
of the Company)) and assumed responsibility for the payment of all legal fees
incurred by such persons in connection with the Winston Actions and the Winston
Settlement (subject to the insurance coverage litigation described below).
The foregoing description of the Winston Settlement and the Winston
Settlement Agreement is qualified in its entirety by reference to the Winston
Settlement Agreement, a copy of which was filed by the Company with the
Commission on August 14, 1998 as Exhibit 10.01 to Quarterly Report on Form 10-Q
for the quarterly period ended June 30, 1998.
F-30
<PAGE>
The Company maintains a directors and officers insurance and company
reimbursement policy (the "National Policy") issued by National Union Fire
Insurance Company of Pittsburgh, PA ("National Union") with a $2,000,000 limit
and an excess directors and officers liability and company reimbursement policy
(the "Stonewall Policy") issued by Stonewall Surplus Lines Insurance Company,
now known as American Dynasty Surplus Lines Insurance Company ("Stonewall"),
with a $2,000,000 limit. The Company believes that the amounts that it has to
pay pursuant to the Winston Settlement and in connection with the Winston
Actions are covered losses under both the National Union Policy and the
Stonewall Policy. In addition, the Company believes that the legal fees and
other expenses incurred by the Company and the other defendants in connection
with the Winston Actions are also covered losses under the National Union Policy
and the Stonewall Policy. In connection with a previous proposed settlement of
the Winston Actions which was never consummated, National Union and Stonewall
both refused to contribute to such proposed settlement, asserting that such
proposed settlement did not encompass any covered loss (as defined in the
National Policy and the Stonewall Policy, respectively). On January 29, 1998,
the Company commenced a lawsuit in the United States District Court for the
Southern District of New York against National Union and Stonewall in connection
with such refusal to contribute to such proposed settlement. In the complaint,
the plaintiffs alleged that National Union and Stonewall wrongfully failed to
contribute to the proposed settlement and sought reimbursement from National
Union and Stonewall up to the limits of their respective policies. National
Union and Stonewall both answered the complaint and denied liability. As a
result of the termination of the previously proposed settlement, the Company on
one hand, and Stonewall and National Union, on the other hand, agreed to dismiss
such action without prejudice and such action was dismissed on May 29, 1998 by
the United States District Court for the Southern District of New York. The
Company gave both National Union and Stonewall notice of the Winston Settlement
and provided each of them with a copy of the Winston Settlement Agreement on
August 12, 1998. National Union and Stonewall reviewed the Winston Settlement
Agreement and separately informed the Company that their basic position, denying
coverage, had not changed. On February 12, 1999, the Company commenced a lawsuit
in the Circuit Court for the Fifteenth Judicial Circuit in and for Palm Beach
County, Florida against both National Union and Stonewall alleging, among other
things, that National Union and Stonewall have wrongfully refused to contribute
to the Winston Settlement and seeking reimbursement from National Union
and Stonewall up to the limits of their respective policies. The initial
complaint in the new lawsuit was served on each of National Union and Stonewall
on February 12, 1999 and on March 17, 1999 the Company filed an amended
complaint, which, among other things, added the other defendants to the Winston
Actions as plaintiffs. National Union and Stonewall have until March 29, 1999 to
answer the amended complaint. In connection with this action, the Company has
retained counsel for all of the plaintiffs and is assuming responsibility for
the payment of all legal fees incurred by such persons in connection with this
action. At this time, the Company is not in a position to render an opinion as
to the outcome of this action.
15. Subsequent Events
On January 28, 1999 the Delaware Court approved the Winston Settlement at a
hearing held for such purpose. The order of the Delaware Court became final upon
expiration of a 30 day appeal period which began on February 3, 1999, the day
the Court's order was entered upon the Court's docket, and expired at the close
of business on March 5, 1999.
F-31
<PAGE>
At the close of business on March 5, 1999, Milestone canceled and retired
2,983,284 shares of its Series A Preferred Stock, representing approximately 99%
of the then outstanding shares of Series A Preferred Stock, pursuant to the
terms of the Winston Settlement.
As a result of the Winston Settlement, the Company is
required to reserve approximately $9,000,000 with a court appointed trustee for
twelve months. On March 18, 1999 the Company wired approximately $9,000,000 to
such court appointed trustee to be held for the benefit of the plaintiffs.
See note 14. Legal Proceedings, for a description of the court Winston
Actions and the Winston Settlement.
16. Consolidated Quarterly Summary of Operations
The following is a summary of financial information with respect to the
Company's operations for the four fiscal quarters during fiscal year 1998:
<TABLE>
<CAPTION>
Fourth Third Second First
Quarter Quarter Quarter Quarter
================================================== ================= === ============== ================ ===============
<S> <C> <C> <C> <C>
Total revenues $ 8,094,090 a $6,331,620 $5,429,905 $ 5,659,776
Total expenses 12,719,360 b 6,327,988 6,964,991 6,681,108
----------- ---------- ---------- ---------
(Loss) income before income taxes (4,625,270) 3,632 (1,535,086) (1,021,332)
Provision (benefit) for income taxes 2,606,499 (367,821) (498,584) (487,038)
---------- --------- --------- ---------
Net (loss) income $ (7,231,769) $ 371,453 $(1,036,502) $ (534,294)
============= ============ ============ ============
Net (loss) income per common share $ (1.71) $ 0.09 $ (0.25) $ (0.13)
=========== ========= ========== ==========
Weighted average common shares outstanding 4,235,245 4,230,245 4,225,727 4,213,368
========= ========= ========= =========
- -------------------------------------------------- ----------------- --- -------------- ---------------- ---------------
</TABLE>
Note:
(a) Includes approximately $4,251,000 of gain on sale of real estate and
real estate related assets.
(b) Includes approximately $7,084,000 of accrued litigation expense
directly related to the Winston Settlement See Item 14. Legal Proceedings for a
description of the Winston Action and the Winston Settlement.
F-33
<PAGE>
MILESTONE PROPERTIES, INC. AND SUBSIDIARIES
SCHEDULE III
Real Estate and Accumulated Depreciation
December 31, 1998
<TABLE>
<CAPTION>
Cost of Accumulated Date Depreciation
Location Encumbrances Land Building Improvements Total Depreciation Acquired Life
======================= ================== =========== ============ ============ ============= ============== ========== ===========
Pine Oak Plaza,
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sunrise, FL $ 1,155,466 $ 110,000 $ 990,000 $ 49,845 $1,149,845 $ (36,976) 9/24/97 50
Regency Walk,
Jacksonville, FL 1,832,595 215,000 1,935,000 68,847 2,218,847 (36,937) 4/01/98 50
Orange Park,
Orange Park, FL 1,294,056 150,000 1,350,000 0 1,500,000 (20,250) 4/17/98 50
Teeca Plaza,
Boca Raton, FL 1,795,235 207,500 1,867,500 103,823 2,178,823 (39,440) 7/15/98 50
Country Grove Plaza,
W. Palm Beach, FL 878,877 110,000 990,000 0 1,100,000 (6,600) 9/11/98 50
Mandarin Central,
Jacksonville, FL 3,947,350 465,000 4,185,000 0 4,650,000 (20,925) 10/13/98 50
Pine Crest,
Ft. Lauderdale, FL 2,398,033 320,000 2,880,000 0 3,200,000 (14,400) 10/27/98 50
Lincoln Park,
Davie, FL 3,219,000 384,000 3,456,000 0 3,840,000 (11,520) 11/10/98 50
Sunrise Shopping Center
Zanesville, OH 850,193 0 2,530,219 120,463 2,650,682 (1,096,709) 10/23/95 50
Family Dollar Stores,
Blackstone, VA 0 0 794,909 8,607 803,516 (595,293) 10/23/95 26.65
Totals $ 17,370,805 $ 1,961,500 $ 20,978,628 $ 351,585 $23,291,713 $ (1,879,050)
============ =========== ============ ========= =========== =============
- ----------------------- ------------------ ----------- ------------ ----------- ------------- -------------- --------- ---------
</TABLE>
S-1
<PAGE>
MILESTONE PROPERTIES, INC. AND SUBSIDIARIES
SCHEDULE III
Real Estate and Accumulated Depreciation
December 31, 1998
Reconciliation of Property and Improvements:
1998 1997 1996
==================== ================= ================= =================
Beginning Balance $25,546,306 $24,268,310 $24,221,311
Acquisitions 18,515,000 1,100,000 0
Improvements 351,585 177,996 46,999
Dispositions (21,121,178) 0 0
------------ -----------------------------------
Ending Balance $23,291,713 $25,546,306 $24,268,310
============= =========== ===========
- -------------------- ----------------- ----------------- -----------------
Reconciliation of Accumulated Depreciation:
1998 1997 1996
====================== ================= ================= =================
Beginning Balance $6,065,951 $5,545,018 $5,063,178
Depreciation expense 492,686 520,933 481,840
Dispositions (4,679,587) 0 0
----------- -----------------------------------
Ending Balance $1,879,050 $6,065,951 $5,545,018
=========== ========== ==========
- ---------------------- ----------------- ----------------- -----------------
At December 31, 1998, the tax basis of the Company's owned real estate was
approximately $22,616,000.
S-2
Exhibit 10.8
THIRD AMENDMENT
OF MANAGEMENT AGREEMENT
THIS THIRD AMENDMENT OF MANAGEMENT AGREEMENT is made and entered into
as of January 1, 1998, by and between Milestone Properties, Inc., ("Milestone")
and Concord Assets Group, Inc., ("Concord").
WHEREAS, Concord and Milestone entered into that certain Management
Agreement dated December 18, 1990, which Agreement provided for Milestone to
undertake Management Services, as therein described, on behalf of Concord for a
fee of $50,000.00 per month; and
WHEREAS, the parties to said Management Agreement agreed in February
1992, that Milestone would provide certain of its personnel to Concord, for
which Concord would reimburse Milestone based upon the hourly wage rate of such
employees, and that furthermore, Milestone was to provide office space and
general office services to Concord, for which Concord would reimburse Milestone;
and
WHEREAS, the Management Agreement was amended by Second Amended
Management Agreement dated, as of January 1, 1993, whereby the management fee
was reduced from $50,000.00 per month to $25,000.00 per month and established
the percentage for reimbursement for office space and general office services,
to be paid by Concord to Milestone, at forty-nine (49%) percent of actual cost;
and
WHEREAS, the parties to the Management Agreement agreed in March 1995,
to reduce the management fee from $25,000.00 per month to $50,000.00 per annum
and to reduce the percentage of reimbursement for office space and general
office services from forty-nine (49%) percent of actual costs to twelve and one
half (12-1/2%) percent of actual costs; and
WHEREAS, the parties to the Management Agreement have agreed to
memorialize in writing these and further amendments to the Management Agreement.
NOW THEREFORE in consideration of the services rendered, and the fees
previously established, and other valuable consideration, the receipt of which
is hereby acknowledged, the parties hereto do hereby agrees as follows:
1. The management fee established by the Management Agreement, is hereby reduced
from $50,000.00 per annum to $25,000.00 per annum.
2. The percentage of reimbursement for office space and general office services
provided by Milestone to Concord is confirmed as reduced from forty-nine (49%)
percent of actual costs to twelve and one half (12 1-/2%) percent of actual
costs.
Except as hereby modified, the Management Agreement, as originally
established, remains unmodified as to its terms and conditions, and is hereby
ratified and confirmed in all respects.
IN WITNESS WHEREOF the undersigned parties have hereby entered into
this Agreement the date first above written.
Milestone Properties, Inc.
WITNESSES: a Delaware corporation
By:
Joseph Otto, Vice President
Concord Assets Group, Inc.
a New York corporation
By:
Robert Mandor, President
<PAGE>
STATE OF FLORIDA
COUNTY OF PALM BEACH
The foregoing instrument was acknowledged before me this ______ day of
__________, 1999, by Joseph Otto, as Vice President of Milestone Properties,
Inc., a Delaware corporation, on behalf of the corporation. He is personally
known to me or has produced a drivers license as identification.
NOTARY PUBLIC:
Sign:
Print:
State of Florida at Large (SEAL)
My Commission Expires:
STATE OF FLORIDA
COUNTY OF PALM BEACH
The foregoing instrument was acknowledged before me this ______ day of
__________, 1999, by Robert Mandor, as President of Concord Assets Group, Inc.,
a New York corporation, on behalf of the corporation. He is personally known to
me or has produced a drivers license as identification.
NOTARY PUBLIC:
Sign:
Print:
State of Florida at Large (SEAL)
My Commission Expires:
Exhibit 10.9
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), dated as of January 1,
1999, by and between MILESTONE PROPERTIES, INC., a Delaware corporation (the
"Company"), and Leonard S. Mandor (the "Executive").
W I T N E S S E T H
WHEREAS, the Executive is currently the Chief Executive Officer of the
Company;
WHEREAS, the Executive possesses intimate knowledge of the business and
affairs of the Company, its policies, methods and personnel;
WHEREAS, the Board of Directors (the "Board") of the Company recognizes
that the Executive's contribution to the growth and success of the Company has
been, and believes will continue to be, substantial, and desires to assure the
Company of the Executive's present and continued employment in an executive
capacity and to compensate him therefor;
WHEREAS, the Board has determined that this Agreement will encourage
the Executive's continued attention and dedication to the Company; and
WHEREAS, the Executive is willing to make his services available to the
Company on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth herein, the parties hereby agree as follows:
1. Employment.
1.1 Employment and Term. The Company shall continue
to employ the Executive and the Executive shall
continue to serve the Company, upon the terms and
conditions set forth herein, for an initial term of
three years commencing as of January 1, 1999, unless
sooner terminated as hereinafter set forth, which
term shall thereafter be extended for additional
consecutive one year periods, except as otherwise set
forth herein, unless written notice is given by
either party to the other party no later than 60 days
before the expiration of the Term (as defined herein)
of such party's intention not to extend the Term. The
period during which the Executive is employed
hereunder is referred to as the "Term". In the event
that the Company elects not to renew this Agreement,
the Executive shall be entitled to the payments
provided herein under Section 4.2, subject to the
provisions of Section 4.1 and Section 6 hereof.
1.2 Duties of Executive. The Executive shall serve as the Chief Executive
Officer of the Company and shall diligently perform such duties and services as
are commensurate with such position and as may reasonably be designated by the
By-laws of the Company and from time to time assigned by the Board. The
Executive shall devote such time to the business and affairs of the Company as
the Board deems necessary. -------------------
1.3 Place of Performance. In connection with the Executive's employment by
the Company, the Executive shall be based at the Company's principal executive
offices in Boca Raton, Florida. The Executive may be required to travel on the
Company's business to an extent substantially consistent with his present travel
obligations. --------------------
2. Compensation.
2.1 Base Salary. During the Term, the Executive shall
receive a base salary subject to adjustments as
hereinafter provided (the "Base Salary") at the
annual rate of $446,698. During the Term, the Board,
or an appropriate committee thereof, shall review
annually the Base Salary payable to the Executive and
adjust the same in its sole discretion, provided,
however, that the Base Salary at any time may not be
less than $446,698. In connection with making
adjustments to the Base Salary as provided for in
this Section 2.1, the Board, or an appropriate
committee thereof, will consider the contributions of
the Executive to the Company's efficiency, growth,
productivity and profitability, the expansion of the
Executive's duties, if any, the level of the
Executive's responsibilities, the Executive's tenure
with the Company, and such other factors as they deem
relevant. The Base Salary shall be payable in
substantially equal installments consistent with the
Company's normal payroll schedule, subject to
applicable withholding and other taxes.
2.2 Bonus. The Executive may be issued annual bonuses in accordance with
the guidelines set forth in the Management Incentive Plan as adopted by the
Compensation Committee of the Board on May 24, 1994, as it may be amended from
time to time, for executives of the Company, or as otherwise determined by the
Board. In addition to the foregoing, and not in limitation thereof, the
Executive may receive such additional bonuses as the Board, in its sole
discretion, may determine -----
3. Expense Reimbursement and Other Benefits.
3.1 Expense Reimbursement. During the Term, the
Company, upon the submission of supporting
documentation satisfactory to the Company by the
Executive, and in accordance with Company's policies
for its executives, shall reimburse the Executive for
all reasonable expenses actually paid or incurred by
the Executive in the course of, and pursuant to, the
business of the Company, including expenses for
travel and entertainment. Reimbursement for expenses
shall be subject to such regulations and procedures
as the Company may from time to time establish.
3.2 Vacation. During the Term, the Executive shall be entitled to such
amount of annual paid vacation time as designated in the Company's employee
manual or as otherwise designated by the Board, provided, however, that the
Executive shall be entitled to no less than four weeks annual paid vacation. The
time during which the Executive may use his vacation time and be absent from the
office shall be at his sole discretion. --------
3.3 Fringe and Medical Benefits. The Company shall provide the following
benefits to the Executive, either through direct payments by the Company or by
reimbursement: ---------------------------
(a) A term life insurance policy insuring
the Executive's life which provides a
benefit of no less than $200,000, naming
such beneficiaries as the Executive may
designate from time to time. Notwithstanding
the foregoing, if the Company is unable to
obtain term life insurance which provides a
benefit of no less than $200,000 on the
Executive's life at a normal and customary
cost thereof, as reasonably determined by
the Board (the "Company Funded Premium"),
for a person of the Executive's age, then
this provision and the obligation of the
Company hereunder shall be limited to (i) a
contribution by the Company of an amount not
less than the Company Funded Premium toward
the payment of the premium of such other
term life insurance policy, without regard
to the benefit provided thereby, as the
Executive is able to obtain, or (ii) at the
Executive's election, the Company Funded
Premium may be applied toward such term life
insurance insuring the Executive's life
providing for a lesser benefit as the
Company may procure. If requested by the
Company, the Executive agrees to cooperate
with the Company in obtaining, at the
Company's expense, such life insurance. Such
cooperation shall include, without
limitation, completing and signing such
forms or applications, undergoing physical
examinations, and such other acts as may be
required in order to obtain such insurance.
(b) The Executive shall be eligible to
participate in all benefit plans established
by the Company, on the same basis and
subject to the same qualifications as other
executive officers of the Company including,
but not limited to, medical, bonus, stock
option and other benefit programs. In
addition, the Company may provide such
fringe benefits to the Executive, either
through direct payments or by
reimbursements, as the Company or the Board
may determine from time to time.
<PAGE>
4. Termination.
4.1 Termination for Cause. Notwithstanding anything
contained in this Agreement to the contrary, the
Executive's employment with the Company may be
terminated by the Company for "Cause". As used in
this Agreement, the term "Cause" shall mean only (i)
any action or omission of the Executive which
constitutes a willful and material breach of this
Agreement, including, but not limited to, the failure
of the Executive to satisfactorily perform his duties
under Section 1.2 hereof, which is not cured, or as
to which diligent attempts to cure have not commenced
within the time period provided for in this Section
4.1, (ii) the commission by the Executive of any act
which would constitute fraud, embezzlement or
misappropriation as against the Company, or (iii) the
conviction (from which no appeal can be taken) of the
Executive of any criminal act which is a felony.
Termination of the Executive pursuant to this Section
4.1 shall be communicated by a notice (the "Notice of
Termination") to the Executive from the Board setting
forth a resolution duly adopted by the affirmative
vote of not less than a majority of the entire
membership of the Board (excluding the Executive if
he is then a director of the Company) at a meeting
thereof duly called and held for such purpose finding
that in the good faith opinion of the Board, the
Executive was guilty of conduct set forth in the
definition of Cause and specifying the particulars
thereof in detail. In the event of a proposed
termination for Cause described in clause (i) of this
Section 4.1, the Executive shall be given a notice (a
"Notice of Cause") from the Board setting forth in
reasonable detail any alleged acts or failures to act
which the Board believes may be grounds for
termination of the Executive's employment pursuant to
the terms hereof and the opportunity to meet with the
Board at a time and place mutually convenient to both
the Board and the Executive, but in no event later
than 10 business days after the Notice of Cause is
given to the Executive, at which meeting the
Executive shall have the right to appear with legal
counsel of his choosing to refute any determination
of Cause specified in such notice, and any
termination of the Executive's employment by reason
of such determination of Cause shall not be effective
until the Executive is afforded such opportunity to
appear and be heard to defend such act or failure to
act. If the Executive shall fail to correct such act
or failure to act within 10 business days after such
meeting, the Executive's employment by the Company
shall be terminated by delivery to the Executive of a
Notice of Termination, which Notice of Termination
shall be effective when given. If, within the period
provided, the Executive corrects such act or failure
to act, the Executive's employment may not then be
terminated by the Board. Upon any termination
pursuant to this Section 4.1, the Company shall pay
to the Executive any unpaid Base Salary accrued
through the effective date of termination specified
in the Notice of Termination. In addition, the
Company shall pay any benefits owed to the Executive
under any plan that the Executive participates in
pursuant to Section 3.3 hereof, in accordance with
the terms of such plans as in effect on the date of
termination of employment under this Section 4.1.
Except as provided in this Section 4.1, the Company
shall have no further liability hereunder (other than
to make all reimbursements for reasonable business
expenses incurred prior to the date of termination,
subject, however, to the provisions of Section 3.1
hereof).
4.2 Termination Without Cause. In the event that the
Executive's employment is terminated other than (i)
for Cause or (ii) in connection with, or as a result
of, a Change of Control, the Company shall (a) give
the Executive 30 days written notice of the
termination of his employment and (b) pay to the
Executive the Executive's Base Salary, as then in
effect, accrued and unpaid through the date that his
employment was terminated, together with all other
accrued and unpaid benefits owing to the Executive
through the date of the termination of the
Executive's employment with the Company plus an
amount equal to 300% of the Executive's Base Salary,
as then in effect. Subject to Section 7 hereof, all
payments provided for in this Section 4.2 shall be
made by the Company in substantially equal
installments consistent with the Company's normal
payroll schedule, subject to applicable withholding
and other taxes. In addition, the Company shall pay
any benefits owed to the Executive under any plan
that the Executive participates in pursuant to
Section 3.3 hereof, in accordance with the terms of
such plans as in effect on the date of termination of
his employment under this Section 4.2. Except as
provided in this Section 4.2, the Company shall have
no further liability hereunder (other than to make
all reimbursements for reasonable business expenses
incurred prior to the date of termination, subject,
however, to the provisions of Section 3.1 hereof). In
the event that there has been a Change of Control
pursuant to Section 6 hereof, or this Agreement has
been assigned pursuant to Section 10 hereof, this
Section 4.2 shall not survive the assignment of this
Agreement.
5. Disability or Death.
5.1 Disability. Notwithstanding anything contained in
this Agreement to the contrary, if, during the Term,
the Executive suffers a disability (as defined
below), the Company shall, subject to the provisions
of Section 5.2 hereof, either directly, through
insurance, or through a combination of both, continue
to pay the Executive an amount equal to the Base
Salary, as then in effect, plus a proportionate
amount of any compensation earned by or due to the
Executive as provided for in Section 2.2 hereof
through the end of the first 180 days of such
disability, provided, however, that, in the event
that the Executive is disabled for a period of more
than 180 days in any 12 month period, the Company
may, at its election, by a vote of not less than a
majority of the entire membership of the Board
(excluding the Executive if he is then a director of
the Company) within 90 days from the 180th day that
the Executive is disabled, terminate the Executive's
employment with the Company. In the event of such
termination, (i) payment of the Executive's Base
Salary, as then in effect, and fringe benefits (to
the extent permissible by applicable law) shall be
continued for a period of 12 months after such
termination, and (ii) the Executive shall receive a
one time bonus in an amount equal to the highest
annual bonus paid to the Executive with respect to
any of the three years immediately preceding the date
of termination of the Executive to be paid to the
Executive within 15 business days after his
termination. In addition, the Company shall pay any
benefits owed to the Executive under any plan that
the Executive participates in pursuant to Section 3.3
hereof, in accordance with the terms of such plans as
in effect on the date of termination of employment
under this Section 5.1. Except as provided in this
Section 5.1, the Company shall have no further
liability hereunder (other than to make all
reimbursements for reasonable business expenses
incurred by the Executive prior to the date of
termination, subject, however, to the provisions of
Section 3.1 hereof). For purposes of this Agreement
"disability" means a reasonable determination by the
Board, based on reasonable medical evidence, that the
Executive is incapable of substantially performing
his obligations pursuant to the terms of this
Agreement by reason of physical or mental illness or
injury.
5.2 Death. In the event of the death of the Executive
during the Term, the Company shall pay to the
Executive's legal representative (i) any unpaid Base
Salary accrued through the date of the Executive's
death, (ii) the Executive's Base Salary, as then in
effect, and fringe benefits (to the extent
permissible by applicable law) for a period of 12
months after the Executive's death, and (iii) a one
time bonus in an amount equal to the highest annual
bonus paid to the Executive with respect to any of
the three years immediately preceding the date of
death of the Executive. In addition, the Company
shall pay to the Executive's legal representative any
benefits owed to the Executive under any plan that
the Executive participated in pursuant to Section 3.3
hereof, in accordance with the terms of such plans as
in effect on the date of the Executive's death.
Except as provided in this Section 5.2, the Company
shall have no further liability hereunder (other than
to make all reimbursements of reasonable business
expenses incurred by the Executive prior to the date
of the Executive's death, subject, however, to the
provisions of Section 3.1 hereof).
6. Change of Control.
(a) For the purposes of this Agreement, a "Change of
Control" shall be deemed to have taken place if: (i)
in connection with any cash tender or exchange offer,
merger or other business combination, contested
election, or any other transaction, the persons who
were directors of the Company before such
transactions shall cease to constitute at least
two-thirds of the Board or of the board of directors
of any successor to the Company, as the direct or
indirect result of, or in connection with, any such
transaction, (ii) a complete liquidation or
dissolution of the Company occurs, (iii) there is a
sale or other disposition (other than to a wholly
owned subsidiary) of all, or substantially all, of
the assets of the Company, or (iv) any person,
including a "group" (within the meaning of Section
13(d)(3) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")), hereafter acquires
(other than directly from the Company or through open
market purchases approved by the Board, as long as
the majority of the Board approving such purchases is
the majority at the time such purchases are made) any
voting securities of the Company such that
immediately after such acquisition such person has
beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 20% or
more of the combined voting power of the then
outstanding securities of the Company (if,
immediately prior to such acquisition, such person
did not then have beneficial ownership of 20% or more
of the combined voting power of the outstanding
securities of the Company), provided, however, in
determining whether a Change of Control has occurred,
the acquisition of securities by (a) an employee
benefit plan (or a trust forming a part thereof)
maintained by either (y) the Company or (z) any
corporation or person of which a majority of its
voting power or its voting equity securities or
equity interest is owned, directly or indirectly, by
the Company (for purposes of this definition, a
"Subsidiary"), or (b) the Company or a Subsidiary,
shall not constitute an acquisition which would cause
a Change of Control. For purposes of this Agreement,
the acquisition of additional shares of the Company's
securities by Concord Assets Group, Inc. or any of
its affiliates shall not constitute a Change of
Control. For Change of Control purposes, if the
Company is a private entity, a Change of Control
would be deemed to take place upon the occurrence of
an event, the result of which is a person (or group
of affiliated persons) acquiring ownership,
beneficially or otherwise, of greater than 50% of the
voting securities of the Company.
(b) The Company and the Executive hereby agree that,
if the Executive is employed by the Company on the
date on which a Change of Control occurs (the "Change
of Control Date"), the Company (and any successor
company that assumes this Agreement) will continue to
retain the Executive and the Executive will remain
employed by the Company (or such successor company)
and the Executive agrees to exercise such authority
and perform such executive duties for the Company (or
successor company) as are commensurate with the
authority being exercised and duties being performed
by the Executive immediately prior to the Change of
Control Date, until the third anniversary of the
Change of Control Date, without regard to automatic
renewals as set forth in Section 1.1. Unless
otherwise indicated herein, the term "the Company"
shall include any successor company that assumes this
Agreement.
(c) If after a Change of Control the Executive is
requested and, in his sole and absolute discretion,
consents to change his principal business location,
the Company will reimburse the Executive for his
reasonable relocation expenses, including, without
limitation, moving expenses, temporary living and
travel expenses for a reasonable time while arranging
to move his residence to the changed location,
closing costs, if any, associated with the sale of
his existing residence and the purchase of a
replacement residence at the changed location, plus
an additional amount representing a gross-up of any
state or federal taxes payable by the Executive as a
result of any such reimbursement. If the Executive
shall not consent to change his business location,
the Executive may continue to provide the services
required of him hereunder from his then residence
and/or business address, and the Company shall
continue to maintain an office for the Executive at
such location commensurate with the Executive's
office at the Company prior to the Change of Control
Date.
(d) After a Change of Control the Company shall (i)
continue to pay the Executive a salary in an amount
not less than the Base Salary as in effect on the
Change of Control Date, (ii) pay the Executive
bonuses in an amount per year not less than the
average of those bonuses paid to the Executive during
the three year period immediately preceding the
Change of Control Date, and (iii) continue employment
benefit programs for the Executive at levels not less
than those in effect on the Change of Control Date
(but subject to such reductions as may be required to
maintain such plans in compliance with applicable
federal law regulating employee benefit programs).
(e) If after a Change of Control this Agreement has
not been assigned to the successor company and (i)
the Executive's employment is terminated by the
Company or successor company other than for Cause, or
(ii) there shall have occurred a material reduction
in the Executive's compensation or employment related
benefits, or a material change in the Executive's
status, working conditions, management
responsibilities or titles, and the Executive
voluntarily terminates his relationship with the
Company (or the successor company) within 60 days of
any such occurrence, or the last in a series of such
occurrences, the Executive shall be entitled to
receive, subject to the provisions of subparagraph
(f) of this Section 6, a "lump sum payment" equal to
(y) 299% of the Executive's "Base Period Income" as
determined under subparagraph (f) of this Section 6
reduced by (z) any additional payments to such
Executive required to be taken into consideration for
the purposes of calculating a "parachute payment"
within the meaning of Section 280G of the Internal
Revenue Code of 1986, as amended (the "Code"), and
regulations promulgated thereunder, provided,
however, that no such lump sum payment shall be
owing, payable or paid to the Executive if the
Company procures a position for the Executive with a
company or entity that conducts business similar to
that of the Company's in all material respects in the
same general geographic vicinity as the Company
currently conducts its business, with an employment
agreement having terms and conditions substantially
the same as those of this Agreement in all material
respects. If payable, such lump sum payment will be
paid to the Executive within 15 business days after
his termination of employment with the Company (or
such successor company). Such termination payment
shall not be reduced by any present value or similar
factor, and the Executive shall not be required to
mitigate the amount of such payment by securing other
employment or otherwise, nor will such payment be
reduced by reason of the Executive securing other
employment or for any other reason. The termination
payment shall be paid in lieu of any severance pay
due to the Executive pursuant to any severance or
employment agreement with, or severance payment plan
of, the Company.
(f) The Executive's "Base Period Income" shall be his average annual
compensation (including, without limitation, his Base Salary and any bonuses)
for the five years immediately preceding the date of his termination of
employment with the Company. If the Executive has not been employed by the
Company for a full five years at the time that his employment with the Company
is terminated, his Base Period Income shall be determined based on the period
that he was employed by the Company.
(g) In the event that the Executive's employment with
the Company is terminated other than for Cause,
disability or death after this Agreement has been
assigned pursuant to Section 10 hereof, the company
that assumed this Agreement shall pay to the
Executive the Executive's Base Salary, as then in
effect, accrued and unpaid through the date that his
employment was terminated, together with all other
accrued and unpaid benefits owing to the Executive
through the date of the termination of the
Executive's employment plus, subject to the
provisions of subparagraph (f) of this Section 6, a
"lump sum payment" equal to (i) 299% of the
Executive's "Base Period Income" as determined under
subparagraph (f) of this Section 6 reduced by (ii)
any additional payments to such Executive required to
be taken into consideration for the purposes of
calculating a "parachute payment" within the meaning
of Section 280G of the Code and regulations
promulgated thereunder. If payable, such lump sum
payment will be paid to the Executive within 15
business days after his termination of employment
with the Company (or such successor company). Such
termination payment shall not be reduced by any
present
2
51004739.07
<PAGE>
value or similar factor, and the Executive
shall not be required to mitigate the amount of such payment by securing other
employment or otherwise, nor will such payment be reduced by reason of the
Executive securing other employment or for any other reason. The termination
payment shall be paid in lieu of any severance pay due to the Executive pursuant
to any severance or employment agreement with, or severance payment plan of, the
Company.
7. Mitigation.
In the event that the Executive's employment with the Company
is terminated pursuant to the provisions of Section 4.2
hereof, the Executive shall be obligated to seek other
employment to mitigate the amount of any payments provided for
under this Agreement. If the Executive obtains other
employment, the amount of any payment provided for pursuant to
Section 4.2 hereof shall be reduced by any compensation earned
by the Executive as the result of employment by another
employer after the termination of the Executive's employment
with the Company. If the amount of all compensation earned by
the Executive as the result of employment by another employer
after the termination of the Executive's employment with the
Company is equal to or greater than the amount of all payments
provided for pursuant to Section 4.2 hereof, the Company shall
have no further liability to the Executive under Section 4.2
hereof.
8. Restrictive Covenants.
8.1 Nondisclosure. During the Term and following the
termination of the Executive's employment with the
Company, the Executive shall not divulge,
communicate, use to the detriment of the Company or
for the benefit of any other person or persons, or
misuse in any way, any Confidential Information (as
hereinafter defined) pertaining to the business of
the Company. Any Confidential Information, or data
now or hereafter acquired by the Executive with
respect to the business of the Company (which shall
include, but not be limited to, information
concerning the Company's financial condition,
prospects, technology, customers, suppliers, methods
of doing business and marketing and promotion of the
Company's services), shall be deemed a valuable,
special and unique asset of the Company that is
received by the Executive in confidence and as a
fiduciary. For purposes of this Agreement,
"Confidential Information" means information
disclosed to the Executive or known by the Executive
as a consequence of, or through, his employment by
the Company (including information conceived,
originated, discovered or developed by the Executive)
prior to, or after, the date hereof and not generally
known or in the public domain, about the Company or
its business. Notwithstanding the foregoing, nothing
herein shall be deemed to restrict the Executive from
disclosing Confidential Information to the extent
required by law.
8.2 Nonsolicitation of Employees. During the Term and
for a period of two years following the termination
of the Executive's employment with the Company, the
Executive shall not directly or indirectly, for
himself or for any other person, firm, corporation,
partnership, association or other entity, attempt to
employ or enter into any contractual arrangement,
directly or indirectly, with any employee of the
Company or any person who was an employee of the
Company at any time during the six month period
immediately prior to the Executive's termination and
whose employment with the Company was terminated by
the Company.
8.3 Books and Records. All books, records, accounts and similar
repositories of Confidential Information of the Company, whether prepared by the
Executive or otherwise coming into the Executive's possession, shall be the
exclusive property of the Company and shall be returned immediately to the
Company upon termination of this Agreement or upon the Board's request at any
time. -----------------
9. Injunction.
It is recognized and hereby acknowledged by the parties hereto
that a breach by the Executive of any of the covenants
contained in Section 8 of this Agreement will cause
irreparable harm and damage to the Company, the monetary
amount of which may be virtually impossible to ascertain and,
therefore, that damages at law would be insufficient for
breach of any of the covenants contained in Section 8 hereof.
As a result, the Executive agrees that in the event of a
breach or threatened breach by the Executive of any provisions
of Section 8 hereof, the Company shall be entitled to
equitable relief in the form of an injunction to prevent
irreparable injury and that such right to injunctive relief
shall be cumulative and in addition to whatever other remedies
the Company may possess. In connection with any proceeding to
seek injunctive relief, the parties hereto waive any
requirement to post a bond.
10. Consolidation, Merger or Sale of Assets; Assignability.
Nothing in this Agreement shall preclude the Company from
consolidating or merging into or with, or transferring all or
substantially all of its assets to, another corporation or
entity which assumes this Agreement, and all obligations of
the Company hereunder, in writing. Nothing in this Agreement
shall preclude the Company from assigning this Agreement to
another entity in the event that the Company is liquidated or
upon a Change of Control if the successor company is not
otherwise obligated to assume this Agreement. Upon such
consolidation, merger, transfer of assets, liquidation,
assignment and assumption, the term "the Company" as used
herein, shall mean such other corporation or entity that
assumes this Agreement, and this Agreement shall continue in
full force and effect except as otherwise provided in this
Section 10. Except as otherwise provided in this Section 10,
this Agreement shall not be assigned by either party except
with the written consent of the other. In the event that this
Agreement is assigned in accordance with the provisions of
this Section 10, this Agreement shall continue until the third
anniversary of the date of such assignment and the automatic
renewals as set forth in Section 1.1 hereof and the Change of
Control provisions of Section 6 hereof shall no longer be
enforceable.
11. Binding Effect.
Except as herein otherwise provided, this Agreement shall
inure to the benefit of, and shall be binding upon, the parties hereto, their
personal representatives, successors, heirs and assigns.
12. Reformation.
If any provision of this Agreement is held to be illegal,
invalid or unenforceable under present or future laws effective during the term
of this Agreement, in lieu of such illegal, invalid or unenforceable provision,
there shall be added automatically as a part of this Agreement a provision as
similar in terms to such illegal, invalid or unenforceable provision as may be
possible and be legal, valid and enforceable.
13. Terminology.
All personal pronouns used in this Agreement, whether used in the
masculine, the feminine or the neuter gender, shall include all other genders,
and the singular shall include the plural and vice versa. Titles of Sections are
for convenience only, and neither limit nor amplify the provisions of this
Agreement.
14. Governing Law.
This Agreement shall be governed and construed in accordance
with the laws of the State of Florida, without regard to the conflict of laws
principles thereof.
15. Entire Agreement
This Agreement contains the entire understanding between the
parties hereto and may not be changed or modified except by an agreement in
writing signed by all the parties hereto.
16. Counterparts.
This Agreement may be executed in any number of counterparts
and each such counterpart shall for all purposes be deemed an original.
3
51004739.07
<PAGE>
17. Notice.
All notices or communications hereunder shall be in writing
and shall be deemed given when delivered in person or when sent by registered or
certified mail, return receipt requested, or by overnight courier service, to a
party at the following address, or at such other address as any party shall have
given notice to the other in the manner herein provided:
If to the Company, to:
Milestone Properties, Inc.
150 East Palmetto Park Road, 4th Floor
Boca Raton, Florida 33432
Attn: Robert A. Mandor, President
If to the Executive, to the address on file
in the personnel records of the Company.
4
<PAGE>
IN WITNESS WHEROF, this Agreement has been duly signed by the parties
hereto as of the day and year first above written.
MILESTONE PROPERTIES, INC.
By___________________________
Name: Joseph P. Otto
Title: Vice President
------------------------------
Leonard S. Mandor
Exhibit 10.10
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), dated as of January 1,
1999, by and between MILESTONE PROPERTIES, INC., a Delaware corporation (the
"Company"), and Robert A. Mandor (the "Executive").
W I T N E S S E T H
WHEREAS, the Executive is currently the President and Chief Financial
Officer of the Company;
WHEREAS, the Executive possesses intimate knowledge of the business and
affairs of the Company, its policies, methods and personnel;
WHEREAS, the Board of Directors (the "Board") of the Company recognizes
that the Executive's contribution to the growth and success of the Company has
been, and believes will continue to be, substantial, and desires to assure the
Company of the Executive's present and continued employment in an executive
capacity and to compensate him therefor;
WHEREAS, the Board has determined that this Agreement will encourage
the Executive's continued attention and dedication to the Company; and
WHEREAS, the Executive is willing to make his services available to the
Company on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth herein, the parties hereby agree as follows:
1. Employment.
1.1 Employment and Term. The Company shall continue
to employ the Executive and the Executive shall
continue to serve the Company, upon the terms and
conditions set forth herein, for an initial term of
three years commencing as of January 1, 1999, unless
sooner terminated as hereinafter set forth, which
term shall thereafter be extended for additional
consecutive one year periods, except as otherwise set
forth herein, unless written notice is given by
either party to the other party no later than 60 days
before the expiration of the Term (as defined herein)
of such party's intention not to extend the Term. The
period during which the Executive is employed
hereunder is referred to as the "Term". In the event
that the Company elects not to renew this Agreement,
the Executive shall be entitled to the payments
provided herein under Section 4.2, subject to the
provisions of Section 4.1 and Section 6 hereof.
1.2 Duties of Executive. The Executive shall serve as the President and
Chief Financial Officer of the Company and shall diligently perform such duties
and services as are commensurate with such positions and as may reasonably be
designated by the By-laws of the Company and from time to time assigned by the
Board. The Executive shall devote such time to the business and affairs of the
Company as the Board deems necessary. -------------------
1.3 Place of Performance. In connection with the Executive's employment by
the Company, the Executive shall be based at the Company's principal executive
offices in Boca Raton, Florida. The Executive may be required to travel on the
Company's business to an extent substantially consistent with his present travel
obligations. --------------------
2. Compensation.
2.1 Base Salary. During the Term, the Executive shall
receive a base salary subject to adjustments as
hereinafter provided (the "Base Salary") at the
annual rate of $382,887. During the Term, the Board,
or an appropriate committee thereof, shall review
annually the Base Salary payable to the Executive and
adjust the same in its sole discretion, provided,
however, that the Base Salary at any time may not be
less than $382,887. In connection with making
adjustments to the Base Salary as provided for in
this Section 2.1, the Board, or an appropriate
committee thereof, will consider the contributions of
the Executive to the Company's efficiency, growth,
productivity and profitability, the expansion of the
Executive's duties, if any, the level of the
Executive's responsibilities, the Executive's tenure
with the Company, and such other factors as they deem
relevant. The Base Salary shall be payable in
substantially equal installments consistent with the
Company's normal payroll schedule, subject to
applicable withholding and other taxes.
2.2 Bonus. The Executive may be issued annual bonuses in accordance with
the guidelines set forth in the Management Incentive Plan as adopted by the
Compensation Committee of the Board on May 24, 1994, as it may be amended from
time to time, for executives of the Company, or as otherwise determined by the
Board. In addition to the foregoing, and not in limitation thereof, the
Executive may receive such additional bonuses as the Board, in its sole
discretion, may determine -----
3. Expense Reimbursement and Other Benefits.
3.1 Expense Reimbursement. During the Term, the
Company, upon the submission of supporting
documentation satisfactory to the Company by the
Executive, and in accordance with Company's policies
for its executives, shall reimburse the Executive for
all reasonable expenses actually paid or incurred by
the Executive in the course of, and pursuant to, the
business of the Company, including expenses for
travel and entertainment. Reimbursement for expenses
shall be subject to such regulations and procedures
as the Company may from time to time establish.
3.2 Vacation. During the Term, the Executive shall be entitled to such
amount of annual paid vacation time as designated in the Company's employee
manual or as otherwise designated by the Board, provided, however, that the
Executive shall be entitled to no less than four weeks annual paid vacation. The
time during which the Executive may use his vacation time and be absent from the
office shall be at his sole discretion. --------
3.3 Fringe and Medical Benefits. The Company shall provide the following
benefits to the Executive, either through direct payments by the Company or by
reimbursement: ---------------------------
(a) A term life insurance policy insuring
the Executive's life which provides a
benefit of no less than $200,000, naming
such beneficiaries as the Executive may
designate from time to time. Notwithstanding
the foregoing, if the Company is unable to
obtain term life insurance which provides a
benefit of no less than $200,000 on the
Executive's life at a normal and customary
cost thereof, as reasonably determined by
the Board (the "Company Funded Premium"),
for a person of the Executive's age, then
this provision and the obligation of the
Company hereunder shall be limited to (i) a
contribution by the Company of an amount not
less than the Company Funded Premium toward
the payment of the premium of such other
term life insurance policy, without regard
to the benefit provided thereby, as the
Executive is able to obtain, or (ii) at the
Executive's election, the Company Funded
Premium may be applied toward such term life
insurance insuring the Executive's life
providing for a lesser benefit as the
Company may procure. If requested by the
Company, the Executive agrees to cooperate
with the Company in obtaining, at the
Company's expense, such life insurance. Such
cooperation shall include, without
limitation, completing and signing such
forms or applications, undergoing physical
examinations, and such other acts as may be
required in order to obtain such insurance.
(b) The Executive shall be eligible to
participate in all benefit plans established
by the Company, on the same basis and
subject to the same qualifications as other
executive officers of the Company including,
but not limited to, medical, bonus, stock
option and other benefit programs. In
addition, the Company may provide such
fringe benefits to the Executive, either
through direct payments or by
reimbursements, as the Company or the Board
may determine from time to time.
<PAGE>
4. Termination.
4.1 Termination for Cause. Notwithstanding anything
contained in this Agreement to the contrary, the
Executive's employment with the Company may be
terminated by the Company for "Cause". As used in
this Agreement, the term "Cause" shall mean only (i)
any action or omission of the Executive which
constitutes a willful and material breach of this
Agreement, including, but not limited to, the failure
of the Executive to satisfactorily perform his duties
under Section 1.2 hereof, which is not cured, or as
to which diligent attempts to cure have not commenced
within the time period provided for in this Section
4.1, (ii) the commission by the Executive of any act
which would constitute fraud, embezzlement or
misappropriation as against the Company, or (iii) the
conviction (from which no appeal can be taken) of the
Executive of any criminal act which is a felony.
Termination of the Executive pursuant to this Section
4.1 shall be communicated by a notice (the "Notice of
Termination") to the Executive from the Board setting
forth a resolution duly adopted by the affirmative
vote of not less than a majority of the entire
membership of the Board (excluding the Executive if
he is then a director of the Company) at a meeting
thereof duly called and held for such purpose finding
that in the good faith opinion of the Board, the
Executive was guilty of conduct set forth in the
definition of Cause and specifying the particulars
thereof in detail. In the event of a proposed
termination for Cause described in clause (i) of this
Section 4.1, the Executive shall be given a notice (a
"Notice of Cause") from the Board setting forth in
reasonable detail any alleged acts or failures to act
which the Board believes may be grounds for
termination of the Executive's employment pursuant to
the terms hereof and the opportunity to meet with the
Board at a time and place mutually convenient to both
the Board and the Executive, but in no event later
than 10 business days after the Notice of Cause is
given to the Executive, at which meeting the
Executive shall have the right to appear with legal
counsel of his choosing to refute any determination
of Cause specified in such notice, and any
termination of the Executive's employment by reason
of such determination of Cause shall not be effective
until the Executive is afforded such opportunity to
appear and be heard to defend such act or failure to
act. If the Executive shall fail to correct such act
or failure to act within 10 business days after such
meeting, the Executive's employment by the Company
shall be terminated by delivery to the Executive of a
Notice of Termination, which Notice of Termination
shall be effective when given. If, within the period
provided, the Executive corrects such act or failure
to act, the Executive's employment may not then be
terminated by the Board. Upon any termination
pursuant to this Section 4.1, the Company shall pay
to the Executive any unpaid Base Salary accrued
through the effective date of termination specified
in the Notice of Termination. In addition, the
Company shall pay any benefits owed to the Executive
under any plan that the Executive participates in
pursuant to Section 3.3 hereof, in accordance with
the terms of such plans as in effect on the date of
termination of employment under this Section 4.1.
Except as provided in this Section 4.1, the Company
shall have no further liability hereunder (other than
to make all reimbursements for reasonable business
expenses incurred prior to the date of termination,
subject, however, to the provisions of Section 3.1
hereof).
4.2 Termination Without Cause. In the event that the
Executive's employment is terminated other than (i)
for Cause or (ii) in connection with, or as a result
of, a Change of Control, the Company shall (a) give
the Executive 30 days written notice of the
termination of his employment and (b) pay to the
Executive the Executive's Base Salary, as then in
effect, accrued and unpaid through the date that his
employment was terminated, together with all other
accrued and unpaid benefits owing to the Executive
through the date of the termination of the
Executive's employment with the Company plus an
amount equal to 300% of the Executive's Base Salary,
as then in effect. Subject to Section 7 hereof, all
payments provided for in this Section 4.2 shall be
made by the Company in substantially equal
installments consistent with the Company's normal
payroll schedule, subject to applicable withholding
and other taxes. In addition, the Company shall pay
any benefits owed to the Executive under any plan
that the Executive participates in pursuant to
Section 3.3 hereof, in accordance with the terms of
such plans as in effect on the date of termination of
his employment under this Section 4.2. Except as
provided in this Section 4.2, the Company shall have
no further liability hereunder (other than to make
all reimbursements for reasonable business expenses
incurred prior to the date of termination, subject,
however, to the provisions of Section 3.1 hereof). In
the event that there has been a Change of Control
pursuant to Section 6 hereof, or this Agreement has
been assigned pursuant to Section 10 hereof, this
Section 4.2 shall not survive the assignment of this
Agreement.
5. Disability or Death.
5.1 Disability. Notwithstanding anything contained in
this Agreement to the contrary, if, during the Term,
the Executive suffers a disability (as defined
below), the Company shall, subject to the provisions
of Section 5.2 hereof, either directly, through
insurance, or through a combination of both, continue
to pay the Executive an amount equal to the Base
Salary, as then in effect, plus a proportionate
amount of any compensation earned by or due to the
Executive as provided for in Section 2.2 hereof
through the end of the first 180 days of such
disability, provided, however, that, in the event
that the Executive is disabled for a period of more
than 180 days in any 12 month period, the Company
may, at its election, by a vote of not less than a
majority of the entire membership of the Board
(excluding the Executive if he is then a director of
the Company) within 90 days from the 180th day that
the Executive is disabled, terminate the Executive's
employment with the Company. In the event of such
termination, (i) payment of the Executive's Base
Salary, as then in effect, and fringe benefits (to
the extent permissible by applicable law) shall be
continued for a period of 12 months after such
termination, and (ii) the Executive shall receive a
one time bonus in an amount equal to the highest
annual bonus paid to the Executive with respect to
any of the three years immediately preceding the date
of termination of the Executive to be paid to the
Executive within 15 business days after his
termination. In addition, the Company shall pay any
benefits owed to the Executive under any plan that
the Executive participates in pursuant to Section 3.3
hereof, in accordance with the terms of such plans as
in effect on the date of termination of employment
under this Section 5.1. Except as provided in this
Section 5.1, the Company shall have no further
liability hereunder (other than to make all
reimbursements for reasonable business expenses
incurred by the Executive prior to the date of
termination, subject, however, to the provisions of
Section 3.1 hereof). For purposes of this Agreement
"disability" means a reasonable determination by the
Board, based on reasonable medical evidence, that the
Executive is incapable of substantially performing
his obligations pursuant to the terms of this
Agreement by reason of physical or mental illness or
injury.
5.2 Death. In the event of the death of the Executive
during the Term, the Company shall pay to the
Executive's legal representative (i) any unpaid Base
Salary accrued through the date of the Executive's
death, (ii) the Executive's Base Salary, as then in
effect, and fringe benefits (to the extent
permissible by applicable law) for a period of 12
months after the Executive's death, and (iii) a one
time bonus in an amount equal to the highest annual
bonus paid to the Executive with respect to any of
the three years immediately preceding the date of
death of the Executive. In addition, the Company
shall pay to the Executive's legal representative any
benefits owed to the Executive under any plan that
the Executive participated in pursuant to Section 3.3
hereof, in accordance with the terms of such plans as
in effect on the date of the Executive's death.
Except as provided in this Section 5.2, the Company
shall have no further liability hereunder (other than
to make all reimbursements of reasonable business
expenses incurred by the Executive prior to the date
of the Executive's death, subject, however, to the
provisions of Section 3.1 hereof).
6. Change of Control.
(a) For the purposes of this Agreement, a "Change of
Control" shall be deemed to have taken place if: (i)
in connection with any cash tender or exchange offer,
merger or other business combination, contested
election, or any other transaction, the persons who
were directors of the Company before such
transactions shall cease to constitute at least
two-thirds of the Board or of the board of directors
of any successor to the Company, as the direct or
indirect result of, or in connection with, any such
transaction, (ii) a complete liquidation or
dissolution of the Company occurs, (iii) there is a
sale or other disposition (other than to a wholly
owned subsidiary) of all, or substantially all, of
the assets of the Company, or (iv) any person,
including a "group" (within the meaning of Section
13(d)(3) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")), hereafter acquires
(other than directly from the Company or through open
market purchases approved by the Board, as long as
the majority of the Board approving such purchases is
the majority at the time such purchases are made) any
voting securities of the Company such that
immediately after such acquisition such person has
beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 20% or
more of the combined voting power of the then
outstanding securities of the Company (if,
immediately prior to such acquisition, such person
did not then have beneficial ownership of 20% or more
of the combined voting power of the outstanding
securities of the Company), provided, however, in
determining whether a Change of Control has occurred,
the acquisition of securities by (a) an employee
benefit plan (or a trust forming a part thereof)
maintained by either (y) the Company or (z) any
corporation or person of which a majority of its
voting power or its voting equity securities or
equity interest is owned, directly or indirectly, by
the Company (for purposes of this definition, a
"Subsidiary"), or (b) the Company or a Subsidiary,
shall not constitute an acquisition which would cause
a Change of Control. For purposes of this Agreement,
the acquisition of additional shares of the Company's
securities by Concord Assets Group, Inc. or any of
its affiliates shall not constitute a Change of
Control. For Change of Control purposes, if the
Company is a private entity, a Change of Control
would be deemed to take place upon the occurrence of
an event, the result of which is a person (or group
of affiliated persons) acquiring ownership,
beneficially or otherwise, of greater than 50% of the
voting securities of the Company.
(b) The Company and the Executive hereby agree that,
if the Executive is employed by the Company on the
date on which a Change of Control occurs (the "Change
of Control Date"), the Company (and any successor
company that assumes this Agreement) will continue to
retain the Executive and the Executive will remain
employed by the Company (or such successor company)
and the Executive agrees to exercise such authority
and perform such executive duties for the Company (or
successor company) as are commensurate with the
authority being exercised and duties being performed
by the Executive immediately prior to the Change of
Control Date, until the third anniversary of the
Change of Control Date, without regard to automatic
renewals as set forth in Section 1.1. Unless
otherwise indicated herein, the term "the Company"
shall include any successor company that assumes this
Agreement.
(c) If after a Change of Control the Executive is
requested and, in his sole and absolute discretion,
consents to change his principal business location,
the Company will reimburse the Executive for his
reasonable relocation expenses, including, without
limitation, moving expenses, temporary living and
travel expenses for a reasonable time while arranging
to move his residence to the changed location,
closing costs, if any, associated with the sale of
his existing residence and the purchase of a
replacement residence at the changed location, plus
an additional amount representing a gross-up of any
state or federal taxes payable by the Executive as a
result of any such reimbursement. If the Executive
shall not consent to change his business location,
the Executive may continue to provide the services
required of him hereunder from his then residence
and/or business address, and the Company shall
continue to maintain an office for the Executive at
such location commensurate with the Executive's
office at the Company prior to the Change of Control
Date.
(d) After a Change of Control the Company shall (i)
continue to pay the Executive a salary in an amount
not less than the Base Salary as in effect on the
Change of Control Date, (ii) pay the Executive
bonuses in an amount per year not less than the
average of those bonuses paid to the Executive during
the three year period immediately preceding the
Change of Control Date, and (iii) continue employment
benefit programs for the Executive at levels not less
than those in effect on the Change of Control Date
(but subject to such reductions as may be required to
maintain such plans in compliance with applicable
federal law regulating employee benefit programs).
(e) If after a Change of Control this Agreement has
not been assigned to the successor company and (i)
the Executive's employment is terminated by the
Company or successor company other than for Cause, or
(ii) there shall have occurred a material reduction
in the Executive's compensation or employment related
benefits, or a material change in the Executive's
status, working conditions, management
responsibilities or titles, and the Executive
voluntarily terminates his relationship with the
Company (or the successor company) within 60 days of
any such occurrence, or the last in a series of such
occurrences, the Executive shall be entitled to
receive, subject to the provisions of subparagraph
(f) of this Section 6, a "lump sum payment" equal to
(y) 299% of the Executive's "Base Period Income" as
determined under subparagraph (f) of this Section 6
reduced by (z) any additional payments to such
Executive required to be taken into consideration for
the purposes of calculating a "parachute payment"
within the meaning of Section 280G of the Internal
Revenue Code of 1986, as amended (the "Code"), and
regulations promulgated thereunder, provided,
however, that no such lump sum payment shall be
owing, payable or paid to the Executive if the
Company procures a position for the Executive with a
company or entity that conducts business similar to
that of the Company's in all material respects in the
same general geographic vicinity as the Company
currently conducts its business, with an employment
agreement having terms and conditions substantially
the same as those of this Agreement in all material
respects. If payable, such lump sum payment will be
paid to the Executive within 15 business days after
his termination of employment with the Company (or
such successor company). Such termination payment
shall not be reduced by any present value or similar
factor, and the Executive shall not be required to
mitigate the amount of such payment by securing other
employment or otherwise, nor will such payment be
reduced by reason of the Executive securing other
employment or for any other reason. The termination
payment shall be paid in lieu of any severance pay
due to the Executive pursuant to any severance or
employment agreement with, or severance payment plan
of, the Company.
(f) The Executive's "Base Period Income" shall be his average annual
compensation (including, without limitation, his Base Salary and any bonuses)
for the five years immediately preceding the date of his termination of
employment with the Company. If the Executive has not been employed by the
Company for a full five years at the time that his employment with the Company
is terminated, his Base Period Income shall be determined based on the period
that he was employed by the Company.
(g) In the event that the Executive's employment with
the Company is terminated other than for Cause,
disability or death after this Agreement has been
assigned pursuant to Section 10 hereof, the company
that assumed this Agreement shall pay to the
Executive the Executive's Base Salary, as then in
effect, accrued and unpaid through the date that his
employment was terminated, together with all other
accrued and unpaid benefits owing to the Executive
through the date of the termination of the
Executive's employment plus, subject to the
provisions of subparagraph (f) of this Section 6, a
"lump sum payment" equal to (i) 299% of the
Executive's "Base Period Income" as determined under
subparagraph (f) of this Section 6 reduced by (ii)
any additional payments to such Executive required to
be taken into consideration for the purposes of
calculating a "parachute payment" within the meaning
of Section 280G of the Code and regulations
promulgated thereunder. If payable, such lump sum
payment will be paid to the Executive within 15
business days after his termination of employment
with the Company (or such successor company). Such
termination payment shall not be reduced by any
present
2
51004894.02
<PAGE>
value or similar factor, and the Executive
shall not be required to mitigate the amount of such payment by securing other
employment or otherwise, nor will such payment be reduced by reason of the
Executive securing other employment or for any other reason. The termination
payment shall be paid in lieu of any severance pay due to the Executive pursuant
to any severance or employment agreement with, or severance payment plan of, the
Company.
7. Mitigation.
In the event that the Executive's employment with the Company
is terminated pursuant to the provisions of Section 4.2
hereof, the Executive shall be obligated to seek other
employment to mitigate the amount of any payments provided for
under this Agreement. If the Executive obtains other
employment, the amount of any payment provided for pursuant to
Section 4.2 hereof shall be reduced by any compensation earned
by the Executive as the result of employment by another
employer after the termination of the Executive's employment
with the Company. If the amount of all compensation earned by
the Executive as the result of employment by another employer
after the termination of the Executive's employment with the
Company is equal to or greater than the amount of all payments
provided for pursuant to Section 4.2 hereof, the Company shall
have no further liability to the Executive under Section 4.2
hereof.
8. Restrictive Covenants.
8.1 Nondisclosure. During the Term and following the
termination of the Executive's employment with the
Company, the Executive shall not divulge,
communicate, use to the detriment of the Company or
for the benefit of any other person or persons, or
misuse in any way, any Confidential Information (as
hereinafter defined) pertaining to the business of
the Company. Any Confidential Information, or data
now or hereafter acquired by the Executive with
respect to the business of the Company (which shall
include, but not be limited to, information
concerning the Company's financial condition,
prospects, technology, customers, suppliers, methods
of doing business and marketing and promotion of the
Company's services), shall be deemed a valuable,
special and unique asset of the Company that is
received by the Executive in confidence and as a
fiduciary. For purposes of this Agreement,
"Confidential Information" means information
disclosed to the Executive or known by the Executive
as a consequence of, or through, his employment by
the Company (including information conceived,
originated, discovered or developed by the Executive)
prior to, or after, the date hereof and not generally
known or in the public domain, about the Company or
its business. Notwithstanding the foregoing, nothing
herein shall be deemed to restrict the Executive from
disclosing Confidential Information to the extent
required by law.
8.2 Nonsolicitation of Employees. During the Term and
for a period of two years following the termination
of the Executive's employment with the Company, the
Executive shall not directly or indirectly, for
himself or for any other person, firm, corporation,
partnership, association or other entity, attempt to
employ or enter into any contractual arrangement,
directly or indirectly, with any employee of the
Company or any person who was an employee of the
Company at any time during the six month period
immediately prior to the Executive's termination and
whose employment with the Company was terminated by
the Company.
8.3 Books and Records. All books, records, accounts and similar
repositories of Confidential Information of the Company, whether prepared by the
Executive or otherwise coming into the Executive's possession, shall be the
exclusive property of the Company and shall be returned immediately to the
Company upon termination of this Agreement or upon the Board's request at any
time. -----------------
9. Injunction.
It is recognized and hereby acknowledged by the parties hereto
that a breach by the Executive of any of the covenants
contained in Section 8 of this Agreement will cause
irreparable harm and damage to the Company, the monetary
amount of which may be virtually impossible to ascertain and,
therefore, that damages at law would be insufficient for
breach of any of the covenants contained in Section 8 hereof.
As a result, the Executive agrees that in the event of a
breach or threatened breach by the Executive of any provisions
of Section 8 hereof, the Company shall be entitled to
equitable relief in the form of an injunction to prevent
irreparable injury and that such right to injunctive relief
shall be cumulative and in addition to whatever other remedies
the Company may possess. In connection with any proceeding to
seek injunctive relief, the parties hereto waive any
requirement to post a bond.
10. Consolidation, Merger or Sale of Assets; Assignability.
Nothing in this Agreement shall preclude the Company from
consolidating or merging into or with, or transferring all or
substantially all of its assets to, another corporation or
entity which assumes this Agreement, and all obligations of
the Company hereunder, in writing. Nothing in this Agreement
shall preclude the Company from assigning this Agreement to
another entity in the event that the Company is liquidated or
upon a Change of Control if the successor company is not
otherwise obligated to assume this Agreement. Upon such
consolidation, merger, transfer of assets, liquidation,
assignment and assumption, the term "the Company" as used
herein, shall mean such other corporation or entity that
assumes this Agreement, and this Agreement shall continue in
full force and effect except as otherwise provided in this
Section 10. Except as otherwise provided in this Section 10,
this Agreement shall not be assigned by either party except
with the written consent of the other. In the event that this
Agreement is assigned in accordance with the provisions of
this Section 10, this Agreement shall continue until the third
anniversary of the date of such assignment and the automatic
renewals as set forth in Section 1.1 hereof and the Change of
Control provisions of Section 6 hereof shall no longer be
enforceable.
11. Binding Effect.
Except as herein otherwise provided, this Agreement shall
inure to the benefit of, and shall be binding upon, the parties hereto, their
personal representatives, successors, heirs and assigns.
12. Reformation.
If any provision of this Agreement is held to be illegal,
invalid or unenforceable under present or future laws effective during the term
of this Agreement, in lieu of such illegal, invalid or unenforceable provision,
there shall be added automatically as a part of this Agreement a provision as
similar in terms to such illegal, invalid or unenforceable provision as may be
possible and be legal, valid and enforceable.
13. Terminology.
All personal pronouns used in this Agreement, whether used in the
masculine, the feminine or the neuter gender, shall include all other genders,
and the singular shall include the plural and vice versa. Titles of Sections are
for convenience only, and neither limit nor amplify the provisions of this
Agreement.
14. Governing Law.
This Agreement shall be governed and construed in accordance
with the laws of the State of Florida, without regard to the conflict of laws
principles thereof.
15. Entire Agreement
This Agreement contains the entire understanding between the
parties hereto and may not be changed or modified except by an agreement in
writing signed by all the parties hereto.
16. Counterparts.
This Agreement may be executed in any number of counterparts
and each such counterpart shall for all purposes be deemed an original.
3
<PAGE>
17. Notice.
All notices or communications hereunder shall be in writing
and shall be deemed given when delivered in person or when sent by registered or
certified mail, return receipt requested, or by overnight courier service, to a
party at the following address, or at such other address as any party shall have
given notice to the other in the manner herein provided:
If to the Company, to:
Milestone Properties, Inc.
150 East Palmetto Park Road, 4th Floor
Boca Raton, Florida 33432
Attn: Robert A. Mandor, President
If to the Executive, to the address on file
in the personnel records of the Company.
4
<PAGE>
IN WITNESS WHEROF, this Agreement has been duly signed by the parties
hereto as of the day and year first above written.
MILESTONE PROPERTIES, INC.
By___________________________
Name: Joseph P. Otto
Title: Vice President
------------------------------
Robert A. Mandor
Exhibit 10.11
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), dated as of January 1,
1999, by and between MILESTONE PROPERTIES, INC., a Delaware corporation (the
"Company"), and Harvey Shore (the "Executive").
W I T N E S S E T H
WHEREAS, the Executive is currently a Senior Vice President of the Company;
WHEREAS, the Executive possesses intimate knowledge of the business and
affairs of the Company, its policies, methods and personnel;
WHEREAS, the Board of Directors (the "Board") of the Company recognizes
that the Executive's contribution to the growth and success of the Company has
been, and believes will continue to be, substantial, and desires to assure the
Company of the Executive's present and continued employment in an executive
capacity and to compensate him therefor;
WHEREAS, the Board has determined that this Agreement will encourage
the Executive's continued attention and dedication to the Company; and
WHEREAS, the Executive is willing to make his services available to the
Company on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth herein, the parties hereby agree as follows:
1. Employment.
1.1 Employment and Term. The Company shall continue
to employ the Executive and the Executive shall
continue to serve the Company, upon the terms and
conditions set forth herein, for an initial term of
three years commencing as of January 1, 1999, unless
sooner terminated as hereinafter set forth, which
term shall thereafter be extended for additional
consecutive one year periods, except as otherwise set
forth herein, unless written notice is given by
either party to the other party no later than 60 days
before the expiration of the Term (as defined herein)
of such party's intention not to extend the Term. The
period during which the Executive is employed
hereunder is referred to as the "Term". In the event
that the Company elects not to renew this Agreement,
the Executive shall be entitled to the payments
provided herein under Section 4.2, subject to the
provisions of Section 4.1 and Section 6 hereof.
1.2 Duties of Executive. The Executive shall serve as a Senior Vice
President of the Company and shall diligently perform such duties and services
as are commensurate with such position and as may reasonably be designated by
the By-laws of the Company and from time to time assigned by the Board. The
Executive shall devote such time to the business and affairs of the Company as
the Board, the Chief Executive Officer or the President of the Company deems
necessary. -------------------
1.3 Place of Performance. In connection with the Executive's employment by
the Company, the Executive shall be based at the Company's principal executive
offices in Boca Raton, Florida. The Executive may be required to travel on the
Company's business to an extent substantially consistent with his present travel
obligations. --------------------
2. Compensation.
2.1 Base Salary. During the Term, the Executive shall
receive a base salary subject to adjustments as
hereinafter provided (the "Base Salary") at the
annual rate of $158,826. During the Term, the Board,
or an appropriate committee thereof, shall review
annually the Base Salary payable to the Executive and
adjust the same in its sole discretion, provided,
however, that the Base Salary at any time may not be
less than $158,826. In connection with making
adjustments to the Base Salary as provided for in
this Section 2.1, the Board, or an appropriate
committee thereof, will consider the contributions of
the Executive to the Company's efficiency, growth,
productivity and profitability, the expansion of the
Executive's duties, if any, the level of the
Executive's responsibilities, the Executive's tenure
with the Company, and such other factors as they deem
relevant. The Base Salary shall be payable in
substantially equal installments consistent with the
Company's normal payroll schedule, subject to
applicable withholding and other taxes.
2.2 Bonus. The Executive may be issued annual bonuses as the Board, in its
sole discretion, may determine. -----
3. Expense Reimbursement and Other Benefits.
3.1 Expense Reimbursement. During the Term, the
Company, upon the submission of supporting
documentation satisfactory to the Company by the
Executive, and in accordance with Company's policies
for its executives, shall reimburse the Executive for
all reasonable expenses actually paid or incurred by
the Executive in the course of, and pursuant to, the
business of the Company, including expenses for
travel and entertainment. Reimbursement for expenses
shall be subject to such regulations and procedures
as the Company may from time to time establish.
3.2 Vacation. During the Term, the Executive shall be entitled to such
amount of annual paid vacation time as designated in the Company's employee
manual or as otherwise designated by the Board, provided, however, that the
Executive shall be entitled to no less than four weeks annual paid vacation. The
time during which the Executive may use his vacation time and be absent from the
office shall be at his discretion, provided, however, that such time is
compatible, as reasonably determined by the Company's Chief Executive
Officer or President, with the vacation and work schedules of other relevant
employees and the business demands of the Company.
3.3 Fringe and Medical Benefits. The Company shall provide the following
benefits to the Executive, either through direct payments by the Company or by
reimbursement: ---------------------------
(a) A term life insurance policy insuring
the Executive's life which provides a
benefit of no less than $200,000, naming
such beneficiaries as the Executive may
designate from time to time. Notwithstanding
the foregoing, if the Company is unable to
obtain term life insurance which provides a
benefit of no less than $200,000 on the
Executive's life at a normal and customary
cost thereof, as reasonably determined by
the Board (the "Company Funded Premium"),
for a person of the Executive's age, then
this provision and the obligation of the
Company hereunder shall be limited to (i) a
contribution by the Company of an amount not
less than the Company Funded Premium toward
the payment of the premium of such other
term life insurance policy, without regard
to the benefit provided thereby, as the
Executive is able to obtain, or (ii) at the
Executive's election, the Company Funded
Premium may be applied toward such term life
insurance insuring the Executive's life
providing for a lesser benefit as the
Company may procure. If requested by the
Company, the Executive agrees to cooperate
with the Company in obtaining, at the
Company's expense, such life insurance. Such
cooperation shall include, without
limitation, completing and signing such
forms or applications, undergoing physical
examinations, and such other acts as may be
required in order to obtain such insurance.
(b) The Executive shall be eligible to
participate in all benefit plans established
by the Company, on the same basis and
subject to the same qualifications as other
executive officers of the Company including,
but not limited to, medical, bonus, stock
option and other benefit programs. In
addition, the Company may provide such
fringe benefits to the Executive, either
through direct payments or by
reimbursements, as the Company or the Board
may determine from time to time.
<PAGE>
4. Termination.
4.1 Termination for Cause. Notwithstanding anything
contained in this Agreement to the contrary, the
Executive's employment with the Company may be
terminated by the Company for "Cause". As used in
this Agreement, the term "Cause" shall mean only (i)
any action or omission of the Executive which
constitutes a willful and material breach of this
Agreement, including, but not limited to, the failure
of the Executive to satisfactorily perform his duties
under Section 1.2 hereof, which is not cured, or as
to which diligent attempts to cure have not commenced
within the time period provided for in this Section
4.1, (ii) the commission by the Executive of any act
which would constitute fraud, embezzlement or
misappropriation as against the Company, or (iii) the
conviction (from which no appeal can be taken) of the
Executive of any criminal act which is a felony.
Termination of the Executive pursuant to this Section
4.1 shall be communicated by a notice (the "Notice of
Termination") to the Executive from the Board setting
forth a resolution duly adopted by the affirmative
vote of not less than a majority of the entire
membership of the Board (excluding the Executive if
he is then a director of the Company) at a meeting
thereof duly called and held for such purpose finding
that in the good faith opinion of the Board, the
Executive was guilty of conduct set forth in the
definition of Cause and specifying the particulars
thereof in detail. In the event of a proposed
termination for Cause described in clause (i) of this
Section 4.1, the Executive shall be given a notice (a
"Notice of Cause") from the Board setting forth in
reasonable detail any alleged acts or failures to act
which the Board believes may be grounds for
termination of the Executive's employment pursuant to
the terms hereof and the opportunity to meet with the
Board at a time and place mutually convenient to both
the Board and the Executive, but in no event later
than 10 business days after the Notice of Cause is
given to the Executive, at which meeting the
Executive shall have the right to appear with legal
counsel of his choosing to refute any determination
of Cause specified in such notice, and any
termination of the Executive's employment by reason
of such determination of Cause shall not be effective
until the Executive is afforded such opportunity to
appear and be heard to defend such act or failure to
act. If the Executive shall fail to correct such act
or failure to act within 10 business days after such
meeting, the Executive's employment by the Company
shall be terminated by delivery to the Executive of a
Notice of Termination, which Notice of Termination
shall be effective when given. If, within the period
provided, the Executive corrects such act or failure
to act, the Executive's employment may not then be
terminated by the Board. Upon any termination
pursuant to this Section 4.1, the Company shall pay
to the Executive any unpaid Base Salary accrued
through the effective date of termination specified
in the Notice of Termination. In addition, the
Company shall pay any benefits owed to the Executive
under any plan that the Executive participates in
pursuant to Section 3.3 hereof, in accordance with
the terms of such plans as in effect on the date of
termination of employment under this Section 4.1.
Except as provided in this Section 4.1, the Company
shall have no further liability hereunder (other than
to make all reimbursements for reasonable business
expenses incurred prior to the date of termination,
subject, however, to the provisions of Section 3.1
hereof).
4.2 Termination Without Cause. In the event that the
Executive's employment is terminated other than (i)
for Cause or (ii) in connection with, or as a result
of, a Change of Control, the Company shall (a) give
the Executive 30 days written notice of the
termination of his employment and (b) pay to the
Executive the Executive's Base Salary, as then in
effect, accrued and unpaid through the date that his
employment was terminated, together with all other
accrued and unpaid benefits owing to the Executive
through the date of the termination of the
Executive's employment with the Company plus an
amount equal to 300% of the Executive's Base Salary,
as then in effect. Subject to Section 7 hereof, all
payments provided for in this Section 4.2 shall be
made by the Company in substantially equal
installments consistent with the Company's normal
payroll schedule, subject to applicable withholding
and other taxes. In addition, the Company shall pay
any benefits owed to the Executive under any plan
that the Executive participates in pursuant to
Section 3.3 hereof, in accordance with the terms of
such plans as in effect on the date of termination of
his employment under this Section 4.2. Except as
provided in this Section 4.2, the Company shall have
no further liability hereunder (other than to make
all reimbursements for reasonable business expenses
incurred prior to the date of termination, subject,
however, to the provisions of Section 3.1 hereof). In
the event that there has been a Change of Control
pursuant to Section 6 hereof, or this Agreement has
been assigned pursuant to Section 10 hereof, this
Section 4.2 shall not survive the assignment of this
Agreement.
5. Disability or Death.
5.1 Disability. Notwithstanding anything contained in
this Agreement to the contrary, if, during the Term,
the Executive suffers a disability (as defined
below), the Company shall, subject to the provisions
of Section 5.2 hereof, either directly, through
insurance, or through a combination of both, continue
to pay the Executive an amount equal to the Base
Salary, as then in effect, plus a proportionate
amount of any compensation earned by or due to the
Executive as provided for in Section 2.2 hereof
through the end of the first 180 days of such
disability, provided, however, that, in the event
that the Executive is disabled for a period of more
than 180 days in any 12 month period, the Company
may, at its election, by a vote of not less than a
majority of the entire membership of the Board
(excluding the Executive if he is then a director of
the Company) within 90 days from the 180th day that
the Executive is disabled, terminate the Executive's
employment with the Company. In the event of such
termination, (i) payment of the Executive's Base
Salary, as then in effect, and fringe benefits (to
the extent permissible by applicable law) shall be
continued for a period of 12 months after such
termination, and (ii) the Executive shall receive a
one time bonus in an amount equal to the highest
annual bonus paid to the Executive with respect to
any of the three years immediately preceding the date
of termination of the Executive to be paid to the
Executive within 15 business days after his
termination. In addition, the Company shall pay any
benefits owed to the Executive under any plan that
the Executive participates in pursuant to Section 3.3
hereof, in accordance with the terms of such plans as
in effect on the date of termination of employment
under this Section 5.1. Except as provided in this
Section 5.1, the Company shall have no further
liability hereunder (other than to make all
reimbursements for reasonable business expenses
incurred by the Executive prior to the date of
termination, subject, however, to the provisions of
Section 3.1 hereof). For purposes of this Agreement
"disability" means a reasonable determination by the
Board, based on reasonable medical evidence, that the
Executive is incapable of substantially performing
his obligations pursuant to the terms of this
Agreement by reason of physical or mental illness or
injury.
5.2 Death. In the event of the death of the Executive
during the Term, the Company shall pay to the
Executive's legal representative (i) any unpaid Base
Salary accrued through the date of the Executive's
death, (ii) the Executive's Base Salary, as then in
effect, and fringe benefits (to the extent
permissible by applicable law) for a period of 12
months after the Executive's death, and (iii) a one
time bonus in an amount equal to the highest annual
bonus paid to the Executive with respect to any of
the three years immediately preceding the date of
death of the Executive. In addition, the Company
shall pay to the Executive's legal representative any
benefits owed to the Executive under any plan that
the Executive participated in pursuant to Section 3.3
hereof, in accordance with the terms of such plans as
in effect on the date of the Executive's death.
Except as provided in this Section 5.2, the Company
shall have no further liability hereunder (other than
to make all reimbursements of reasonable business
expenses incurred by the Executive prior to the date
of the Executive's death, subject, however, to the
provisions of Section 3.1 hereof).
6. Change of Control.
(a) For the purposes of this Agreement, a "Change of
Control" shall be deemed to have taken place if: (i)
in connection with any cash tender or exchange offer,
merger or other business combination, contested
election, or any other transaction, the persons who
were directors of the Company before such
transactions shall cease to constitute at least
two-thirds of the Board or of the board of directors
of any successor to the Company, as the direct or
indirect result of, or in connection with, any such
transaction, (ii) a complete liquidation or
dissolution of the Company occurs, (iii) there is a
sale or other disposition (other than to a wholly
owned subsidiary) of all, or substantially all, of
the assets of the Company, or (iv) any person,
including a "group" (within the meaning of Section
13(d)(3) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")), hereafter acquires
(other than directly from the Company or through open
market purchases approved by the Board, as long as
the majority of the Board approving such purchases is
the majority at the time such purchases are made) any
voting securities of the Company such that
immediately after such acquisition such person has
beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 20% or
more of the combined voting power of the then
outstanding securities of the Company (if,
immediately prior to such acquisition, such person
did not then have beneficial ownership of 20% or more
of the combined voting power of the outstanding
securities of the Company), provided, however, in
determining whether a Change of Control has occurred,
the acquisition of securities by (a) an employee
benefit plan (or a trust forming a part thereof)
maintained by either (y) the Company or (z) any
corporation or person of which a majority of its
voting power or its voting equity securities or
equity interest is owned, directly or indirectly, by
the Company (for purposes of this definition, a
"Subsidiary"), or (b) the Company or a Subsidiary,
shall not constitute an acquisition which would cause
a Change of Control. For purposes of this Agreement,
the acquisition of additional shares of the Company's
securities by Concord Assets Group, Inc. or any of
its affiliates shall not constitute a Change of
Control. For Change of Control purposes, if the
Company is a private entity, a Change of Control
would be deemed to take place upon the occurrence of
an event, the result of which is a person (or group
of affiliated persons) acquiring ownership,
beneficially or otherwise, of greater than 50% of the
voting securities of the Company.
(b) The Company and the Executive hereby agree that,
if the Executive is employed by the Company on the
date on which a Change of Control occurs (the "Change
of Control Date"), the Company (and any successor
company that assumes this Agreement) will continue to
retain the Executive and the Executive will remain
employed by the Company (or such successor company)
and the Executive agrees to exercise such authority
and perform such executive duties for the Company (or
successor company) as are commensurate with the
authority being exercised and duties being performed
by the Executive immediately prior to the Change of
Control Date, until the third anniversary of the
Change of Control Date, without regard to automatic
renewals as set forth in Section 1.1. Unless
otherwise indicated herein, the term "the Company"
shall include any successor company that assumes this
Agreement.
(c) If after a Change of Control the Executive is
requested and, in his sole and absolute discretion,
consents to change his principal business location,
the Company will reimburse the Executive for his
reasonable relocation expenses, including, without
limitation, moving expenses, temporary living and
travel expenses for a reasonable time while arranging
to move his residence to the changed location,
closing costs, if any, associated with the sale of
his existing residence and the purchase of a
replacement residence at the changed location, plus
an additional amount representing a gross-up of any
state or federal taxes payable by the Executive as a
result of any such reimbursement. If the Executive
shall not consent to change his business location,
the Executive may continue to provide the services
required of him hereunder from his then residence
and/or business address, and the Company shall
continue to maintain an office for the Executive at
such location commensurate with the Executive's
office at the Company prior to the Change of Control
Date.
(d) After a Change of Control the Company shall (i)
continue to pay the Executive a salary in an amount
not less than the Base Salary as in effect on the
Change of Control Date, (ii) pay the Executive
bonuses in an amount per year not less than the
average of those bonuses paid to the Executive during
the three year period immediately preceding the
Change of Control Date, and (iii) continue employment
benefit programs for the Executive at levels not less
than those in effect on the Change of Control Date
(but subject to such reductions as may be required to
maintain such plans in compliance with applicable
federal law regulating employee benefit programs).
(e) If after a Change of Control this Agreement has
not been assigned to the successor company and (i)
the Executive's employment is terminated by the
Company or successor company other than for Cause, or
(ii) there shall have occurred a material reduction
in the Executive's compensation or employment related
benefits, or a material change in the Executive's
status, working conditions, management
responsibilities or titles, and the Executive
voluntarily terminates his relationship with the
Company (or the successor company) within 60 days of
any such occurrence, or the last in a series of such
occurrences, the Executive shall be entitled to
receive, subject to the provisions of subparagraph
(f) of this Section 6, a "lump sum payment" equal to
(y) 299% of the Executive's "Base Period Income" as
determined under subparagraph (f) of this Section 6
reduced by (z) any additional payments to such
Executive required to be taken into consideration for
the purposes of calculating a "parachute payment"
within the meaning of Section 280G of the Internal
Revenue Code of 1986, as amended (the "Code"), and
regulations promulgated thereunder, provided,
however, that no such lump sum payment shall be
owing, payable or paid to the Executive if the
Company procures a position for the Executive with a
company or entity that conducts business similar to
that of the Company's in all material respects in the
same general geographic vicinity as the Company
currently conducts its business, with an employment
agreement having terms and conditions substantially
the same as those of this Agreement in all material
respects. If payable, such lump sum payment will be
paid to the Executive within 15 business days after
his termination of employment with the Company (or
such successor company). Such termination payment
shall not be reduced by any present value or similar
factor, and the Executive shall not be required to
mitigate the amount of such payment by securing other
employment or otherwise, nor will such payment be
reduced by reason of the Executive securing other
employment or for any other reason. The termination
payment shall be paid in lieu of any severance pay
due to the Executive pursuant to any severance or
employment agreement with, or severance payment plan
of, the Company.
(f) The Executive's "Base Period Income" shall be his average annual
compensation (including, without limitation, his Base Salary and any bonuses)
for the five years immediately preceding the date of his termination of
employment with the Company. If the Executive has not been employed by the
Company for a full five years at the time that his employment with the Company
is terminated, his Base Period Income shall be determined based on the period
that he was employed by the Company.
(g) In the event that the Executive's employment with
the Company is terminated other than for Cause,
disability or death after this Agreement has been
assigned pursuant to Section 10 hereof, the company
that assumed this Agreement shall pay to the
Executive the Executive's Base Salary, as then in
effect, accrued and unpaid through the date that his
employment was terminated, together with all other
accrued and unpaid benefits owing to the Executive
through the date of the termination of the
Executive's employment plus, subject to the
provisions of subparagraph (f) of this Section 6, a
"lump sum payment" equal to (i) 299% of the
Executive's "Base Period Income" as determined under
subparagraph (f) of this Section 6 reduced by (ii)
any additional payments to such Executive required to
be taken into consideration for the purposes of
calculating a "parachute payment" within the meaning
of Section 280G of the Code and regulations
promulgated thereunder. If payable, such lump sum
payment will be paid to the Executive within 15
business days after his termination of employment
with the Company (or such successor company). Such
termination payment shall not be reduced by any
present
2
51004895.03
<PAGE>
value or similar factor, and the Executive
shall not be required to mitigate the amount of such payment by securing other
employment or otherwise, nor will such payment be reduced by reason of the
Executive securing other employment or for any other reason. The termination
payment shall be paid in lieu of any severance pay due to the Executive pursuant
to any severance or employment agreement with, or severance payment plan of, the
Company.
7. Mitigation.
In the event that the Executive's employment with the Company
is terminated pursuant to the provisions of Section 4.2
hereof, the Executive shall be obligated to seek other
employment to mitigate the amount of any payments provided for
under this Agreement. If the Executive obtains other
employment, the amount of any payment provided for pursuant to
Section 4.2 hereof shall be reduced by any compensation earned
by the Executive as the result of employment by another
employer after the termination of the Executive's employment
with the Company. If the amount of all compensation earned by
the Executive as the result of employment by another employer
after the termination of the Executive's employment with the
Company is equal to or greater than the amount of all payments
provided for pursuant to Section 4.2 hereof, the Company shall
have no further liability to the Executive under Section 4.2
hereof.
8. Restrictive Covenants.
8.1 Nondisclosure. During the Term and following the
termination of the Executive's employment with the
Company, the Executive shall not divulge,
communicate, use to the detriment of the Company or
for the benefit of any other person or persons, or
misuse in any way, any Confidential Information (as
hereinafter defined) pertaining to the business of
the Company. Any Confidential Information, or data
now or hereafter acquired by the Executive with
respect to the business of the Company (which shall
include, but not be limited to, information
concerning the Company's financial condition,
prospects, technology, customers, suppliers, methods
of doing business and marketing and promotion of the
Company's services), shall be deemed a valuable,
special and unique asset of the Company that is
received by the Executive in confidence and as a
fiduciary. For purposes of this Agreement,
"Confidential Information" means information
disclosed to the Executive or known by the Executive
as a consequence of, or through, his employment by
the Company (including information conceived,
originated, discovered or developed by the Executive)
prior to, or after, the date hereof and not generally
known or in the public domain, about the Company or
its business. Notwithstanding the foregoing, nothing
herein shall be deemed to restrict the Executive from
disclosing Confidential Information to the extent
required by law.
8.2 Nonsolicitation of Employees. During the Term and
for a period of two years following the termination
of the Executive's employment with the Company, the
Executive shall not directly or indirectly, for
himself or for any other person, firm, corporation,
partnership, association or other entity, attempt to
employ or enter into any contractual arrangement,
directly or indirectly, with any employee of the
Company or any person who was an employee of the
Company at any time during the six month period
immediately prior to the Executive's termination and
whose employment with the Company was terminated by
the Company.
8.3 Books and Records. All books, records, accounts and similar
repositories of Confidential Information of the Company, whether prepared by the
Executive or otherwise coming into the Executive's possession, shall be the
exclusive property of the Company and shall be returned immediately to the
Company upon termination of this Agreement or upon the Board's request at any
time. -----------------
9. Injunction.
It is recognized and hereby acknowledged by the parties hereto
that a breach by the Executive of any of the covenants
contained in Section 8 of this Agreement will cause
irreparable harm and damage to the Company, the monetary
amount of which may be virtually impossible to ascertain and,
therefore, that damages at law would be insufficient for
breach of any of the covenants contained in Section 8 hereof.
As a result, the Executive agrees that in the event of a
breach or threatened breach by the Executive of any provisions
of Section 8 hereof, the Company shall be entitled to
equitable relief in the form of an injunction to prevent
irreparable injury and that such right to injunctive relief
shall be cumulative and in addition to whatever other remedies
the Company may possess. In connection with any proceeding to
seek injunctive relief, the parties hereto waive any
requirement to post a bond.
10. Consolidation, Merger or Sale of Assets; Assignability.
Nothing in this Agreement shall preclude the Company from
consolidating or merging into or with, or transferring all or
substantially all of its assets to, another corporation or
entity which assumes this Agreement, and all obligations of
the Company hereunder, in writing. Nothing in this Agreement
shall preclude the Company from assigning this Agreement to
another entity in the event that the Company is liquidated or
upon a Change of Control if the successor company is not
otherwise obligated to assume this Agreement. Upon such
consolidation, merger, transfer of assets, liquidation,
assignment and assumption, the term "the Company" as used
herein, shall mean such other corporation or entity that
assumes this Agreement, and this Agreement shall continue in
full force and effect except as otherwise provided in this
Section 10. Except as otherwise provided in this Section 10,
this Agreement shall not be assigned by either party except
with the written consent of the other. In the event that this
Agreement is assigned in accordance with the provisions of
this Section 10, this Agreement shall continue until the third
anniversary of the date of such assignment and the automatic
renewals as set forth in Section 1.1 hereof and the Change of
Control provisions of Section 6 hereof shall no longer be
enforceable.
11. Binding Effect.
Except as herein otherwise provided, this Agreement shall
inure to the benefit of, and shall be binding upon, the parties hereto, their
personal representatives, successors, heirs and assigns.
12. Reformation.
If any provision of this Agreement is held to be illegal,
invalid or unenforceable under present or future laws effective during the term
of this Agreement, in lieu of such illegal, invalid or unenforceable provision,
there shall be added automatically as a part of this Agreement a provision as
similar in terms to such illegal, invalid or unenforceable provision as may be
possible and be legal, valid and enforceable.
13. Terminology.
All personal pronouns used in this Agreement, whether used in the
masculine, the feminine or the neuter gender, shall include all other genders,
and the singular shall include the plural and vice versa. Titles of Sections are
for convenience only, and neither limit nor amplify the provisions of this
Agreement.
14. Governing Law.
This Agreement shall be governed and construed in accordance
with the laws of the State of Florida, without regard to the conflict of laws
principles thereof.
15. Entire Agreement
This Agreement contains the entire understanding between the
parties hereto and may not be changed or modified except by an agreement in
writing signed by all the parties hereto.
16. Counterparts.
This Agreement may be executed in any number of counterparts
and each such counterpart shall for all purposes be deemed an original.
3
<PAGE>
17. Notice.
All notices or communications hereunder shall be in writing
and shall be deemed given when delivered in person or when sent by registered or
certified mail, return receipt requested, or by overnight courier service, to a
party at the following address, or at such other address as any party shall have
given notice to the other in the manner herein provided:
If to the Company, to:
Milestone Properties, Inc.
150 East Palmetto Park Road, 4th Floor
Boca Raton, Florida 33432
Attn: Robert A. Mandor, President
If to the Executive, to the address on file
in the personnel records of the Company.
4
<PAGE>
IN WITNESS WHEROF, this Agreement has been duly signed by the parties
hereto as of the day and year first above written.
MILESTONE PROPERTIES, INC.
By___________________________
Name: Robert A. Mandor
Title: President
------------------------------
Harvey Shore
Exhibit 10.12
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), dated as of January 1,
1999, by and between MILESTONE PROPERTIES, INC., a Delaware corporation (the
"Company"), and Joseph P. Otto (the "Executive").
W I T N E S S E T H
WHEREAS, the Executive is currently a Vice President of the Company;
WHEREAS, the Executive possesses intimate knowledge of the business and
affairs of the Company, its policies, methods and personnel;
WHEREAS, the Board of Directors (the "Board") of the Company recognizes
that the Executive's contribution to the growth and success of the Company has
been, and believes will continue to be, substantial, and desires to assure the
Company of the Executive's present and continued employment in an executive
capacity and to compensate him therefor;
WHEREAS, the Board has determined that this Agreement will encourage
the Executive's continued attention and dedication to the Company; and
WHEREAS, the Executive is willing to make his services available to the
Company on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth herein, the parties hereby agree as follows:
1. Employment.
1.1 Employment and Term. The Company shall continue
to employ the Executive and the Executive shall
continue to serve the Company, upon the terms and
conditions set forth herein, for an initial term of
three years commencing as of January 1, 1999, unless
sooner terminated as hereinafter set forth, which
term shall thereafter be extended for additional
consecutive one year periods, except as otherwise set
forth herein, unless written notice is given by
either party to the other party no later than 60 days
before the expiration of the Term (as defined herein)
of such party's intention not to extend the Term. The
period during which the Executive is employed
hereunder is referred to as the "Term". In the event
that the Company elects not to renew this Agreement,
the Executive shall be entitled to the payments
provided herein under Section 4.2, subject to the
provisions of Section 4.1 and Section 6 hereof.
1.2 Duties of Executive. The Executive shall serve as a Vice President of
the Company and shall diligently perform such duties and services as are
commensurate with such position and as may reasonably be designated by the
By-laws of the Company and from time to time assigned by the Board. The
Executive shall devote such time to the business and affairs of the Company as
the Board, the Chief Executive Officer or the President of the Company deems
necessary. -------------------
1.3 Place of Performance. In connection with the Executive's employment by
the Company, the Executive shall be based at the Company's principal executive
offices in Boca Raton, Florida. The Executive may be required to travel on the
Company's business to an extent substantially consistent with his present travel
obligations. --------------------
2. Compensation.
2.1 Base Salary. During the Term, the Executive shall
receive a base salary subject to adjustments as
hereinafter provided (the "Base Salary") at the
annual rate of $192,938. During the Term, the Board,
or an appropriate committee thereof, shall review
annually the Base Salary payable to the Executive and
adjust the same in its sole discretion, provided,
however, that the Base Salary at any time may not be
less than $192,938. In connection with making
adjustments to the Base Salary as provided for in
this Section 2.1, the Board, or an appropriate
committee thereof, will consider the contributions of
the Executive to the Company's efficiency, growth,
productivity and profitability, the expansion of the
Executive's duties, if any, the level of the
Executive's responsibilities, the Executive's tenure
with the Company, and such other factors as they deem
relevant. The Base Salary shall be payable in
substantially equal installments consistent with the
Company's normal payroll schedule, subject to
applicable withholding and other taxes.
2.2 Bonus. The Executive may be issued annual bonuses as the Board, in its
sole discretion, may determine. -----
3. Expense Reimbursement and Other Benefits.
3.1 Expense Reimbursement. During the Term, the
Company, upon the submission of supporting
documentation satisfactory to the Company by the
Executive, and in accordance with Company's policies
for its executives, shall reimburse the Executive for
all reasonable expenses actually paid or incurred by
the Executive in the course of, and pursuant to, the
business of the Company, including expenses for
travel and entertainment. Reimbursement for expenses
shall be subject to such regulations and procedures
as the Company may from time to time establish.
3.2 Vacation. During the Term, the Executive shall be entitled to such
amount of annual paid vacation time as designated in the Company's employee
manual or as otherwise designated by the Board, provided, however, that the
Executive shall be entitled to no less than four weeks annual paid vacation. The
time during which the Executive may use his vacation time and be absent from the
office shall be at his discretion, provided, however, that such time is
compatible, as reasonably determined by the Company's Chief Executive
Officer or President, with the vacation and work schedules of other relevant
employees and the business demands of the Company.
3.3 Fringe and Medical Benefits. The Company shall provide the following
benefits to the Executive, either through direct payments by the Company or by
reimbursement: ---------------------------
(a) A term life insurance policy insuring
the Executive's life which provides a
benefit of no less than $200,000, naming
such beneficiaries as the Executive may
designate from time to time. Notwithstanding
the foregoing, if the Company is unable to
obtain term life insurance which provides a
benefit of no less than $200,000 on the
Executive's life at a normal and customary
cost thereof, as reasonably determined by
the Board (the "Company Funded Premium"),
for a person of the Executive's age, then
this provision and the obligation of the
Company hereunder shall be limited to (i) a
contribution by the Company of an amount not
less than the Company Funded Premium toward
the payment of the premium of such other
term life insurance policy, without regard
to the benefit provided thereby, as the
Executive is able to obtain, or (ii) at the
Executive's election, the Company Funded
Premium may be applied toward such term life
insurance insuring the Executive's life
providing for a lesser benefit as the
Company may procure. If requested by the
Company, the Executive agrees to cooperate
with the Company in obtaining, at the
Company's expense, such life insurance. Such
cooperation shall include, without
limitation, completing and signing such
forms or applications, undergoing physical
examinations, and such other acts as may be
required in order to obtain such insurance.
(b) The Executive shall be eligible to
participate in all benefit plans established
by the Company, on the same basis and
subject to the same qualifications as other
executive officers of the Company including,
but not limited to, medical, bonus, stock
option and other benefit programs. In
addition, the Company may provide such
fringe benefits to the Executive, either
through direct payments or by
reimbursements, as the Company or the Board
may determine from time to time.
<PAGE>
4. Termination.
4.1 Termination for Cause. Notwithstanding anything
contained in this Agreement to the contrary, the
Executive's employment with the Company may be
terminated by the Company for "Cause". As used in
this Agreement, the term "Cause" shall mean only (i)
any action or omission of the Executive which
constitutes a willful and material breach of this
Agreement, including, but not limited to, the failure
of the Executive to satisfactorily perform his duties
under Section 1.2 hereof, which is not cured, or as
to which diligent attempts to cure have not commenced
within the time period provided for in this Section
4.1, (ii) the commission by the Executive of any act
which would constitute fraud, embezzlement or
misappropriation as against the Company, or (iii) the
conviction (from which no appeal can be taken) of the
Executive of any criminal act which is a felony.
Termination of the Executive pursuant to this Section
4.1 shall be communicated by a notice (the "Notice of
Termination") to the Executive from the Board setting
forth a resolution duly adopted by the affirmative
vote of not less than a majority of the entire
membership of the Board (excluding the Executive if
he is then a director of the Company) at a meeting
thereof duly called and held for such purpose finding
that in the good faith opinion of the Board, the
Executive was guilty of conduct set forth in the
definition of Cause and specifying the particulars
thereof in detail. In the event of a proposed
termination for Cause described in clause (i) of this
Section 4.1, the Executive shall be given a notice (a
"Notice of Cause") from the Board setting forth in
reasonable detail any alleged acts or failures to act
which the Board believes may be grounds for
termination of the Executive's employment pursuant to
the terms hereof and the opportunity to meet with the
Board at a time and place mutually convenient to both
the Board and the Executive, but in no event later
than 10 business days after the Notice of Cause is
given to the Executive, at which meeting the
Executive shall have the right to appear with legal
counsel of his choosing to refute any determination
of Cause specified in such notice, and any
termination of the Executive's employment by reason
of such determination of Cause shall not be effective
until the Executive is afforded such opportunity to
appear and be heard to defend such act or failure to
act. If the Executive shall fail to correct such act
or failure to act within 10 business days after such
meeting, the Executive's employment by the Company
shall be terminated by delivery to the Executive of a
Notice of Termination, which Notice of Termination
shall be effective when given. If, within the period
provided, the Executive corrects such act or failure
to act, the Executive's employment may not then be
terminated by the Board. Upon any termination
pursuant to this Section 4.1, the Company shall pay
to the Executive any unpaid Base Salary accrued
through the effective date of termination specified
in the Notice of Termination. In addition, the
Company shall pay any benefits owed to the Executive
under any plan that the Executive participates in
pursuant to Section 3.3 hereof, in accordance with
the terms of such plans as in effect on the date of
termination of employment under this Section 4.1.
Except as provided in this Section 4.1, the Company
shall have no further liability hereunder (other than
to make all reimbursements for reasonable business
expenses incurred prior to the date of termination,
subject, however, to the provisions of Section 3.1
hereof).
4.2 Termination Without Cause. In the event that the
Executive's employment is terminated other than (i)
for Cause or (ii) in connection with, or as a result
of, a Change of Control, the Company shall (a) give
the Executive 30 days written notice of the
termination of his employment and (b) pay to the
Executive the Executive's Base Salary, as then in
effect, accrued and unpaid through the date that his
employment was terminated, together with all other
accrued and unpaid benefits owing to the Executive
through the date of the termination of the
Executive's employment with the Company plus an
amount equal to 300% of the Executive's Base Salary,
as then in effect. Subject to Section 7 hereof, all
payments provided for in this Section 4.2 shall be
made by the Company in substantially equal
installments consistent with the Company's normal
payroll schedule, subject to applicable withholding
and other taxes. In addition, the Company shall pay
any benefits owed to the Executive under any plan
that the Executive participates in pursuant to
Section 3.3 hereof, in accordance with the terms of
such plans as in effect on the date of termination of
his employment under this Section 4.2. Except as
provided in this Section 4.2, the Company shall have
no further liability hereunder (other than to make
all reimbursements for reasonable business expenses
incurred prior to the date of termination, subject,
however, to the provisions of Section 3.1 hereof). In
the event that there has been a Change of Control
pursuant to Section 6 hereof, or this Agreement has
been assigned pursuant to Section 10 hereof, this
Section 4.2 shall not survive the assignment of this
Agreement.
5. Disability or Death.
5.1 Disability. Notwithstanding anything contained in
this Agreement to the contrary, if, during the Term,
the Executive suffers a disability (as defined
below), the Company shall, subject to the provisions
of Section 5.2 hereof, either directly, through
insurance, or through a combination of both, continue
to pay the Executive an amount equal to the Base
Salary, as then in effect, plus a proportionate
amount of any compensation earned by or due to the
Executive as provided for in Section 2.2 hereof
through the end of the first 180 days of such
disability, provided, however, that, in the event
that the Executive is disabled for a period of more
than 180 days in any 12 month period, the Company
may, at its election, by a vote of not less than a
majority of the entire membership of the Board
(excluding the Executive if he is then a director of
the Company) within 90 days from the 180th day that
the Executive is disabled, terminate the Executive's
employment with the Company. In the event of such
termination, (i) payment of the Executive's Base
Salary, as then in effect, and fringe benefits (to
the extent permissible by applicable law) shall be
continued for a period of 12 months after such
termination, and (ii) the Executive shall receive a
one time bonus in an amount equal to the highest
annual bonus paid to the Executive with respect to
any of the three years immediately preceding the date
of termination of the Executive to be paid to the
Executive within 15 business days after his
termination. In addition, the Company shall pay any
benefits owed to the Executive under any plan that
the Executive participates in pursuant to Section 3.3
hereof, in accordance with the terms of such plans as
in effect on the date of termination of employment
under this Section 5.1. Except as provided in this
Section 5.1, the Company shall have no further
liability hereunder (other than to make all
reimbursements for reasonable business expenses
incurred by the Executive prior to the date of
termination, subject, however, to the provisions of
Section 3.1 hereof). For purposes of this Agreement
"disability" means a reasonable determination by the
Board, based on reasonable medical evidence, that the
Executive is incapable of substantially performing
his obligations pursuant to the terms of this
Agreement by reason of physical or mental illness or
injury.
5.2 Death. In the event of the death of the Executive
during the Term, the Company shall pay to the
Executive's legal representative (i) any unpaid Base
Salary accrued through the date of the Executive's
death, (ii) the Executive's Base Salary, as then in
effect, and fringe benefits (to the extent
permissible by applicable law) for a period of 12
months after the Executive's death, and (iii) a one
time bonus in an amount equal to the highest annual
bonus paid to the Executive with respect to any of
the three years immediately preceding the date of
death of the Executive. In addition, the Company
shall pay to the Executive's legal representative any
benefits owed to the Executive under any plan that
the Executive participated in pursuant to Section 3.3
hereof, in accordance with the terms of such plans as
in effect on the date of the Executive's death.
Except as provided in this Section 5.2, the Company
shall have no further liability hereunder (other than
to make all reimbursements of reasonable business
expenses incurred by the Executive prior to the date
of the Executive's death, subject, however, to the
provisions of Section 3.1 hereof).
6. Change of Control.
(a) For the purposes of this Agreement, a "Change of
Control" shall be deemed to have taken place if: (i)
in connection with any cash tender or exchange offer,
merger or other business combination, contested
election, or any other transaction, the persons who
were directors of the Company before such
transactions shall cease to constitute at least
two-thirds of the Board or of the board of directors
of any successor to the Company, as the direct or
indirect result of, or in connection with, any such
transaction, (ii) a complete liquidation or
dissolution of the Company occurs, (iii) there is a
sale or other disposition (other than to a wholly
owned subsidiary) of all, or substantially all, of
the assets of the Company, or (iv) any person,
including a "group" (within the meaning of Section
13(d)(3) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")), hereafter acquires
(other than directly from the Company or through open
market purchases approved by the Board, as long as
the majority of the Board approving such purchases is
the majority at the time such purchases are made) any
voting securities of the Company such that
immediately after such acquisition such person has
beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 20% or
more of the combined voting power of the then
outstanding securities of the Company (if,
immediately prior to such acquisition, such person
did not then have beneficial ownership of 20% or more
of the combined voting power of the outstanding
securities of the Company), provided, however, in
determining whether a Change of Control has occurred,
the acquisition of securities by (a) an employee
benefit plan (or a trust forming a part thereof)
maintained by either (y) the Company or (z) any
corporation or person of which a majority of its
voting power or its voting equity securities or
equity interest is owned, directly or indirectly, by
the Company (for purposes of this definition, a
"Subsidiary"), or (b) the Company or a Subsidiary,
shall not constitute an acquisition which would cause
a Change of Control. For purposes of this Agreement,
the acquisition of additional shares of the Company's
securities by Concord Assets Group, Inc. or any of
its affiliates shall not constitute a Change of
Control. For Change of Control purposes, if the
Company is a private entity, a Change of Control
would be deemed to take place upon the occurrence of
an event, the result of which is a person (or group
of affiliated persons) acquiring ownership,
beneficially or otherwise, of greater than 50% of the
voting securities of the Company.
(b) The Company and the Executive hereby agree that,
if the Executive is employed by the Company on the
date on which a Change of Control occurs (the "Change
of Control Date"), the Company (and any successor
company that assumes this Agreement) will continue to
retain the Executive and the Executive will remain
employed by the Company (or such successor company)
and the Executive agrees to exercise such authority
and perform such executive duties for the Company (or
successor company) as are commensurate with the
authority being exercised and duties being performed
by the Executive immediately prior to the Change of
Control Date, until the third anniversary of the
Change of Control Date, without regard to automatic
renewals as set forth in Section 1.1. Unless
otherwise indicated herein, the term "the Company"
shall include any successor company that assumes this
Agreement.
(c) If after a Change of Control the Executive is
requested and, in his sole and absolute discretion,
consents to change his principal business location,
the Company will reimburse the Executive for his
reasonable relocation expenses, including, without
limitation, moving expenses, temporary living and
travel expenses for a reasonable time while arranging
to move his residence to the changed location,
closing costs, if any, associated with the sale of
his existing residence and the purchase of a
replacement residence at the changed location, plus
an additional amount representing a gross-up of any
state or federal taxes payable by the Executive as a
result of any such reimbursement. If the Executive
shall not consent to change his business location,
the Executive may continue to provide the services
required of him hereunder from his then residence
and/or business address, and the Company shall
continue to maintain an office for the Executive at
such location commensurate with the Executive's
office at the Company prior to the Change of Control
Date.
(d) After a Change of Control the Company shall (i)
continue to pay the Executive a salary in an amount
not less than the Base Salary as in effect on the
Change of Control Date, (ii) pay the Executive
bonuses in an amount per year not less than the
average of those bonuses paid to the Executive during
the three year period immediately preceding the
Change of Control Date, and (iii) continue employment
benefit programs for the Executive at levels not less
than those in effect on the Change of Control Date
(but subject to such reductions as may be required to
maintain such plans in compliance with applicable
federal law regulating employee benefit programs).
(e) If after a Change of Control this Agreement has
not been assigned to the successor company and (i)
the Executive's employment is terminated by the
Company or successor company other than for Cause, or
(ii) there shall have occurred a material reduction
in the Executive's compensation or employment related
benefits, or a material change in the Executive's
status, working conditions, management
responsibilities or titles, and the Executive
voluntarily terminates his relationship with the
Company (or the successor company) within 60 days of
any such occurrence, or the last in a series of such
occurrences, the Executive shall be entitled to
receive, subject to the provisions of subparagraph
(f) of this Section 6, a "lump sum payment" equal to
(y) 299% of the Executive's "Base Period Income" as
determined under subparagraph (f) of this Section 6
reduced by (z) any additional payments to such
Executive required to be taken into consideration for
the purposes of calculating a "parachute payment"
within the meaning of Section 280G of the Internal
Revenue Code of 1986, as amended (the "Code"), and
regulations promulgated thereunder, provided,
however, that no such lump sum payment shall be
owing, payable or paid to the Executive if the
Company procures a position for the Executive with a
company or entity that conducts business similar to
that of the Company's in all material respects in the
same general geographic vicinity as the Company
currently conducts its business, with an employment
agreement having terms and conditions substantially
the same as those of this Agreement in all material
respects. If payable, such lump sum payment will be
paid to the Executive within 15 business days after
his termination of employment with the Company (or
such successor company). Such termination payment
shall not be reduced by any present value or similar
factor, and the Executive shall not be required to
mitigate the amount of such payment by securing other
employment or otherwise, nor will such payment be
reduced by reason of the Executive securing other
employment or for any other reason. The termination
payment shall be paid in lieu of any severance pay
due to the Executive pursuant to any severance or
employment agreement with, or severance payment plan
of, the Company.
(f) The Executive's "Base Period Income" shall be his average annual
compensation (including, without limitation, his Base Salary and any bonuses)
for the five years immediately preceding the date of his termination of
employment with the Company. If the Executive has not been employed by the
Company for a full five years at the time that his employment with the Company
is terminated, his Base Period Income shall be determined based on the period
that he was employed by the Company.
(g) In the event that the Executive's employment with
the Company is terminated other than for Cause,
disability or death after this Agreement has been
assigned pursuant to Section 10 hereof, the company
that assumed this Agreement shall pay to the
Executive the Executive's Base Salary, as then in
effect, accrued and unpaid through the date that his
employment was terminated, together with all other
accrued and unpaid benefits owing to the Executive
through the date of the termination of the
Executive's employment plus, subject to the
provisions of subparagraph (f) of this Section 6, a
"lump sum payment" equal to (i) 299% of the
Executive's "Base Period Income" as determined under
subparagraph (f) of this Section 6 reduced by (ii)
any additional payments to such Executive required to
be taken into consideration for the purposes of
calculating a "parachute payment" within the meaning
of Section 280G of the Code and regulations
promulgated thereunder. If payable, such lump sum
payment will be paid to the Executive within 15
business days after his termination of employment
with the Company (or such successor company). Such
termination payment shall not be reduced by any
present
2
<PAGE>
value or similar factor, and the Executive
shall not be required to mitigate the amount of such payment by securing other
employment or otherwise, nor will such payment be reduced by reason of the
Executive securing other employment or for any other reason. The termination
payment shall be paid in lieu of any severance pay due to the Executive pursuant
to any severance or employment agreement with, or severance payment plan of, the
Company.
7. Mitigation.
In the event that the Executive's employment with the Company
is terminated pursuant to the provisions of Section 4.2
hereof, the Executive shall be obligated to seek other
employment to mitigate the amount of any payments provided for
under this Agreement. If the Executive obtains other
employment, the amount of any payment provided for pursuant to
Section 4.2 hereof shall be reduced by any compensation earned
by the Executive as the result of employment by another
employer after the termination of the Executive's employment
with the Company. If the amount of all compensation earned by
the Executive as the result of employment by another employer
after the termination of the Executive's employment with the
Company is equal to or greater than the amount of all payments
provided for pursuant to Section 4.2 hereof, the Company shall
have no further liability to the Executive under Section 4.2
hereof.
8. Restrictive Covenants.
8.1 Nondisclosure. During the Term and following the
termination of the Executive's employment with the
Company, the Executive shall not divulge,
communicate, use to the detriment of the Company or
for the benefit of any other person or persons, or
misuse in any way, any Confidential Information (as
hereinafter defined) pertaining to the business of
the Company. Any Confidential Information, or data
now or hereafter acquired by the Executive with
respect to the business of the Company (which shall
include, but not be limited to, information
concerning the Company's financial condition,
prospects, technology, customers, suppliers, methods
of doing business and marketing and promotion of the
Company's services), shall be deemed a valuable,
special and unique asset of the Company that is
received by the Executive in confidence and as a
fiduciary. For purposes of this Agreement,
"Confidential Information" means information
disclosed to the Executive or known by the Executive
as a consequence of, or through, his employment by
the Company (including information conceived,
originated, discovered or developed by the Executive)
prior to, or after, the date hereof and not generally
known or in the public domain, about the Company or
its business. Notwithstanding the foregoing, nothing
herein shall be deemed to restrict the Executive from
disclosing Confidential Information to the extent
required by law.
8.2 Nonsolicitation of Employees. During the Term and
for a period of two years following the termination
of the Executive's employment with the Company, the
Executive shall not directly or indirectly, for
himself or for any other person, firm, corporation,
partnership, association or other entity, attempt to
employ or enter into any contractual arrangement,
directly or indirectly, with any employee of the
Company or any person who was an employee of the
Company at any time during the six month period
immediately prior to the Executive's termination and
whose employment with the Company was terminated by
the Company.
8.3 Books and Records. All books, records, accounts and similar
repositories of Confidential Information of the Company, whether prepared by the
Executive or otherwise coming into the Executive's possession, shall be the
exclusive property of the Company and shall be returned immediately to the
Company upon termination of this Agreement or upon the Board's request at any
time. -----------------
9. Injunction.
It is recognized and hereby acknowledged by the parties hereto
that a breach by the Executive of any of the covenants
contained in Section 8 of this Agreement will cause
irreparable harm and damage to the Company, the monetary
amount of which may be virtually impossible to ascertain and,
therefore, that damages at law would be insufficient for
breach of any of the covenants contained in Section 8 hereof.
As a result, the Executive agrees that in the event of a
breach or threatened breach by the Executive of any provisions
of Section 8 hereof, the Company shall be entitled to
equitable relief in the form of an injunction to prevent
irreparable injury and that such right to injunctive relief
shall be cumulative and in addition to whatever other remedies
the Company may possess. In connection with any proceeding to
seek injunctive relief, the parties hereto waive any
requirement to post a bond.
10. Consolidation, Merger or Sale of Assets; Assignability.
Nothing in this Agreement shall preclude the Company from
consolidating or merging into or with, or transferring all or
substantially all of its assets to, another corporation or
entity which assumes this Agreement, and all obligations of
the Company hereunder, in writing. Nothing in this Agreement
shall preclude the Company from assigning this Agreement to
another entity in the event that the Company is liquidated or
upon a Change of Control if the successor company is not
otherwise obligated to assume this Agreement. Upon such
consolidation, merger, transfer of assets, liquidation,
assignment and assumption, the term "the Company" as used
herein, shall mean such other corporation or entity that
assumes this Agreement, and this Agreement shall continue in
full force and effect except as otherwise provided in this
Section 10. Except as otherwise provided in this Section 10,
this Agreement shall not be assigned by either party except
with the written consent of the other. In the event that this
Agreement is assigned in accordance with the provisions of
this Section 10, this Agreement shall continue until the third
anniversary of the date of such assignment and the automatic
renewals as set forth in Section 1.1 hereof and the Change of
Control provisions of Section 6 hereof shall no longer be
enforceable.
11. Binding Effect.
Except as herein otherwise provided, this Agreement shall
inure to the benefit of, and shall be binding upon, the parties hereto, their
personal representatives, successors, heirs and assigns.
12. Reformation.
If any provision of this Agreement is held to be illegal,
invalid or unenforceable under present or future laws effective during the term
of this Agreement, in lieu of such illegal, invalid or unenforceable provision,
there shall be added automatically as a part of this Agreement a provision as
similar in terms to such illegal, invalid or unenforceable provision as may be
possible and be legal, valid and enforceable.
13. Terminology.
All personal pronouns used in this Agreement, whether used in the
masculine, the feminine or the neuter gender, shall include all other genders,
and the singular shall include the plural and vice versa. Titles of Sections are
for convenience only, and neither limit nor amplify the provisions of this
Agreement.
14. Governing Law.
This Agreement shall be governed and construed in accordance
with the laws of the State of Florida, without regard to the conflict of laws
principles thereof.
15. Entire Agreement
This Agreement contains the entire understanding between the
parties hereto and may not be changed or modified except by an agreement in
writing signed by all the parties hereto.
16. Counterparts.
This Agreement may be executed in any number of counterparts
and each such counterpart shall for all purposes be deemed an original.
3
<PAGE>
17. Notice.
All notices or communications hereunder shall be in writing
and shall be deemed given when delivered in person or when sent by registered or
certified mail, return receipt requested, or by overnight courier service, to a
party at the following address, or at such other address as any party shall have
given notice to the other in the manner herein provided:
If to the Company, to:
Milestone Properties, Inc.
150 East Palmetto Park Road, 4th Floor
Boca Raton, Florida 33432
Attn: Robert A. Mandor, President
If to the Executive, to the address on file
in the personnel records of the Company.
4
<PAGE>
IN WITNESS WHEROF, this Agreement has been duly signed by the parties
hereto as of the day and year first above written.
MILESTONE PROPERTIES, INC.
By___________________________
Name: Robert A. Mandor
Title: President
------------------------------
Joseph P. Otto
Exhibit 10.13
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), dated as of January 1,
1999, by and between MILESTONE PROPERTIES, INC., a Delaware corporation (the
"Company"), and Patrick S. Kirse (the "Executive").
W I T N E S S E T H
WHEREAS, the Executive is currently a Vice President of the Company;
WHEREAS, the Executive possesses intimate knowledge of the business and
affairs of the Company, its policies, methods and personnel;
WHEREAS, the Board of Directors (the "Board") of the Company recognizes
that the Executive's contribution to the growth and success of the Company has
been, and believes will continue to be, substantial, and desires to assure the
Company of the Executive's present and continued employment in an executive
capacity and to compensate him therefor;
WHEREAS, the Board has determined that this Agreement will encourage
the Executive's continued attention and dedication to the Company; and
WHEREAS, the Executive is willing to make his services available to the
Company on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth herein, the parties hereby agree as follows:
1. Employment.
1.1 Employment and Term. The Company shall continue
to employ the Executive and the Executive shall
continue to serve the Company, upon the terms and
conditions set forth herein, for an initial term of
three years commencing as of January 1, 1999, unless
sooner terminated as hereinafter set forth, which
term shall thereafter be extended for additional
consecutive one year periods, except as otherwise set
forth herein, unless written notice is given by
either party to the other party no later than 60 days
before the expiration of the Term (as defined herein)
of such party's intention not to extend the Term. The
period during which the Executive is employed
hereunder is referred to as the "Term". In the event
that the Company elects not to renew this Agreement,
the Executive shall be entitled to the payments
provided herein under Section 4.2, subject to the
provisions of Section 4.1 and Section 6 hereof.
1.2 Duties of Executive. The Executive shall serve as a Vice President of
the Company and shall diligently perform such duties and services as are
commensurate with such position and as may reasonably be designated by the
By-laws of the Company and from time to time assigned by the Board. The
Executive shall devote such time to the business and affairs of the Company as
the Board, the Chief Executive Officer or the President of the Company deems
necessary. -------------------
1.3 Place of Performance. In connection with the Executive's employment by
the Company, the Executive shall be based at the Company's principal executive
offices in Boca Raton, Florida. The Executive may be required to travel on the
Company's business to an extent substantially consistent with his present travel
obligations. --------------------
2. Compensation.
2.1 Base Salary. During the Term, the Executive shall
receive a base salary subject to adjustments as
hereinafter provided (the "Base Salary") at the
annual rate of $105,000. During the Term, the Board,
or an appropriate committee thereof, shall review
annually the Base Salary payable to the Executive and
adjust the same in its sole discretion, provided,
however, that the Base Salary at any time may not be
less than $105,000. In connection with making
adjustments to the Base Salary as provided for in
this Section 2.1, the Board, or an appropriate
committee thereof, will consider the contributions of
the Executive to the Company's efficiency, growth,
productivity and profitability, the expansion of the
Executive's duties, if any, the level of the
Executive's responsibilities, the Executive's tenure
with the Company, and such other factors as they deem
relevant. The Base Salary shall be payable in
substantially equal installments consistent with the
Company's normal payroll schedule, subject to
applicable withholding and other taxes.
2.2 Bonus. The Executive may be issued annual bonuses as the Board, in its
sole discretion, may determine. -----
3. Expense Reimbursement and Other Benefits.
3.1 Expense Reimbursement. During the Term, the
Company, upon the submission of supporting
documentation satisfactory to the Company by the
Executive, and in accordance with Company's policies
for its executives, shall reimburse the Executive for
all reasonable expenses actually paid or incurred by
the Executive in the course of, and pursuant to, the
business of the Company, including expenses for
travel and entertainment. Reimbursement for expenses
shall be subject to such regulations and procedures
as the Company may from time to time establish.
3.2 Vacation. During the Term, the Executive shall be entitled to such
amount of annual paid vacation time as designated in the Company's employee
manual or as otherwise designated by the Board, provided, however, that the
Executive shall be entitled to no less than four weeks annual paid vacation. The
time during which the Executive may use his vacation time and be absent from the
office shall be at his discretion, provided, however, that such time is
compatible, as reasonably determined by the Company's Chief Executive
Officer or President, with the vacation and work schedules of other relevant
employees and the business demands of the Company.
3.3 Fringe and Medical Benefits. The Company shall provide the following
benefits to the Executive, either through direct payments by the Company or by
reimbursement: ---------------------------
(a) A term life insurance policy insuring
the Executive's life which provides a
benefit of no less than $200,000, naming
such beneficiaries as the Executive may
designate from time to time. Notwithstanding
the foregoing, if the Company is unable to
obtain term life insurance which provides a
benefit of no less than $200,000 on the
Executive's life at a normal and customary
cost thereof, as reasonably determined by
the Board (the "Company Funded Premium"),
for a person of the Executive's age, then
this provision and the obligation of the
Company hereunder shall be limited to (i) a
contribution by the Company of an amount not
less than the Company Funded Premium toward
the payment of the premium of such other
term life insurance policy, without regard
to the benefit provided thereby, as the
Executive is able to obtain, or (ii) at the
Executive's election, the Company Funded
Premium may be applied toward such term life
insurance insuring the Executive's life
providing for a lesser benefit as the
Company may procure. If requested by the
Company, the Executive agrees to cooperate
with the Company in obtaining, at the
Company's expense, such life insurance. Such
cooperation shall include, without
limitation, completing and signing such
forms or applications, undergoing physical
examinations, and such other acts as may be
required in order to obtain such insurance.
(b) The Executive shall be eligible to
participate in all benefit plans established
by the Company, on the same basis and
subject to the same qualifications as other
executive officers of the Company including,
but not limited to, medical, bonus, stock
option and other benefit programs. In
addition, the Company may provide such
fringe benefits to the Executive, either
through direct payments or by
reimbursements, as the Company or the Board
may determine from time to time.
<PAGE>
4. Termination.
4.1 Termination for Cause. Notwithstanding anything
contained in this Agreement to the contrary, the
Executive's employment with the Company may be
terminated by the Company for "Cause". As used in
this Agreement, the term "Cause" shall mean only (i)
any action or omission of the Executive which
constitutes a willful and material breach of this
Agreement, including, but not limited to, the failure
of the Executive to satisfactorily perform his duties
under Section 1.2 hereof, which is not cured, or as
to which diligent attempts to cure have not commenced
within the time period provided for in this Section
4.1, (ii) the commission by the Executive of any act
which would constitute fraud, embezzlement or
misappropriation as against the Company, or (iii) the
conviction (from which no appeal can be taken) of the
Executive of any criminal act which is a felony.
Termination of the Executive pursuant to this Section
4.1 shall be communicated by a notice (the "Notice of
Termination") to the Executive from the Board setting
forth a resolution duly adopted by the affirmative
vote of not less than a majority of the entire
membership of the Board (excluding the Executive if
he is then a director of the Company) at a meeting
thereof duly called and held for such purpose finding
that in the good faith opinion of the Board, the
Executive was guilty of conduct set forth in the
definition of Cause and specifying the particulars
thereof in detail. In the event of a proposed
termination for Cause described in clause (i) of this
Section 4.1, the Executive shall be given a notice (a
"Notice of Cause") from the Board setting forth in
reasonable detail any alleged acts or failures to act
which the Board believes may be grounds for
termination of the Executive's employment pursuant to
the terms hereof and the opportunity to meet with the
Board at a time and place mutually convenient to both
the Board and the Executive, but in no event later
than 10 business days after the Notice of Cause is
given to the Executive, at which meeting the
Executive shall have the right to appear with legal
counsel of his choosing to refute any determination
of Cause specified in such notice, and any
termination of the Executive's employment by reason
of such determination of Cause shall not be effective
until the Executive is afforded such opportunity to
appear and be heard to defend such act or failure to
act. If the Executive shall fail to correct such act
or failure to act within 10 business days after such
meeting, the Executive's employment by the Company
shall be terminated by delivery to the Executive of a
Notice of Termination, which Notice of Termination
shall be effective when given. If, within the period
provided, the Executive corrects such act or failure
to act, the Executive's employment may not then be
terminated by the Board. Upon any termination
pursuant to this Section 4.1, the Company shall pay
to the Executive any unpaid Base Salary accrued
through the effective date of termination specified
in the Notice of Termination. In addition, the
Company shall pay any benefits owed to the Executive
under any plan that the Executive participates in
pursuant to Section 3.3 hereof, in accordance with
the terms of such plans as in effect on the date of
termination of employment under this Section 4.1.
Except as provided in this Section 4.1, the Company
shall have no further liability hereunder (other than
to make all reimbursements for reasonable business
expenses incurred prior to the date of termination,
subject, however, to the provisions of Section 3.1
hereof).
4.2 Termination Without Cause. In the event that the
Executive's employment is terminated other than (i)
for Cause or (ii) in connection with, or as a result
of, a Change of Control, the Company shall (a) give
the Executive 30 days written notice of the
termination of his employment and (b) pay to the
Executive the Executive's Base Salary, as then in
effect, accrued and unpaid through the date that his
employment was terminated, together with all other
accrued and unpaid benefits owing to the Executive
through the date of the termination of the
Executive's employment with the Company plus an
amount equal to 300% of the Executive's Base Salary,
as then in effect. Subject to Section 7 hereof, all
payments provided for in this Section 4.2 shall be
made by the Company in substantially equal
installments consistent with the Company's normal
payroll schedule, subject to applicable withholding
and other taxes. In addition, the Company shall pay
any benefits owed to the Executive under any plan
that the Executive participates in pursuant to
Section 3.3 hereof, in accordance with the terms of
such plans as in effect on the date of termination of
his employment under this Section 4.2. Except as
provided in this Section 4.2, the Company shall have
no further liability hereunder (other than to make
all reimbursements for reasonable business expenses
incurred prior to the date of termination, subject,
however, to the provisions of Section 3.1 hereof). In
the event that there has been a Change of Control
pursuant to Section 6 hereof, or this Agreement has
been assigned pursuant to Section 10 hereof, this
Section 4.2 shall not survive the assignment of this
Agreement.
5. Disability or Death.
5.1 Disability. Notwithstanding anything contained in
this Agreement to the contrary, if, during the Term,
the Executive suffers a disability (as defined
below), the Company shall, subject to the provisions
of Section 5.2 hereof, either directly, through
insurance, or through a combination of both, continue
to pay the Executive an amount equal to the Base
Salary, as then in effect, plus a proportionate
amount of any compensation earned by or due to the
Executive as provided for in Section 2.2 hereof
through the end of the first 180 days of such
disability, provided, however, that, in the event
that the Executive is disabled for a period of more
than 180 days in any 12 month period, the Company
may, at its election, by a vote of not less than a
majority of the entire membership of the Board
(excluding the Executive if he is then a director of
the Company) within 90 days from the 180th day that
the Executive is disabled, terminate the Executive's
employment with the Company. In the event of such
termination, (i) payment of the Executive's Base
Salary, as then in effect, and fringe benefits (to
the extent permissible by applicable law) shall be
continued for a period of 12 months after such
termination, and (ii) the Executive shall receive a
one time bonus in an amount equal to the highest
annual bonus paid to the Executive with respect to
any of the three years immediately preceding the date
of termination of the Executive to be paid to the
Executive within 15 business days after his
termination. In addition, the Company shall pay any
benefits owed to the Executive under any plan that
the Executive participates in pursuant to Section 3.3
hereof, in accordance with the terms of such plans as
in effect on the date of termination of employment
under this Section 5.1. Except as provided in this
Section 5.1, the Company shall have no further
liability hereunder (other than to make all
reimbursements for reasonable business expenses
incurred by the Executive prior to the date of
termination, subject, however, to the provisions of
Section 3.1 hereof). For purposes of this Agreement
"disability" means a reasonable determination by the
Board, based on reasonable medical evidence, that the
Executive is incapable of substantially performing
his obligations pursuant to the terms of this
Agreement by reason of physical or mental illness or
injury.
5.2 Death. In the event of the death of the Executive
during the Term, the Company shall pay to the
Executive's legal representative (i) any unpaid Base
Salary accrued through the date of the Executive's
death, (ii) the Executive's Base Salary, as then in
effect, and fringe benefits (to the extent
permissible by applicable law) for a period of 12
months after the Executive's death, and (iii) a one
time bonus in an amount equal to the highest annual
bonus paid to the Executive with respect to any of
the three years immediately preceding the date of
death of the Executive. In addition, the Company
shall pay to the Executive's legal representative any
benefits owed to the Executive under any plan that
the Executive participated in pursuant to Section 3.3
hereof, in accordance with the terms of such plans as
in effect on the date of the Executive's death.
Except as provided in this Section 5.2, the Company
shall have no further liability hereunder (other than
to make all reimbursements of reasonable business
expenses incurred by the Executive prior to the date
of the Executive's death, subject, however, to the
provisions of Section 3.1 hereof).
6. Change of Control.
(a) For the purposes of this Agreement, a "Change of
Control" shall be deemed to have taken place if: (i)
in connection with any cash tender or exchange offer,
merger or other business combination, contested
election, or any other transaction, the persons who
were directors of the Company before such
transactions shall cease to constitute at least
two-thirds of the Board or of the board of directors
of any successor to the Company, as the direct or
indirect result of, or in connection with, any such
transaction, (ii) a complete liquidation or
dissolution of the Company occurs, (iii) there is a
sale or other disposition (other than to a wholly
owned subsidiary) of all, or substantially all, of
the assets of the Company, or (iv) any person,
including a "group" (within the meaning of Section
13(d)(3) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")), hereafter acquires
(other than directly from the Company or through open
market purchases approved by the Board, as long as
the majority of the Board approving such purchases is
the majority at the time such purchases are made) any
voting securities of the Company such that
immediately after such acquisition such person has
beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 20% or
more of the combined voting power of the then
outstanding securities of the Company (if,
immediately prior to such acquisition, such person
did not then have beneficial ownership of 20% or more
of the combined voting power of the outstanding
securities of the Company), provided, however, in
determining whether a Change of Control has occurred,
the acquisition of securities by (a) an employee
benefit plan (or a trust forming a part thereof)
maintained by either (y) the Company or (z) any
corporation or person of which a majority of its
voting power or its voting equity securities or
equity interest is owned, directly or indirectly, by
the Company (for purposes of this definition, a
"Subsidiary"), or (b) the Company or a Subsidiary,
shall not constitute an acquisition which would cause
a Change of Control. For purposes of this Agreement,
the acquisition of additional shares of the Company's
securities by Concord Assets Group, Inc. or any of
its affiliates shall not constitute a Change of
Control. For Change of Control purposes, if the
Company is a private entity, a Change of Control
would be deemed to take place upon the occurrence of
an event, the result of which is a person (or group
of affiliated persons) acquiring ownership,
beneficially or otherwise, of greater than 50% of the
voting securities of the Company.
(b) The Company and the Executive hereby agree that,
if the Executive is employed by the Company on the
date on which a Change of Control occurs (the "Change
of Control Date"), the Company (and any successor
company that assumes this Agreement) will continue to
retain the Executive and the Executive will remain
employed by the Company (or such successor company)
and the Executive agrees to exercise such authority
and perform such executive duties for the Company (or
successor company) as are commensurate with the
authority being exercised and duties being performed
by the Executive immediately prior to the Change of
Control Date, until the third anniversary of the
Change of Control Date, without regard to automatic
renewals as set forth in Section 1.1. Unless
otherwise indicated herein, the term "the Company"
shall include any successor company that assumes this
Agreement.
(c) If after a Change of Control the Executive is
requested and, in his sole and absolute discretion,
consents to change his principal business location,
the Company will reimburse the Executive for his
reasonable relocation expenses, including, without
limitation, moving expenses, temporary living and
travel expenses for a reasonable time while arranging
to move his residence to the changed location,
closing costs, if any, associated with the sale of
his existing residence and the purchase of a
replacement residence at the changed location, plus
an additional amount representing a gross-up of any
state or federal taxes payable by the Executive as a
result of any such reimbursement. If the Executive
shall not consent to change his business location,
the Executive may continue to provide the services
required of him hereunder from his then residence
and/or business address, and the Company shall
continue to maintain an office for the Executive at
such location commensurate with the Executive's
office at the Company prior to the Change of Control
Date.
(d) After a Change of Control the Company shall (i)
continue to pay the Executive a salary in an amount
not less than the Base Salary as in effect on the
Change of Control Date, (ii) pay the Executive
bonuses in an amount per year not less than the
average of those bonuses paid to the Executive during
the three year period immediately preceding the
Change of Control Date, and (iii) continue employment
benefit programs for the Executive at levels not less
than those in effect on the Change of Control Date
(but subject to such reductions as may be required to
maintain such plans in compliance with applicable
federal law regulating employee benefit programs).
(e) If after a Change of Control this Agreement has
not been assigned to the successor company and (i)
the Executive's employment is terminated by the
Company or successor company other than for Cause, or
(ii) there shall have occurred a material reduction
in the Executive's compensation or employment related
benefits, or a material change in the Executive's
status, working conditions, management
responsibilities or titles, and the Executive
voluntarily terminates his relationship with the
Company (or the successor company) within 60 days of
any such occurrence, or the last in a series of such
occurrences, the Executive shall be entitled to
receive, subject to the provisions of subparagraph
(f) of this Section 6, a "lump sum payment" equal to
(y) 299% of the Executive's "Base Period Income" as
determined under subparagraph (f) of this Section 6
reduced by (z) any additional payments to such
Executive required to be taken into consideration for
the purposes of calculating a "parachute payment"
within the meaning of Section 280G of the Internal
Revenue Code of 1986, as amended (the "Code"), and
regulations promulgated thereunder, provided,
however, that no such lump sum payment shall be
owing, payable or paid to the Executive if the
Company procures a position for the Executive with a
company or entity that conducts business similar to
that of the Company's in all material respects in the
same general geographic vicinity as the Company
currently conducts its business, with an employment
agreement having terms and conditions substantially
the same as those of this Agreement in all material
respects. If payable, such lump sum payment will be
paid to the Executive within 15 business days after
his termination of employment with the Company (or
such successor company). Such termination payment
shall not be reduced by any present value or similar
factor, and the Executive shall not be required to
mitigate the amount of such payment by securing other
employment or otherwise, nor will such payment be
reduced by reason of the Executive securing other
employment or for any other reason. The termination
payment shall be paid in lieu of any severance pay
due to the Executive pursuant to any severance or
employment agreement with, or severance payment plan
of, the Company.
(f) The Executive's "Base Period Income" shall be his average annual
compensation (including, without limitation, his Base Salary and any bonuses)
for the five years immediately preceding the date of his termination of
employment with the Company. If the Executive has not been employed by the
Company for a full five years at the time that his employment with the Company
is terminated, his Base Period Income shall be determined based on the period
that he was employed by the Company.
(g) In the event that the Executive's employment with
the Company is terminated other than for Cause,
disability or death after this Agreement has been
assigned pursuant to Section 10 hereof, the company
that assumed this Agreement shall pay to the
Executive the Executive's Base Salary, as then in
effect, accrued and unpaid through the date that his
employment was terminated, together with all other
accrued and unpaid benefits owing to the Executive
through the date of the termination of the
Executive's employment plus, subject to the
provisions of subparagraph (f) of this Section 6, a
"lump sum payment" equal to (i) 299% of the
Executive's "Base Period Income" as determined under
subparagraph (f) of this Section 6 reduced by (ii)
any additional payments to such Executive required to
be taken into consideration for the purposes of
calculating a "parachute payment" within the meaning
of Section 280G of the Code and regulations
promulgated thereunder. If payable, such lump sum
payment will be paid to the Executive within 15
business days after his termination of employment
with the Company (or such successor company). Such
termination payment shall not be reduced by any
present
2
51004904.01
<PAGE>
value or similar factor, and the Executive
shall not be required to mitigate the amount of such payment by securing other
employment or otherwise, nor will such payment be reduced by reason of the
Executive securing other employment or for any other reason. The termination
payment shall be paid in lieu of any severance pay due to the Executive pursuant
to any severance or employment agreement with, or severance payment plan of, the
Company.
7. Mitigation.
In the event that the Executive's employment with the Company
is terminated pursuant to the provisions of Section 4.2
hereof, the Executive shall be obligated to seek other
employment to mitigate the amount of any payments provided for
under this Agreement. If the Executive obtains other
employment, the amount of any payment provided for pursuant to
Section 4.2 hereof shall be reduced by any compensation earned
by the Executive as the result of employment by another
employer after the termination of the Executive's employment
with the Company. If the amount of all compensation earned by
the Executive as the result of employment by another employer
after the termination of the Executive's employment with the
Company is equal to or greater than the amount of all payments
provided for pursuant to Section 4.2 hereof, the Company shall
have no further liability to the Executive under Section 4.2
hereof.
8. Restrictive Covenants.
8.1 Nondisclosure. During the Term and following the
termination of the Executive's employment with the
Company, the Executive shall not divulge,
communicate, use to the detriment of the Company or
for the benefit of any other person or persons, or
misuse in any way, any Confidential Information (as
hereinafter defined) pertaining to the business of
the Company. Any Confidential Information, or data
now or hereafter acquired by the Executive with
respect to the business of the Company (which shall
include, but not be limited to, information
concerning the Company's financial condition,
prospects, technology, customers, suppliers, methods
of doing business and marketing and promotion of the
Company's services), shall be deemed a valuable,
special and unique asset of the Company that is
received by the Executive in confidence and as a
fiduciary. For purposes of this Agreement,
"Confidential Information" means information
disclosed to the Executive or known by the Executive
as a consequence of, or through, his employment by
the Company (including information conceived,
originated, discovered or developed by the Executive)
prior to, or after, the date hereof and not generally
known or in the public domain, about the Company or
its business. Notwithstanding the foregoing, nothing
herein shall be deemed to restrict the Executive from
disclosing Confidential Information to the extent
required by law.
8.2 Nonsolicitation of Employees. During the Term and
for a period of two years following the termination
of the Executive's employment with the Company, the
Executive shall not directly or indirectly, for
himself or for any other person, firm, corporation,
partnership, association or other entity, attempt to
employ or enter into any contractual arrangement,
directly or indirectly, with any employee of the
Company or any person who was an employee of the
Company at any time during the six month period
immediately prior to the Executive's termination and
whose employment with the Company was terminated by
the Company.
8.3 Books and Records. All books, records, accounts and similar
repositories of Confidential Information of the Company, whether prepared by the
Executive or otherwise coming into the Executive's possession, shall be the
exclusive property of the Company and shall be returned immediately to the
Company upon termination of this Agreement or upon the Board's request at any
time. -----------------
9. Injunction.
It is recognized and hereby acknowledged by the parties hereto
that a breach by the Executive of any of the covenants
contained in Section 8 of this Agreement will cause
irreparable harm and damage to the Company, the monetary
amount of which may be virtually impossible to ascertain and,
therefore, that damages at law would be insufficient for
breach of any of the covenants contained in Section 8 hereof.
As a result, the Executive agrees that in the event of a
breach or threatened breach by the Executive of any provisions
of Section 8 hereof, the Company shall be entitled to
equitable relief in the form of an injunction to prevent
irreparable injury and that such right to injunctive relief
shall be cumulative and in addition to whatever other remedies
the Company may possess. In connection with any proceeding to
seek injunctive relief, the parties hereto waive any
requirement to post a bond.
10. Consolidation, Merger or Sale of Assets; Assignability.
Nothing in this Agreement shall preclude the Company from
consolidating or merging into or with, or transferring all or
substantially all of its assets to, another corporation or
entity which assumes this Agreement, and all obligations of
the Company hereunder, in writing. Nothing in this Agreement
shall preclude the Company from assigning this Agreement to
another entity in the event that the Company is liquidated or
upon a Change of Control if the successor company is not
otherwise obligated to assume this Agreement. Upon such
consolidation, merger, transfer of assets, liquidation,
assignment and assumption, the term "the Company" as used
herein, shall mean such other corporation or entity that
assumes this Agreement, and this Agreement shall continue in
full force and effect except as otherwise provided in this
Section 10. Except as otherwise provided in this Section 10,
this Agreement shall not be assigned by either party except
with the written consent of the other. In the event that this
Agreement is assigned in accordance with the provisions of
this Section 10, this Agreement shall continue until the third
anniversary of the date of such assignment and the automatic
renewals as set forth in Section 1.1 hereof and the Change of
Control provisions of Section 6 hereof shall no longer be
enforceable.
11. Binding Effect.
Except as herein otherwise provided, this Agreement shall
inure to the benefit of, and shall be binding upon, the parties hereto, their
personal representatives, successors, heirs and assigns.
12. Reformation.
If any provision of this Agreement is held to be illegal,
invalid or unenforceable under present or future laws effective during the term
of this Agreement, in lieu of such illegal, invalid or unenforceable provision,
there shall be added automatically as a part of this Agreement a provision as
similar in terms to such illegal, invalid or unenforceable provision as may be
possible and be legal, valid and enforceable.
13. Terminology.
All personal pronouns used in this Agreement, whether used in the
masculine, the feminine or the neuter gender, shall include all other genders,
and the singular shall include the plural and vice versa. Titles of Sections are
for convenience only, and neither limit nor amplify the provisions of this
Agreement.
14. Governing Law.
This Agreement shall be governed and construed in accordance
with the laws of the State of Florida, without regard to the conflict of laws
principles thereof.
15. Entire Agreement
This Agreement contains the entire understanding between the
parties hereto and may not be changed or modified except by an agreement in
writing signed by all the parties hereto.
16. Counterparts.
This Agreement may be executed in any number of counterparts
and each such counterpart shall for all purposes be deemed an original.
3
<PAGE>
17. Notice.
All notices or communications hereunder shall be in writing
and shall be deemed given when delivered in person or when sent by registered or
certified mail, return receipt requested, or by overnight courier service, to a
party at the following address, or at such other address as any party shall have
given notice to the other in the manner herein provided:
If to the Company, to:
Milestone Properties, Inc.
150 East Palmetto Park Road, 4th Floor
Boca Raton, Florida 33432
Attn: Robert A. Mandor, President
If to the Executive, to the address on file
in the personnel records of the Company.
4
<PAGE>
IN WITNESS WHEROF, this Agreement has been duly signed by the parties
hereto as of the day and year first above written.
MILESTONE PROPERTIES, INC.
By___________________________
Name: Robert A. Mandor
Title: President
------------------------------
Patrick S. Kirse
Exhibit 10.14
Description of Long Term Incentive Plan
On February 18, 1994, the Compensation Committee (the "Compensation
Committee") of the Board of Directors of Milestone Properties, Inc. (the
"Company") adopted a long term incentive plan (the "LTIP") pursuant to which the
Company's two most senior executive officers, Leonard S. Mandor and Robert A.
Mandor, are eligible to receive annual bonuses of 9% of the cumulative adjusted
pre-tax profits of Milestone Asset Management, Inc. ("MAMI"), a wholly owned
subsidiary of the Company. The purpose of the LTIP is to motivate and reward the
Company's two most senior executive officers for their contributions in support
of the achievement of the Company and, specifically, of MAMI. The LTIP is
administered by the Compensation Committee. The LTIP originally provided for the
availability of such bonuses based on MAMI's profitability in 1994, 1995 and
1996, and was subsequently extended to cover 1997, 1998, 1999 and 2000.
Exhibit 10.15
Description of Management Incentive Plan
On May 24, 1994, the Compensation Committee (the "Compensation
Committee") of the Board of Directors of Milestone Properties, Inc. (the
"Company") adopted a management incentive plan (the "Plan") pursuant to which
annual bonuses may be awarded to the Company's executive officers (the
"Participants"). The purpose of the Plan is to motivate and reward the Company's
executive officers for their contributions in support of the achievement of the
Company and, in certain cases, personal, objectives that are established
annually by the Compensation Committee. The Plan is administered by the
Compensation Committee. The Compensation Committee may, in its discretion, allow
non-executive officers of the Company and officers of its subsidiaries to
participate in the Plan.
Pursuant to the Plan, each year a percentage of each Participant's
annual salary is designated as a target bonus award (the "Target Award"). Under
the Plan, the percent of the Target Award that is actually awarded as a bonus to
each of the Company's executive officers is calculated pursuant to a formula
based on (a) the adjusted pre-tax net profit for each year compared to an
adjusted pre-tax net profit target that is established for that year by the
Compensation Committee (b) the performance of the Company's common stock, par
value $.01 per share (the "Common Stock") and $.78 Convertible Series A
preferred stock, par value $.01 per share (the "Preferred Stock") for that year
and (c) for the executive officers of the Company other than the two most senior
executive officers, the achievement of certain individual performance objectives
that were established for that year by the Compensation Committee. The
Compensation Committee has the discretion to adjust the actual payouts of
bonuses under the Plan from those determined by the formulas to reflect
particularly favorable or unfavorable accomplishments during a given year.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 12,048,301
<SECURITIES> 0
<RECEIVABLES> 8,285,514
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 21,534,793
<PP&E> 23,955,290
<DEPRECIATION> 2,437,406
<TOTAL-ASSETS> 86,922,196
<CURRENT-LIABILITIES> 30,018,538
<BONDS> 0
0
29,997
<COMMON> 49,436
<OTHER-SE> 14,630,046
<TOTAL-LIABILITY-AND-EQUITY> 86,922,196
<SALES> 0
<TOTAL-REVENUES> 25,515,391
<CGS> 0
<TOTAL-COSTS> 32,693,447
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9514745451
<INCOME-PRETAX> (7,178,056)
<INCOME-TAX> 1,253,056
<INCOME-CONTINUING> (8,431,112)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,431,112)
<EPS-PRIMARY> (1.99)
<EPS-DILUTED> 0.00
</TABLE>
