UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 1997
Commission File Number 1-11478
KRANZCO REALTY TRUST
(Exact Name of Registrant as Specified in Charter)
Maryland
(State of Other Jurisdiction of
Incorporation or Organization)
23-2691327
(IRS Employer Identification No.)
128 Fayette Street, Conshohocken, Pennsylvania 19428
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code
(610) 941-9292
N/A
Former Name, Former Address and Former Fiscal Year, if Changes Since
Last Report.
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 [ ]
As of August 5, 1997, there were 10,343,320 Common Shares of Beneficial
Interest, par value $0.01 per share, outstanding.
<PAGE>
KRANZCO REALTY TRUST
QUARTERLY REPORT FOR THE PERIOD ENDED
JUNE 30, 1997
INDEX
PART I. PAGE
Item 1. Financial Statements 1
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
PART II. Other Information
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Defaults upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
<PAGE>
<TABLE>
Kranzco Realty Trust and Subsidiaries
Consolidated Balance Sheets
<CAPTION>
June 30, December 31,
1997 1996
(Unaudited)
----------- -----------
<S> <C> <C>
ASSETS:
Shopping center properties owned, at cost
Buildings and improvements 340,344,000 294,293,000
Land 101,486,000 76,198,000
----------- -----------
441,830,000 370,491,000
Less-accumulated depreciation 40,833,000 35,287,000
----------- -----------
400,997,000 335,204,000
Cash and cash equivalents 4,517,000 5,301,000
Restricted cash 765,000 329,000
Rents and other receivables, net of allowance of
$1,322,000 and $1,245,000, June 30, 1997 and December 31,1996 9,054,000 9,661,000
Prepaid expenses 1,407,000 1,729,000
Deferred financing costs, net of accumulated amortization of $483,000
and $203,000, June 30, 1997 and December 31,1996 2,308,000 1,893,000
Deferred costs, net of accumulated amortization of $805,000
and $888,000, June 30, 1997 and December 31,1996 1,989,000 1,793,000
Other assets 1,143,000 3,247,000
----------- -----------
Total assets 422,180,000 359,157,000
=========== ===========
LIABILITIES:
Mortgages and notes payable 247,731,000 212,590,000
Tenant security deposits 1,210,000 1,136,000
Accounts payable and accrued expenses 3,571,000 2,785,000
Other liabilities 329,000 527,000
Distributions payable 5,744,000 5,106,000
----------- -----------
Total liabilities 258,585,000 222,144,000
COMMITMENTS AND CONTINGENCIES
REDEEMABLE PREFERRED SHARES, SERIES C, $0.01 PAR VALUE; 311,850 SHARES,
JUNE 30, 1997, NONE AT DECEMBER 31, 1996 3,119,000 0
BENEFICIARIES' EQUITY:
Preferred shares of beneficial interest, Series A-1,
$0.01 par value; 11,155 shares,
June 30, 1997 and December 31, 1996 1,000 1,000
Preferred shares of beneficial interest, Series B-1 and B-2,
$0.01 par value; 1,183,331 shares,
June 30, 1997, none at December 31, 1996 12,000 0
Common shares of beneficial interest, $0.01 par value; authorized
100,000,000 shares; issued and
outstanding, 10,334,796 and 10,332,784 as of June 30,
1997 and December 31, 1996, respectively 103,000 103,000
Capital in excess of par value 216,625,000 187,177,000
Cumulative net income available for common shareholders 30,640,000 26,754,000
Cumulative distributions on common shares of beneficial interest (86,811,000) (76,891,000)
----------- -----------
160,570,000 137,144,000
Unearned compensation on restricted shares of beneficial interest (94,000) (131,000)
----------- -----------
Total beneficiaries' equity 160,476,000 137,013,000
Total liabilities and beneficiaries' equity 422,180,000 359,157,000
=========== ===========
<FN>
The accompanying notes are an integral part of these statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Kranzco Realty Trust and Subsidiaries
Consolidated Statements of Operations
<CAPTION>
For the three For the three For the six For the six
months ended months ended months ended months ended
June 30, 1997 June 30, 1996 June 30, 1997 June 30, 1996
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES:
Minimum rent 12,114,000 10,391,000 23,043,000 20,968,000
Percentage rent 281,000 196,000 549,000 443,000
Expense reimbursements 2,758,000 2,713,000 5,455,000 6,223,000
Interest income 62,000 216,000 116,000 441,000
Other 44,000 43,000 75,000 62,000
---------- ---------- ---------- ----------
Total revenues 15,259,000 13,559,000 29,238,000 28,137,000
---------- ---------- ---------- ----------
EXPENSES:
Interest 4,768,000 4,230,000 9,254,000 8,511,000
Depreciation and amortization 3,131,000 2,842,000 5,990,000 5,714,000
Real estate taxes 1,627,000 1,514,000 3,223,000 2,959,000
Operations and maintenance 2,068,000 1,995,000 4,039,000 5,184,000
General and administrative 821,000 824,000 1,422,000 1,523,000
---------- ---------- ---------- ----------
Total expenses 12,415,000 11,405,000 23,928,000 23,891,000
---------- ---------- ---------- ----------
INCOME BEFORE LOSS ON SALE OF
REAL ESTATE AND
EXTRAORDINARY ITEM 2,844,000 2,154,000 5,310,000 4,246,000
Loss on sale of real
estate 0 0 0 63,000
---------- ---------- ---------- ----------
INCOME BEFORE EXTRAORDINARY ITEM 2,844,000 2,154,000 5,310,000 4,183,000
Extraordinary loss on
debt refinancing 0 11,052,000 0 11,052,000
---------- ---------- ---------- ----------
NET INCOME (LOSS) 2,844,000 (8,898,000) 5,310,000 (6,869,000)
Preferred Share Distributions 959,000 174,000 1,424,000 347,000
---------- ---------- ---------- ----------
NET INCOME (LOSS) FOR COMMON
SHAREHOLDERS 1,885,000 (9,072,000) 3,886,000 (7,216,000)
========== ========== ========== ==========
Income Before Extraordinary Item
Per Common Share
of Beneficial Interest 0.18 0.19 0.38 0.37
Extraordinary Loss on Debt
Refinancing Per Common
Share of Beneficial Inter 0.00 (1.07) 0.00 (1.07)
---------- ---------- ---------- ----------
Net Income (Loss) Per Common
Share of Beneficial
Interest 0.00 (0.88) 0.00 (0.70)
========== ========== ========== ==========
<FN>
The accompanying notes are an integral part of these statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Kranzco Realty Trust and Subsidiaries
Consolidated Statements of Cash Flows
<CAPTION>
For the six For the six
months ended months ended
June 30, 1997 June 30, 1996
(Unaudited) (Unaudited)
----------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) 5,310,000 (6,869,000)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 5,990,000 5,714,000
Amortization of deferred interest costs 0 675,000
Amortization of unearned compensation on restricted
shares of beneficial interest 37,000 28,000
Loss on sale of real estate 0 63,000
Extraordinary loss on debt refinancing 0 11,052,000
Changes in assets and liabilities:
(Increase) decrease in-
Rents and other receivables 607,000 (1,399,000)
Prepaid expenses 322,000 570,000
Other assets (61,000) (61,000)
Increase (decrease) in-
Accounts payable and accrued expenses 786,000 825,000
Tenant security deposits 74,000 (27,000)
Other liabilities (198,000) (452,000)
----------- ------------
Net cash provided by operating activities 12,867,000 10,119,000
----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in shopping center properties (71,339,000) (1,022,000)
Decrease in other assets 2,165,000 0
Proceeds from sale of real estate 0 524,000
Increase in marketable securities 0 (7,215,000)
(Increase)decrease in restricted cash (436,000) 216,000
Increase in deferred costs (359,000) (262,000)
----------- ------------
Net cash used in investing activities (69,969,000) (7,759,000)
----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions paid on common shares of beneficial interest (9,920,000) (9,910,000)
Distributions paid on preferred shares of beneficial interest (735,000) (278,000)
Issuance of common shares of beneficial interest, net 33,000 16,000
Issuance of preferred shares of beneficial interest, net 32,940,000 0
Redemption of redeemable preferred shares (445,000) 0
Proceeds from sale of interest rate protection agreements 0 3,935,000
Proceeds of mortgages and notes payable 35,629,000 181,700,000
Repayments of mortgages and notes payable (488,000) (179,250,000)
Increase in deferred financing costs (696,000) (1,792,000)
----------- ------------
Net cash provided by (used in) financing activities 56,318,000 (5,579,000)
----------- ------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (784,000) (3,219,000)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 5,301,000 6,129,000
----------- ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD 4,517,000 2,910,000
=========== ============
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Accretion of discount on increasing rate preferred shares 51,000 62,000
=========== ============
<FN>
The Company declared a distribution of $0.48 per common share, payable to shareholders of
record as of June 27, 1997. The distribution of $4,961,000 was paid on July 23, 1997.
The Company declared a distribution of $0.48 per common share, payable to shareholders of
record as of June 26, 1996. The distribution of $4,955,000 was paid on July 17, 1996.
The Company recorded the quarterly distribution on the preferred shares, Series A-1, as of June 30, 1997. The
distribution of $152,000 was paid on July 1, 1997.
The Company recorded the quarterly distribution on the preferred shares, Series A-1, as of June 30, 1996. The
distribution of $145,000 was paid on July 1, 1996.
The Company recorded $569,000 of the distribution on the preferred shares, Series B-1 and B-2, as of June 30, 1997. The
entire distribution of $722,000 was paid on July 20, 1997.
The Company recorded $62,000 of the distribution on the preferred shares, Series C, as of June 30, 1997. The
entire distribution of $62,000 was paid on July 31, 1997.
The accompanying notes are an integral part of these statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Kranzco Realty Trust and Subsidiaries
Consolidated Statements of Beneficiaries' Equity
For the years ended December 31, 1995 and 1996
For the six months ended June 30, 1997
<CAPTION>
Unearned
Cumulative Compensation
Preferred Cumulative Distributions on
Common Preferred Shares of Capital Net Income on Common Restricted
Shares of Shares of Beneficial In Excess Available Shares of Shares of
Beneficial Par Beneficial Interest of for Common Beneficial Beneficial
Interest Value Interest Par Value Par Value Shareholders Interest Interest
------------ -------- ---------- ---------- ------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1994 10,315,497 $103,000 0 $0 $178,712,000 $20,637,000 ($37,248,000) $0
Issuance of common shares 8,062 - - - 145,000 - - (104,000)
Forfeiture of common shares (701) - - - (14,000) - - -
Issuance
of preferred shares, net - - 11,155 1,000 7,976,000 - - -
Accretion
of
discount
on preferred shares
of beneficial interest - - - - 95,000 (95,000) - -
Net income - - - - - 9,877,000 - -
Distributions
on preferred shares - - - - - (390,000) - -
Distributions
on common shares
of
beneficial
interest ($1.92 per share) - - - - - - (19,813,000) -
------------ -------- ---------- ---------- ------------- ------------- -------------- -------------
BALANCE, DECEMBER 31, 1995 10,322,858 $103,000 11,155 $1,000 $186,914,000 $30,029,000 ($57,061,000) ($104,000)
Issuance of common shares 9,949 - - - 145,000 - - (93,000)
Forfeiture of common shares (23) - - - - - - -
Accretion
of
discount
on preferred shares
of beneficial interest - - - - 118,000 (118,000) - -
Accretion
of
unearned compensation on
restricted
shares
of beneficial interest - - - - - - - 66,000
Net loss - - - - - (2,580,000) - -
Distributions
on preferred shares - - - - - (577,000) - -
Distributions
on common shares
of
beneficial
interest ($1.92 per share) - - - - - - (19,830,000) -
------------ -------- ---------- ---------- ------------- ------------- -------------- -------------
BALANCE, DECEMBER 31, 1996 10,332,784 $103,000 11,155 $1,000 $187,177,000 $26,754,000 ($76,891,000) ($131,000)
Issuance of common shares 2,066 - - - 34,000 - - -
Forfeiture of common shares (54) - - - (1,000) - - -
Issuance
of
preferred
shares-Series B-1, B-2 - - 1,183,331 12,000 29,364,000 - - -
Issuance
of
preferred shares-Series C - - 356,400 4,000 3,560,000 - - -
Redemption
of
preferred shares-Series C - - (44,550) - (445,000) - - -
Accretion
of
discount
on preferred shares
of beneficial interest - - - - 51,000 (51,000) - -
Accretion
of
unearned compensation on
restricted
shares
of beneficial interest - - - - - - - 37,000
Net income - - - - - 5,310,000 - -
Distributions
on preferred shares - - - - - (1,373,000) - -
Distributions
on common shares
of
beneficial
interest ($0.96 per share) - - - - - - (9,920,000) -
------------ -------- ---------- ---------- ------------- ------------- -------------- -------------
BALANCE, JUNE 30, 1997 10,334,796 $103,000 1,506,336 $17,000 $219,740,000 $30,640,000 ($86,811,000) ($94,000)
<FN>
The accompanying notes are an integral part of these statements.
</FN>
</TABLE>
<PAGE>
ii.
KRANZCO REALTY TRUST AND SUBSIDIARIES
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1997
1. BASIS OF PRESENTATION:
The financial statements are unaudited but reflect all adjustments which are, in
the opinion of management, necessary to present fairly the results for the
interim periods presented. These financial statements should be read in
conjunction with the financial statements and related notes contained in KRT's
Annual Report on Form 10-K for the year ended December 31, 1996. Results from
any interim period are not necessarily indicative of the results for a full
year.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Business and Nature of Operations
Kranzco Realty Trust (a Maryland real estate investment trust) and its
subsidiaries ("KRT" or the "Company") are engaged in the ownership, management,
leasing, operation, acquisition, development, investment and disposition of
neighborhood and community shopping centers and free-standing properties. The
Company completed its initial public offering of shares of beneficial interest
and commenced operations on November 19, 1992. In addition to its own
properties, the Company may provide management services for shopping centers
owned by third parties. As of June 30, 1997, the Company owned 54 properties in
sixteen states.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of KRT
and its wholly owned subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities as of the date of the financial statements and
reported amounts of revenues and expenses during the reporting periods. The
ultimate results could differ from those estimates.
Real Estate
Real estate assets and improvements or replacements are carried at the lower of
depreciated cost or net realizable value. Depreciation is computed using the
straight-line method over the estimated useful life of thirty years for
buildings and the lesser of the useful life or lease term of the improvements.
Maintenance and repairs are charged to expense, as incurred. The Company
determines potential impairment losses in accordance with the provisions of
Statement of Financial Accounting Standards No. 121 "Accounting for the
Impairment of Long-Lived Assets to Be Disposed Of".
Capitalized Charges
Carrying charges, principally interest and taxes, of land under development and
buildings under construction are capitalized by the Company. Interest is
capitalized using an interest rate which equals a weighted average interest rate
on the Company's indebtedness. The Company capitalizes certain direct labor
charges on identifiable projects, such as acquisitions and certain significant
tenant leases. Capitalization ceases when construction activities are completed
and the property is available for occupancy by tenants and the costs are then
depreciated over the estimated useful life of the property.
Deferred Costs
Deferred costs relate to the organization of the Company, amounts related to
the placement of debt and costs of leasing the shopping centers. Organization
costs are amortized on a straight-line basis over five years. Deferred
financing costs are amortized using the effective interest method over the term
of the related debt. Leasing costs are amortized on a straight-line basis over
the term of the related lease.
Revenue Recognition
Minimum rental income is recognized on a straight-line basis over the term of
the lease agreements regardless of when payments are due and accrued rents are
included in rents receivable. Certain lease agreements contain provisions which
provide for additional rents based on tenants' sales volume and
reimbursement of the tenants' share of real estate taxes and certain common area
maintenance costs. These additional rents are reflected on the accrual basis.
Per Share Data
Net income per share is based on the weighted average number of common shares of
beneficial interest outstanding adjusted to give effect to common share
equivalents. The weighted average number of shares outstanding used in the
computations was 10,334,363 and 10,323,392 as of June 30, 1997 and 1996,
respectively.
Statements of Cash Flows
Cash and cash equivalents include all cash and liquid investments with original
maturities of three months or less, primarily consisting of money market
accounts and government investments. Cash paid for interest was $9,483,000 and
$8,100,000 for the six months ended June 30, 1997 and 1996, respectively.
Income Taxes
The Company and its subsidiaries file a consolidated Federal income tax return.
KRT intends to maintain its election to be taxed as a Real Estate Investment
Trust ("REIT") under Sections 856 to 860 of the Internal Revenue Code.
Accordingly, no provision for Federal income taxes has been reflected in the
financial statements.
The Company is subject to a Federal excise tax computed on a calendar year
basis. The excise tax equals 4% of the excess, if any, of 85% of the Company's
ordinary income plus 95% of any capital gain income for the calendar year over
cash distributions during the calendar year, as defined. No provision for
excise tax has been reflected in the financial statements as no tax was due.
Earnings and profits, which will determine the taxability of distributions to
shareholders, will differ from net income reported for financial reporting
purposes due to the differences in the cost basis for Federal income tax
purposes and in the estimated useful lives used to compute depreciation.
3. INDEBTEDNESS:
At June 30, 1997 and December 31, 1996, the Company had mortgages and notes
payable outstanding of $247,731,000 and $212,590,000, respectively.
In June 1996, the Company completed a refinancing of substantially all of its
variable rate debt and a portion of its fixed rate debt with a new fixed rate
secured financing. The Company entered into a seven year, secured, fixed rate
real estate mortgage loan in the principal amount of $181,700,000 (the
"Mortgage Loan"), at a weighted average interest rate of 7.96%, which is
inclusive of trustee and servicer fees. The Mortgage Loan is secured by twenty
seven shopping center properties (the "Mortgaged Properties"). The net proceeds
of the refinancing transaction of $177,662,000, after net costs of $4,038,000,
were used to retire the short-term funds borrowed to repurchase the $100 million
adjustable rate mortgage loan (the "$100 million REMIC") issued in conjunction
with the Company's initial public offering in November 1992 and to pay off $60
million of additional adjustable rate debt. The entire outstanding principal
balance of the Mortgage Loan is due in June 2003. The Company recorded an
extraordinary loss on refinancing of $11,052,000 including the write off of
approximately $8,844,000 of unamortized deferred finance costs related to the
debt instruments repaid, as well as other costs including prepayment fees,
premiums paid on repurchase of the $100 million REMIC certificates and
professional fees. In connection with the repayment of the $100 million REMIC,
the Company sold its interest rate protection agreements. The proceeds received
on the sale of the agreements of approximately $3,935,000 reduced the
extraordinary loss on debt refinancing. Interest expense for the six months
ending June 30, 1997 and 1996 in the accompanying statements of operations is
shown net of reimbursements of $0 and $275,000, respectively, relating to the
interest rate protection agreements and capitalized interest of $331,000 and
$122,000, respectively.
As a condition of the Mortgage Loan, the Company was required to establish a
Sinking Fund Account and a Capital and TI Reserve Account. On a monthly basis,
$11,000 is deposited into the Sinking Fund Account maintained with a Collateral
Agent until the aggregate amount in the account equals or exceeds $786,000. All
funds in the Sinking Fund Account are to be returned to the Company on the
earlier of the repayment in full of the Mortgage Loan and the date of release or
substitution of the mortgaged property located in Orange, CT. The balance in
the Sinking Fund Account as of June 30, 1997 was $134,000. The Company deposits
on a monthly basis, an amount equal to 1/12th of $0.25 per square foot of the
gross leasable area of the Mortgaged Properties into the Capital and TI Reserve
Account. All funds in the Capital and TI Reserve Account may be used by the
Company to fund capital improvements, repairs, alterations, tenant improvements
and leasing commissions at the Mortgaged Properties. The balance in the Capital
and TI Reserve Account was $243,000 as of June 30, 1997.
In addition, the Company has eight fixed rate mortgages outstanding as of June
30, 1997 totalling $38,131,000. These mortgages have maturity dates ranging
from 1999 through 2009 and interest rates ranging from 7.50% to 10.50%. The
Company is required to make principal payments of $419,000 in 1997, $896,000 in
1998, $8,942,000 in 1999, $6,061,000 in 2000, $1,065,000 in 2001, and $3,437,000
in 2002, respectively, related to these mortgages.
The floating rate mortgages outstanding as of June 30, 1997 total $12,900,000.
These mortgages have maturity dates ranging from 2003 through 2004 and have
interest rates ranging from 7.50% to 9.0%. The Company is required to make
principal payments of $172,000 in 1997, $394,000 in 1998, $410,000 in 1999,
$427,000 in 2000, $445,000 in 2001, and $466,000 in 2002, respectively, related
to these mortgages.
In February 1997, the Company obtained a secured line of credit of up to $50.0
million from Salomon Brothers Realty, Corp. Amounts borrowed under the line
bear interest at the one month London Interbank Offering Rate ("LIBOR") plus 175
basis points, which was 7.44% at June 30, 1997. There was $14,000,000
outstanding under this facility as of June 30, 1997, and an additional
$7,000,000 available for future borrowing. The facility is secured by fourteen
properties and is due in February 1999. The Company has an option to extend the
facility for an additional year. As a condition of the facility, the Company
was required to establish a Repair Reserve Account for immediate and ongoing
capital expenditure reserves and replacement reserves. The balance in the
Repair Reserve Account was $388,000 as of June 30, 1997.
In November 1996, the Company obtained a $3.0 million secured line of credit
from Bank Leumi Trust Company of New York. Amounts borrowed under the line bear
interest at 50 basis points above that bank's reference rate, which was 9.0% as
of June 30, 1997. There was $1.0 million of outstanding borrowings under this
facility as of June 30, 1997. The term of this line expires October 31, 1997.
The Company has a $1.0 million unsecured line of credit from Corestates Bank,
N.A. Amounts borrowed under the line will bear interest at that bank's prime
rate. There were no outstanding borrowings under this facility as of June
30, 1997 and the facility was extended through December 31, 1997.
4. ACQUISITION:
On February 27, 1997, the Company acquired, through a merger, Union Property
Investors, Inc. ("UPI"). UPI owned sixteen properties located in eleven states
that have a total of approximately 1.3 million
square feet of gross leasable area. The purchase price was paid by the Company
by the assumption of approximately $30.2 million of debt, the issuance of
approximately $29.6 million of convertible preferred stock and approximately
$3.6 million of preferred stock and the payment of approximately $1.6 million of
cash. The transaction was accounted for by the purchase method and the results
of operations of each center are included from the respective purchase date.
The pro forma financial information presented below may not be indicative of
results that would have been reported if the acquisition had occurred on January
1, 1997 and 1996, respectively. The extraordinary loss of $11,052,000 on
refinancing recorded in the second quarter of 1996 and the loss of $63,000 on
the sale of real estate recorded in the first quarter of 1996 by the Company
have been excluded from the pro forma presentation.
For the six months ended June 30, 1997
Pro forma total revenues $30,587,000
Pro forma net income for common shareholders $3,803,000
Pro forma net income per common share $0.37
For the six months ended June 30, 1996
Pro forma total revenues $32,237,000
Pro forma net income for common shareholders $3,290,000
Pro forma net income per common share $0.32
5. PREFERRED SHARES OF BENEFICIAL INTEREST:
In connection with the purchase of five shopping centers in April 1995, the
Company issued 11,155 shares of Series A-1 Increasing Rate Cumulative
Convertible Preferred Shares of Beneficial Interest, $0.01 par value per share,
of Kranzco Realty Trust (the "Preferred Shares") at a face amount of
$11,155,000. The Preferred Shares were valued for accounting purposes based
on the fair value of the assets acquired and recorded at approximately
$7,976,000, net of issuance costs. The Preferred Shares have an initial
distribution rate of 5.0% per annum with increases of 0.25% per annum up to a
maximum rate of 6.5% per annum. As of June 30, 1997, the distribution rate on
the Preferred Shares was 5.50%. The Company recorded a discount of
approximately $467,000 at the time of issuance which represents the present
value of the difference between the total distributions to be paid in the seven
year period prior to commencement of the perpetual distribution and the
perpetual distribution amount for that same seven year period. This amount is
accreted on an effective interest method over the seven years through a charge
to cumulative net income available for common shareholders. The Preferred
Shares are redeemable by the Company at any time at their liquidation preference
and are convertible into the Company's Common Shares of Beneficial Interest (the
"Common Shares"), at a rate of 16.67% annually commencing in the fifth year,
with a maximum of 50% convertible in any one year. The Preferred Shares are
convertible into that number of Common Shares as would result in the holder
receiving the same amount of distributions from the Common Shares at the
applicable conversion dates as they received as a holder of the Preferred
Shares, up to a maximum of the greater of 500,000 Common Shares or 5% of the
then outstanding Common Shares.
In connection with the UPI acquisition, the Company issued 1,183,331 shares of
Series B-1 and Series B-2 Cumulative Convertible Preferred Shares of Beneficial
Interest (the "Series B Preferred Shares"), par value $0.01 per share, each with
a $25.00 per share liquidation preference. These shares were recorded, net of
issuance costs, at approximately $29,381,000. The Series B Preferred Shares
have a distribution rate of 9.75% per annum and distributions are paid quarterly
in arrears for each calendar quarter on January 20, April 20, July 20 and
October 20 of each year. The Company also issued 356,400 shares of Series C
Cumulative Redeemable Preferred Shares of Beneficial Interest (the "Series C
Preferred Shares"), par value $0.01 per share, each with a $10.00 liquidation
preference. These shares were recorded, net of issuance costs, at approximately
$3,564,000. The Series C Preferred Shares have a distribution rate of 8% per
annum and distributions are payable quarterly on the last day of January, April,
July and October of each year with respect to the immediately preceding calendar
quarter. The Company is required to redeem, commencing April 1997, in eight
equal quarterly installments all of the outstanding Series C Preferred Shares at
a redemption price equal to the $10.00 liquidation price plus an amount equal to
the accrued and unpaid distributions, if any, allocable to the Series C
Preferred Shares.
5. ACCOUNTING PRONOUNCEMENTS ISSUED BUT NOT YET ADOPTED:
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement 128, Earnings per Share, and Statement 129, Disclosure of Information
about Capital Structure (collectively, the "Statements"). These Statements
establish standards for computing and presenting Earnings per Share as well as
standards for disclosing information about an entity's capital structure. The
Statements are effective for financial statements for periods ending after
December 15, 1997. The Company believes the effect of these Statements will not
have a material financial statement impact upon implementation.
Management's Discussion and Analysis of Financial
Condition and Results of Operations
This Form 10-Q, together with other statements and information publicly
disseminated by the Company, contains certain forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Such statements
are based on assumptions and expectations which may not be realized and are
inherently subject to risks and uncertainties, many of which cannot be predicted
with accuracy and some of which might not even be anticipated. Future events
and actual results, financial and otherwise, may differ materially from the
results discussed in the forward-looking statements. Risks and other factors
that might cause such a difference include, but are not limited to, the effect
of economic and market conditions; risks that the Company's acquisition and
development projects will fail to perform as expected; financing risks, such as
the inability to obtain debt or equity financing on favorable terms; the level
and volatility of interest rates; loss or bankruptcy of one or more of the
Company's major retail tenants; failure of the Company's properties to generate
additional income to offset increases in operating expenses, as well as other
risks listed in the Company's Annual Report on Form 10-K for the year ended
December 31, 1996 under Item 1. Business and from time to time in the Company's
reports filed with the Securities and Exchange Commission or otherwise publicly
disseminated by the Company.
Liquidity and Capital Resources
At June 30, 1997 the Company had $4,517,000 of cash on hand. In addition to
its cash reserve, unused capacity under credit facilities totaled $10,000,000 at
June 30, 1997.
In February 1997, the Company acquired, in a merger, Union Property
Investors, Inc. ("UPI") for approximately $65 million. UPI owned 16 properties
located in 11 states that have a total of approximately 1.3 million square feet
of gross leasable area. The Company funded this purchase through the
assumption of approximately $30.2 million of debt, the issuance of approximately
$29.6 million of Kranzco Series B-1 and Series B-2 Cumulative Convertible
Preferred Shares (together the "Kranzco Series B Preferred Shares") and
approximately $3.6 million of Kranzco Series C Redeemable Preferred Shares and
the payment of approximately $1.6 million of cash. The Kranzco Series B
Preferred Shares and the Kranzco Series C Redeemable Preferred Shares have
distribution rates of 9.75% and 8.0%, respectively. The Kranzco Series C
Redeemable Preferred Shares are required to be redeemed in eight equal quarterly
installments commencing in April 1997. The merger with UPI resulted in a 22%
increase in the Company's gross leasable square feet and enabled the Company to
expand into nine additional states and diversify its geographic presence and
tenant base.
As of June 30, 1997 the Company had total mortgages and notes payable of
$247,731,000 of which $219,831,000 bears interest at fixed rates ranging from
7.50% to 10.5%. As of June 30, 1997, the Company is required to make principal
payments of $1,590,000 in 1997, $1,290,000 in 1998, $23,352,000 in 1999,
$6,488,000 in 2000, $1,510,000 in 2001 and $3,903,000 in 2002.
In June 1996, the Company successfully completed the refinancing of
substantially all of its variable rate debt and a portion of its fixed rate
debt. The Company entered into a seven year, secured, fixed rate real estate
mortgage loan in the principal amount of $181,700,000 (the "Mortgage Loan") at a
weighted average interest rate of 7.96%, which is inclusive of trustee and
servicer fees. The entire principal balance of the Mortgage Loan is due in June
2003.
As a condition of the Mortgage Loan, the Company was required to establish
a Sinking Fund Account and a Capital and TI Reserve Account. On a monthly
basis, $11,000 is deposited into a Sinking Fund Account maintained with the
Collateral Agent until the aggregate amount in the account equals or exceeds
$786,000. All funds in the Sinking Fund Account are to be returned to the
Company on the earlier of the repayment in full of the Mortgage Loan and the
date of release or substitution of a property for the mortgaged property located
in Orange, CT. The balance in the Sinking Fund Account was $134,000 as of June
30, 1997. On a monthly basis, an amount equal to 1/12th of $0.25 per square
foot of the gross leasable area of the Mortgaged Properties is deposited into
the Capital and TI Reserve Account. All funds in the Capital and TI Reserve
Account may be used on a current basis to fund capital improvements, repairs,
alterations, tenant improvements and leasing commissions at the Mortgaged
Properties. The balance in the Capital and TI Reserve Account was $243,000 as
of June 30, 1997.
As of June 30, 1997, the Company had eight fixed rate mortgages outstanding
totalling $38,131,000. These mortgages have maturity dates ranging from 1999
through 2009 and interest rates ranging from 7.5% to 10.5%. The Company is
required to make principal payments of $419,000 in 1997, $896,000 in 1998,
$8,942,000 in 1999, $6,061,000 in 2000, $1,065,000 in 2001, and $3,437,000 in
2002.
In addition, the Company had floating rate mortgages outstanding as of June
30, 1997 totalling $12,900,000. These mortgages have maturity dates ranging
from 2003 through 2004 and have interest rates ranging from 7.50% to 9.0%. The
Company is required to make principal payments of $172,000 in 1997, $394,000 in
1998, $410,000 in 1999, $427,000 in 2000, $445,000 in 2001, and $466,000 in
2002.
In February 1997, the Company obtained a secured first mortgage loan
facility of up to $50 million from Salomon Brothers Realty Corp. (the "Salomon
Facility"). Amounts borrowed under the line bear interest at the one-month
London Interbank Offering Rate ("LIBOR") plus 175 basis points, which was 7.44%
at June 30, 1997. There was $14,000,000 outstanding under this facility as
of June 30, 1997, with $7,000,000 available for future borrowings. The facility
is secured by 14 properties and is due in February 1999. The Company has an
option to extend the facility for an additional year. The proceeds of the
Salomon Facility will be used by the Company for funding property acquisitions,
general corporate purposes and capital needs. As a condition of the Salomon
facility, the Company was required to establish a Repair Reserve Account for
immediate and ongoing capital expenditure reserves and replacement reserves.
The balance in the Repair Reserve Account was $388,000 as of June 30, 1997.
In November 1996, the Company obtained a $3.0 million secured line of credit
from Bank Leumi Trust Company of New York. Amounts borrowed under the line will
bear interest at 50 basis points above that bank's reference rate, which was
9.0% as of June 30, 1997. The outstanding borrowings under this facility
totalled $1,000,000 as of June 30, 1997.
In 1995 the Company obtained a $1.0 million unsecured line of credit from
Corestates Bank, N.A. Amounts borrowed under the line will bear interest at the
bank's prime rate, which was 8.50% at June 30, 1997. The facility was extended
through December 31, 1997, and there were no borrowings outstanding under this
facility as of June 30, 1997.
Effective January 1, 1996, The National Association of Real Estate
Investment Trusts (NAREIT) revised the definition of funds from operations to
income before depreciation and amortization of real estate assets and
significant non-recurring events, less gains on sale of real estate. Funds from
operations does not represent cash flows from operations as defined by generally
accepted accounting principles and is not necessarily indicative as a measure of
liquidity of the Company. Also, funds from operations should not be construed as
an alternative to net income as defined by generally accepted accounting
principles as an indicator of the Company's operating performance. Funds from
operations for common shareholders increased $260,000 or 6% from $4,585,000 for
the second quarter of 1996 to $4,845,000 for the second quarter of 1997, and
increased $498,000 or 5% from $9,070,000 for the first six months of 1996 to
$9,568,000 for the first six months of 1997.
The Company has several tenants which are operating under Chapter 11 of the
United States Bankruptcy Code. Among these tenants are Bradlee's (three stores
representing approximately $2.2 million or 3.6% of the Company's annual
revenues) and Caldor (three stores representing approximately $2.5 million or
4.1% of the Company's annual revenues). To date Bradlee's and Caldor continue
to pay current rent and operate their stores located in the Company's centers
and have not taken any action to reject these leases. Effective November 1,
1996, the Company entered into an agreement to reduce common area maintenance
and real estate tax reimbursements at one of the Caldor locations for a five
year period. Rickel's disaffirmed the lease for the store located at the
Hillcrest Mall in Phillipsburg, NJ on November 30, 1996. The rental for this
store amounted to approximately $300,000 per year including reimbursements for
operating expenses. Rickel's has affirmed the lease for The Mall at Cross
County. The rental for this store amounts to approximately $1.1 million per year
including reimbursements for operating expenses. Effective February 29, 1996,
Jamesway disaffirmed its leases at the two locations in which they had operated.
The Jamesway stores were approximately 60,000 and 76,000 square feet,
respectively, and the average rent paid by Jamesway for these locations was
approximately $2.60 per square foot, which represented less than 1% of revenues
in 1996. The Company has leased the approximately 60,000 square foot store to
Ames Department store, which is also leasing an additional 4,000 square feet at
that location. Other tenants in the Company's portfolio that continue to pay
current rent and operate their stores under Chapter 11 are individually less
than 1% of annual revenues but in the aggregate are approximately 1.4% of the
Company's annual revenues. The Company believes that it is adequately reserved
for these tenants.
Best Products, a tenant in bankruptcy at one of the Company's centers, has
discontinued operations of all of its stores and closed the store in the
Company's portfolio in February 1997. In May 1997, the Company purchased the
lease from Best Products for approximately $650,000. The Company has several
prospective tenants for this space and expects the space to be leased before the
fourth quarter of 1997.
During the six months ended June 30, 1997, the Company invested
approximately $3,669,000 in the expansion and improvement of existing shopping
center properties, exclusive of the acquisition of the sixteen properties. The
Company expects to meet its short-term liquidity requirements through net cash
flow provided from operations, existing cash, long-term or short-term borrowings
and the Capital and TI Reserve account. The Capital and TI Reserve account may
be utilized by the Company for the funding of costs related to capital
improvements, repairs, alterations, tenant improvements and leasing commissions
in the centers secured by the Mortgage Loan. To meet its long-term liquidity
requirements, such as refinancing its balloon mortgages, financing acquisitions
and major capital improvements, the Company intends to either utilize long-term
borrowings, issue debt securities and/or offer additional equity securities.
Management believes it has adequate access to capital to continue to meet
its short-term and long-term requirements and objectives.
Results of Operations
Net income (loss) for common shareholders increased $10,957,000 from
($9,072,000) or ($0.88) per common share in the second quarter of 1996 to
$1,885,000 or $0.18 per common share in the second quarter of 1997. Excluding
the extraordinary loss on refinancing in 1996, the net income for common
shareholders decreased $95,000 or 5% from $1,980,000, or $0.19 per common share,
in the second quarter of 1996 to $1,885,000, or $0.18 per common share, in the
second quarter of 1997. Net income (loss) for common shareholders increased
$11,102,000 from ($7,216,000), or ($0.70) per common share, for the first six
months of 1996 to $3,886,000, or $0.38 per common share, for the corresponding
period in 1997. Excluding the extraordinary loss on refinancing, the net income
for common shareholders increased $50,000 or 1% from $3,836,000, or $0.37 per
common share, for the first six months of 1996 to $3,886,000, or $0.38 per
common share, for the corresponding period in 1997. This increase was due to a
combination of factors as described in further detail below. The Company also
recognized a loss of $63,000 on the sale of real estate in the first quarter of
1996 in connection with the sale of a 3.4 acre parcel of land located in
Philadelphia, Pennsylvania.
Minimum rent increased $1,723,000 or 17% from $10,391,000 in the second quarter
of 1996 to $12,114,000 in the second quarter of 1997 and increased $2,075,000 or
10% from $20,968,000 for the first six months of 1996 to $23,043,000 for the
corresponding period in 1997. The increase was primarily due to the additional
rents from the sixteen centers acquired in February 1997 of approximately
$2,400,000, which was offset by a net decrease in the minimum rents of
approximately $325,000 from the other thirty-eight shopping centers. The
decrease was due to the lower occupancy rate at those centers.
Expense reimbursements increased $45,000 or 2% from $2,713,000 in the second
quarter of 1996 to $2,758,000 in the second quarter of 1997 and decreased
$768,000 or 12% from $6,223,000 for the first six months of 1996 to $5,455,000
for the corresponding period in 1997. The decrease was primarily due to the
common area maintenance expenses which were significantly lower in 1997 due to
the severe winter weather in the Northeast portion of the United States in 1996.
Interest income decreased $154,000 or 71% from $216,000 in the second quarter of
1996 to $62,000 in the second quarter of 1997 and decreased $325,000 or 74% from
$441,000 for the first six months of 1996 to $116,000 for the corresponding
period in 1997. The decrease was primarily due to the sale of the Series A-2
Commercial Mortgage Modified Pass - Through Interest Only Certificates (the
"Series A-2 Certificates"). The Series A-2 Certificates provided for payment of
interest only at 65 basis points calculated on a notional amount of
$100,000,000. The Series A-2 Certificates were sold in connection with the debt
refinancing in June 1996.
Interest expense increased $538,000 or 13% from $4,230,000 in the second quarter
of 1996 to $4,768,000 in the second quarter of 1997 and $743,000 or 9% from
$8,511,000 for the first six months of 1996 to $9,254,000 for the corresponding
period in 1997. The increase is primarily due to the interest expense incurred
in connection with the additional sixteen centers acquired in February 1997. In
addition, interest expense was reduced by capitalized interest on projects under
construction and land under development in the amount of $61,000 and $224,000
for the second quarter of 1996 and 1997, respectively, and $122,000 and
$331,000 for the first six months of 1996 and 1997, respectively.
Depreciation and amortization increased $289,000 or 10% from $2,842,000 in the
second quarter of 1996 to $3,131,000 in the second quarter of 1997 and increased
$276,000 or 5% from $5,714,000 for the first six months of 1996 to $5,990,000
for the corresponding period in 1997. While depreciation expense on buildings
and improvements increased approximately $498,000 in the first six months of
1997 versus the first six months of 1996 due to the sixteen additional centers
acquired in February 1997 as well as two full quarters of depreciation taken on
improvements made prior to 1997, amortization of deferred financing costs
decreased approximately $235,000 in the first six months of 1997 versus 1996.
This decrease was due to the change in deferred financing fees associated with
the Company's debt refinancing in June 1996.
Real estate taxes increased $113,000 or 7% from $1,514,000 in the second quarter
of 1996 to $1,627,000 in the second quarter of 1997, and increased $264,000 or
9% from $2,959,000 for the first six months of 1996 to $3,223,000 for the
corresponding period in 1997. The increase was primarily due to the increase in
expense from the additional sixteen centers acquired in 1997, as well as the
effect of a real estate tax refund of approximately $40,000 recorded in the
first quarter of 1996. The increase was offset by the capitalization of real
estate taxes on projects under construction and land under development in the
amount of $32,000 and $53,000 for the second quarter of 1996 and 1997,
respectively, and $64,000 and $77,000 for the first six months of 1996 and 1997,
respectively.
Operations and maintenance expenses increased $73,000 or 4% from $1,995,000 in
the second quarter of 1996 to $2,068,000 in the second quarter of 1997 and
decreased $1,145,000 or 22% from $5,184,000 for the first six months of 1996 to
$4,039,000 for the corresponding period in 1997. The decrease was primarily due
to the unusually high snow removal costs incurred as a result of the severe
winter experienced in the first quarter of 1996 in the Northeast portion of the
United States (approximately $1 million).
General and administrative expenses decreased $3,000 or less than 1% from
$824,000 in the second quarter of 1996 to $821,000 in the second quarter of 1997
and decreased $101,000 or 7% from $1,523,000 for the first six months of 1996 to
$1,422,000 for the corresponding period in 1997. The decrease is primarily due
to capitalization of certain direct labor costs in 1997 related to identifiable
projects such as the merger of the Company with UPI and certain leasing
projects.
Inflation
Most of the retail tenant leases at the shopping center properties contain
provisions which will entitle the Company to receive percentage rents based on
the tenants' gross sales. Such percentage rents minimize the risk to the Company
of the adverse effects of inflation.
Most of the leases at the shopping center properties require the tenants to pay
a substantial share of operating expenses, such as real estate taxes, insurance
and common area maintenance costs, and thereby reduce the Company's exposure to
increased costs. In addition, many of the leases at the shopping center
properties are for terms of less than ten years, which may enable the Company to
seek increased rents upon renewal of existing leases.
Part II
OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
An annual meeting of shareholders was held on June 4, 1997. Proxies for the
meeting were solicited by the registrant pursuant to Regulation 14 under the
Securities Exchange Act of 1934. In connection with Proposal 1 regarding the
election of trustees, there was no solicitation in opposition to the
management's nominees as listed in the proxy statement and all of such nominees
were elected. There were no broker non-votes in connection with such proprosal.
Votes of 8,969,855 shares were cast for the election of Peter D. Linneman as a
Trustee; votes of 49,717 shares were withheld.
Votes of 8,966,352 shares were cast for the election of E. Donald Shapiro as a
Trustee; votes of 53,220 shares were withheld.
In connection with Proposal 2, there was no solicitation in opposition of the
ratification of the appointment of the Company's independent public accountants
as set forth in the proxy statement and such appointment was ratified. There
were no broker non-votes in connection with such proposal.
Votes of 8,956,496 shares were cast for the ratification of the appointment of
Arthur Andersen LLP as the Company's independent public accountants; votes of
30,735 shares were against; and votes of 32,340 shares abstained.
In connection with Proposal 3, there was no solicitation in opposition of the
amendment to the Company's Declaration of Trust relating to the voting
requirements of the Series B Preferred Shares as set forth in the proxy
statement and such amendment was approved. There were 3,847,243 broker
non-votes in connection with such proposal.
Votes of 4,932,083 shares were cast for the amendment to the Declaration of
Trust; votes of 111,959 shares were against; and votes of 125,782 shares
abstained.
Item 5. Other Information
Not Applicable.
Item 6. Exhibits and Reports on Form 8-K
3.1 Amendment of Amended and Restated Declaration of Trust. Incorporated by
reference to Kranzco Realty Trust's Registration Statement No. 333-32597 on
Form S-3, filed with the Securities and Exchange Commission on August 1, 1997.
10.1 Severance Benefits Agreement dated as of March 28, 1997 by and between
Kranzco Realty Trust and Norman M. Kranzdorf.
10.2 Severance Benefits Agreement dated as of March 28, 1997 by and between
Kranzco Realty Trust and Robert H. Dennis.
10.3 Severance Benefits Agreement dated as of March 28, 1997 by and between
Kranzco Realty Trust and Edmund Barrett.
10.4 Severance Benefits Agreement dated as of March 28, 1997 by and between
Kranzco Realty Trust and Bengt Danielsson.
10.5 Severance Benefits Agreement dated as of March 27, 1997 by and between
Kranzco Realty Trust and Michael Warrington.
10.6 Severance Benefits Agreement dated as of March 28, 1997 by and between
Kranzco Realty Trust and Michael Kranzdorf.
10.7 Severance Benefits Agreement dated as of March 28, 1997 by and between
Kranzco Realty Trust and Peter J. Linneman.
10.8 Severance Benefits Agreement dated as of March 28, 1997 by and between
Kranzco Realty Trust and James B. Selonick.
10.9 Severance Benefits Agreement dated as of March 28, 1997 by and between
Kranzco Realty Trust and E. Donald Shapiro.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
KRANZCO REALTY TRUST
Date: August 5, 1997 /S/ Norman M. Kranzdorf
Chief Executive Officer and President
Date: August 5, 1997 /S/Robert H. Dennis
Chief Financial Officer and Treasurer
KRANZCO REALTY TRUST
AMENDMENT OF DECLARATION OF TRUST
THIS IS TO CERTIFY THAT:
First: Section 2.2 of Article II of the Amended and Restated Declaration of
Trust, dated November 4, 1992, as amended (the "Declaration"), of Kranzco Realty
Trust, a Maryland real estate investment trust (the "Company"), is hereby
amended by (i) deleting the following name and address:
Name Address
Irvin Maizlish c/o Kranzco Realty Trust
128 Fayette Street
Conshohocken, PA 19428;
and (ii) inserting in lieu thereof the following name and address:
Name Address
Bernard J. Korman c/o Kranzco Realty Trust
128 Fayette Street
Conshohocken, PA 19428
SECOND: The foregoing amendment to the Declaration has been duly approved
by the Board of Trustees of the Company by at least a two-thirds vote as
required by law.
THIRD: Each of the undersigned acknowledges this amendment to be the trust
act of the Company and, as to all matters or facts required to be verified under
oath, each of the undersigned acknowledges that, to the best of his knowledge,
information and belief, these matters and facts are true in all material
respects and that this statement is made under the penalties for perjury.
IN WITNESS WHEREOF, the Company has caused this amendment to be signed
in its name and on its behalf by at least a majority of the entire Board of
Trustees of the Company this 4th day of June, 1997.
(SEAL)
/S/Norman M. Kranzdorf, Trustee
(SEAL)
/S/Dr. Peter D. Linneman, Trustee
(SEAL)
/S/James B. Selonick, Trustee
(SEAL)
/S/Edmund Barrett, Trustee
(SEAL)
/S/E. Donald Shapiro, Trustee
(SEAL)
/S/Robert H. Dennis, Trustee
(SEAL)
/S/Bernard J. Korman, Trustee
SEVERANCE BENEFITS AGREEMENT
AGREEMENT, dated as of March 28, 1997, between KRANZCO REALTY TRUST, a
Maryland real estate investment trust with offices at 128 Fayette Street,
Conshohocken, Pennsylvania 19428 (the "Company"), and Norman M. Kranzdorf, an
individual residing at 340 Sprague Road, Narberth, Pennsylvania 19072 (the
"Executive").
WHEREAS, the Company has employed the Executive as an employee of the
Company to perform certain services to the Company upon terms and conditions
which the parties hereto have previously agreed (the "Services");
WHEREAS, the Company recognizes that the Executive's contributions to
the past and future growth of the Company has been substantial; and
WHEREAS, to induce the Executive to remain in the employ of the Company,
the parties hereto desire to set forth certain severance benefits which the
Company will pay to the Executive in the event of a Change in Control of the
Company (as defined in Section 2 hereof).
IT IS AGREED:
1. TERM. This Agreement shall commence on the date hereof and shall
terminate upon the earlier of (a) the date on which the Company has satisfied
all of its obligations hereunder, or (b) the date on which the Executive is no
longer an employee of the Company for any reason whatsoever including, without
limitation, termination without cause. Notwithstanding the termination of this
Agreement subsequent to a Change in Control of the Company, in the event that
the Executive is an employee of the Company at the moment immediately prior to a
Change in Control of the Company, the Executive shall be entitled to receive all
benefits described hereunder and the provisions hereof related thereto shall
survive such termination.
2. CHANGE IN CONTROL OF THE COMPANY. For purposes of this Agreement, a
"Change in Control of the Company" shall be deemed to occur if:
(i) there shall have occurred a change in control of a nature
that would be required to be reported in response to Item 6(e) of Schedule 14A
of Regulation 14A promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), as in effect on the date hereof, whether or not
the Company is then subject to such reporting requirement, provided, however,
that there shall not be deemed to be a Change in Control of the Company if
immediately prior to the occurrence of what would otherwise be a Change in
Control of the Company (a) the Executive is the other party to the transaction
(a "Control of the Company Event") that would otherwise result in a Change in
Control of the Company or (b) the Executive is an Executive officer, trustee,
director or more than 5% equity holder of the other party to the Control of the
Company Event or of any entity, directly or indirectly, controlling such other
party;
(ii) the Company merges or consolidates with, or sells all or
substantially all of its assets to, another company (each, a "Transaction"),
provided, however, that a Transaction shall not be deemed to result in a Change
in Control of the Company if (a) immediately prior thereto the circumstances in
(i)(a) or (i)(b) above exist, or (b) (1) the shareholders of the Company,
immediately before such Transaction own, directly or indirectly, immediately
following such Transaction in excess of fifty percent (50%) of the combined
voting power of the outstanding voting securities of the corporation or other
entity resulting from such Transaction (the "Surviving Corporation") in
substantially the same proportion as their ownership of the voting securities of
the Company immediately before such Transaction and (2) the individuals who were
members of the Company's Board of Trustees immediately prior to the execution of
the agreement providing for such Transaction constitute at least a majority of
the members of the board of directors or the board of trustees, as the case may
be, of the Surviving Corporation, or of a corporation or other entity
beneficially directly or indirectly owning a majority of the outstanding voting
securities of the Surviving Corporation; or
(iii) the Company acquires assets of another company or a subsidiary of
the Company merges or consolidates with another company (each, an "Other
Transaction") and (a) the shareholders of the Company, immediately before such
Other Transaction own, directly or indirectly, immediately following such Other
Transaction 50% or less of the combined voting power of the outstanding voting
securities of the corporation or other entity resulting from such Other
Transaction (the "Other Surviving Corporation") in substantially the same
proportion as their ownership of the voting securities of the Company
immediately before such Other Transaction or (b) the individuals who were
members of the Company's Board of Trustees immediately prior to the execution of
the agreement providing for such Other Transaction constitute less than a
majority of the members of the board of directors or the board of trustees, as
the case may be, of the Other Surviving Corporation, or of a corporation or
other entity beneficially directly or indirectly owning a majority of the
outstanding voting securities of the Other Surviving Corporation, provided,
however, that an Other Transaction shall not be deemed to result in a Change in
Control of the Company if immediately prior thereto the circumstances in (i)(a)
or (i)(b) above exist.
3. COMPENSATION UPON A CHANGE IN CONTROL OF THE COMPANY. If the Executive
is an employee of the Company at the moment immediately prior to a Change in
Control of the Company, the Executive shall be entitled to receive the
compensation set forth below.
(a) The Company shall pay to the Executive, not later than the third
business day following the date of any Change in Control of the Company, a lump
sum severance payment (the "Severance Payment") equal to three (3) times the
Base Amount (as defined below). For purposes of this Section 3(a), the Base
Amount shall mean the Executive's annual compensation during the calendar year
period preceding the calendar year in which the Change in Control of the Company
occurs. For purposes of determining annual compensation in the preceding
sentence, there shall be included (i) all base salary and bonuses paid or
payable to the Executive by the Company with respect to the preceding calendar
year, (ii) all grants of restricted common shares of beneficial interest of the
Company (the "Shares"), if any, with respect to such preceding calendar year,
which Shares shall be valued based on their date of grant Fair Market Value (as
defined in Section 9.2 of the Company's 1995 Incentive Plan or any other plan or
agreement pursuant to which they are issued), and (iii) the fair market value of
any other property or rights given or awarded to the Executive by the Company
with respect to such preceding calendar year.
(b) Any Shares now or hereafter issued to the Executive pursuant to any
restricted Share grant shall vest immediately prior to the date of a Change in
Control of the Company and no longer be subject to repurchase or any other
forfeiture restrictions.
(c) The Company shall maintain in full force and effect for the Executive's
continued benefit for 18 months following a Change in Control of the Company,
all life, accident, medical and dental insurance benefit plans and programs or
arrangements in which the Executive was entitled to participate immediately
prior to the date of a Change in Control of the Company; provided that the
Executive's continued participation is possible under the general terms and
provisions of such plans and programs. In the event that the Executive's
participation in any such plan or program is barred, the Company shall arrange
to provide the Executive with benefits substantially similar to those which the
Executive was entitled to receive under such plans and programs. At the end of
the period of coverage, the Executive shall have the option to have assigned to
him at no cost to the Executive and with no apportionment of prepaid premiums,
any assignable insurance policy owned by the Company and relating specifically
to the Executive.
(d) (i) The Executive shall be entitled to receive additional compensation
in the form of cash equal to, on the date of a Change in Control of the Company
and with respect to each Option to purchase Shares held by the Executive whether
or not such Option has vested or is exercisable on such date (an "Option"), the
number of Shares underlying the Option, multiplied by the amount, if any, that
the exercise price of the Option or the Closing Share Value (as defined below),
whichever is less, exceeds the Initial Share Value (as defined below).
(ii) With respect to each Option, in the event that the Closing
Share Value is greater than the exercise price of such Option, then the
Executive can (1) retain the Option, or (2) forfeit the Option and receive, in
exchange therefor, a cash payment equal to the number of Shares underlying the
Option multiplied by the amount that the Closing Share Value exceeds the
exercise price of the Option.
(iii) For purposes of this subsection (d), the "Initial Share Value"
of an Option shall mean the average of the Closing Prices of the Shares for the
period commencing on the 180th day prior to the date of the Change in Control of
the Company and ending on the 150th day prior to the date of the Change in
Control of the Company, and the "Closing Share Value" shall mean the Closing
Price of the Shares on the date of the Change in Control of the Company. For
purposes of this subsection (d), the "Closing Price" of a Share on any date
shall mean the last sale price, regular way, or, in case no such sale takes
place on such date, the average of the closing bid and asked prices, regular
way, in either case as reported in the principal consolidated transaction
reporting system with respect to securities listed or admitted to trading on the
New York Stock Exchange or, if the Shares are not listed or admitted to trading
on the New York Stock Exchange, as reported in the principal consolidated
transaction reporting system with respect to securities listed on the principal
national securities exchange on which the Shares are listed or admitted to
trading or, if the Shares are not listed or admitted to trading on any national
securities exchange, the last quoted price, or if not so quoted, the average of
the highest bid and lowest ask prices in the over-the-counter market, as
reported by the National Association of Securities Dealers, Inc. Automated
Quotation System or, if such system is no longer used, the principal other
automated quotation system that may then be in use or, if the Shares are not
quoted by any such organization, the average of the closing bid and asked prices
as furnished by a professional market maker making the market in the Shares as
such person is selected from time to time by the Board of Trustees of the
Company.
(e) The Company shall pay the Executive an amount equal to the Additional
Amount pursuant to Section 4 hereof.
(f) The Executive shall not be required to mitigate the amount of any
payment provided for in this Section 3 by seeking other employment or otherwise,
nor shall the amount of any payment or benefit provided for in this Section 3 be
reduced by any compensation earned by him as the result of employment by another
employer or by retirement benefits after the date of termination, or otherwise,
except as specifically provided in this Section 3.
4. ADDITIONAL AMOUNT. Whether or not Section 3 hereof is applicable, if in
the opinion of tax counsel selected by the Executive and reasonably accept-able
to the Company, the Executive has or will receive any compensation or recognize
any income (whether or not pursuant to this Agreement or any plan or other
arrangement of the Company and whether or not the Executive's employment with
the Company has terminated) which constitutes an "excess parachute payment"
within the meaning of Section 280G(b)(1) of the Internal Revenue Code of 1986,
as amended (the "Code") (or for which a tax is otherwise payable under Section
4999 of the Code), then the Company shall pay the Executive an additional amount
(the "Additional Amount") equal to the sum of (i) all taxes payable by the
Executive under Section 4999 of the Code with respect to all such excess
parachute payments (or otherwise), including without limitation the Additional
Amount, plus (ii) all federal, state and local income taxes payable by Executive
with respect to the Additional Amount. The amounts payable pursuant to this
Section 4 shall be paid by the Company to the Executive within 30 days of the
written request therefor made by the Executive.
5. EXPENSES. (a) The Company shall pay or reimburse the Executive, as the
case may be, for all legal and accounting fees and expenses incurred by the
Executive in connection with the structuring, negotiation and preparation of
this Agreement.
(b) The Company shall pay or reimburse the Executive, as the case
may be, for all legal fees and related expenses (including the costs of experts,
evidence and counsel) paid by the Executive as a result of (i) the Executive
seeking to obtain or enforce any right or benefit provided by this Agreement, or
(ii) any action taken by the Company against the Executive in enforcing the
Company's rights hereunder; provided, however, that the Company shall reimburse
the legal fees and related expenses described in this subsection 5(b) only if
and when a final judgement has been rendered in favor of the Executive and all
appeals related to any such action have been exhausted.
6. NO EMPLOYMENT RIGHTS OR OBLIGATIONS. Nothing contained herein shall confer
upon the Executive the right to continue in the employment or service of the
Company or any subsidiary or affiliate of the Company or affect any right that
the Company or any subsidiary or affiliate of the Company may have to terminate
the employment or service of the Executive at any time for any reason.
7. GOVERNING LAW; ARBITRATION. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of Maryland,
without regard to Maryland's conflicts of law principles. Any dispute or
controversy arising under this Agreement, or out of the interpretation hereof,
or based upon the breach hereof, shall be resolved by arbitration held at the
offices of the American Arbitration Association in the City of Philadelphia in
accordance with the rules and regulations of such association prevailing at the
time of the demand for arbitration by either party hereto, and the decision of
the arbitrator or arbitrators shall be final and binding upon both parties
hereto, provided, however, that the arbitrator or arbitrators shall only have
the power and authority to interpret, and not to modify or amend, the terms and
provisions hereof. Judg-ment upon an award rendered by the arbitrator or
arbitrators may be entered in any court having jurisdiction thereof.
Notwith-standing anything contained in this Section 7, either party shall have
the right to seek preliminary injunctive relief in any court in the City of
Philadelphia in aid of, and pending the final decision in, the arbitration
proceeding.
8. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement of the
parties and is intended to supersede all prior negotiations, understandings and
agree-ments with respect to the subject matter hereof. No provision of this
Agreement may be waived or changed, except by a writing signed by the party to
be charged with such waiver or change.
9. SUCCESSORS; BINDING AGREEMENT. This Agreement shall inure to the benefit
of, be binding upon and be enforceable by the Company, its successors and
assigns and the Executive, and the Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and lega-tees.
10. NOTICES. All notices provided for in this Agreement shall be in writing,
and shall be deemed to have been duly given when delivered personally to the
party to receive the same, when given by telex, telegram or mailgram, or when
mailed first class postage prepaid, by registered or certified mail, return
receipt requested, addressed to the party to receive the same at his or its
address above set forth, or such other address as the party to receive the same
shall have specified by written notice given in the manner provided for in this
Section 10. All notices shall be deemed to have been given as of the date of
personal delivery, transmittal or mailing thereof.
11. SEVERABILITY. If any provision in this Agreement is determined to be
invalid, it shall not affect the validity or enforceability of any of the other
remaining pro-visions hereof.
12. EXCULPATION. This Agreement and all documents, agreements,
understandings and arrangements relating to the matters described herein have
been executed by the undersigned in his/her capacity as an officer or trustee of
the Company which has been formed as a Maryland real estate investment trust
pursuant to an Amended and Restated Declaration of Trust of the Company, as
amended, and not individually, and neither the trustees, officers or
shareholders of the Company shall be bound or have any personal liability
hereunder or thereunder. The Executive shall look solely to the assets of the
Company for satisfaction of any liability of the Company in respect of this
Agreement and all documents, agreements, understandings and arrangements
relating to this transaction and will not seek recourse or commence any action
against any of the trustees, officers or shareholders of the Company or any of
their personal assets for the performance or payment of any obligation hereunder
or thereunder. The foregoing shall also apply to any future documents,
agreements, understandings, arrangements and transactions between the parties
hereto.
IN WITNESS WHEREOF, the parties hereto have exe-cuted this Agreement as
of the date first above written.
KRANZCO REALTY TRUST
By: /s/ Norman M. Kranzdorf
EXECUTIVE:
/s/ Norman M. Kranzdorf
SEVERANCE BENEFITS AGREEMENT
AGREEMENT, dated as of March 28, 1997, between KRANZCO REALTY TRUST, a
Maryland real estate investment trust with offices at 128 Fayette Street,
Conshohocken, Pennsylvania 19428 (the "Company"), and Robert H. Dennis, an
individual residing at 2917 Clyston Road, Norristown, Pennsylvania 19403 (the
"Executive").
WHEREAS, the Company has employed the Executive as an employee of the
Company to perform certain services to the Company upon terms and conditions
which the parties hereto have previously agreed (the "Services");
WHEREAS, the Company recognizes that the Executive's contributions to
the past and future growth of the Company has been substantial; and
WHEREAS, to induce the Executive to remain in the employ of the Company,
the parties hereto desire to set forth certain severance benefits which the
Company will pay to the Executive in the event of a Change in Control of the
Company (as defined in Section 2 hereof).
IT IS AGREED:
1. TERM. This Agreement shall commence on the date hereof and shall terminate
upon the earlier of (a) the date on which the Company has satisfied all of its
obligations hereunder, or (b) the date on which the Executive is no longer an
employee of the Company for any reason whatsoever including, without limitation,
termination without cause. Notwithstanding the termination of this Agreement
subsequent to a Change in Control of the Company, in the event that the
Executive is an employee of the Company at the moment immediately prior to a
Change in Control of the Company, the Executive shall be entitled to receive all
benefits described hereunder and the provisions hereof related thereto shall
survive such termination.
2. CHANGE IN CONTROL OF THE COMPANY. For purposes of this Agreement, a "Change
in Control of the Company" shall be deemed to occur if:
(i) there shall have occurred a change in control of a nature that
would be required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), as in effect on the date hereof, whether or not the
Company is then subject to such reporting requirement, provided, however, that
there shall not be deemed to be a Change in Control of the Company if
immediately prior to the occurrence of what would otherwise be a Change in
Control of the Company (a) the Executive is the other party to the transaction
(a "Control of the Company Event") that would otherwise result in a Change in
Control of the Company or (b) the Executive is an Executive officer, trustee,
director or more than 5% equity holder of the other party to the Control of the
Company Event or of any entity, directly or indirectly, controlling such other
party;
(ii) the Company merges or consolidates with, or sells all or
substantially all of its assets to, another company (each, a "Transaction"),
provided, however, that a Transaction shall not be deemed to result in a Change
in Control of the Company if (a) immediately prior thereto the circumstances in
(i)(a) or (i)(b) above exist, or (b) (1) the shareholders of the Company,
immediately before such Transaction own, directly or indirectly, immediately
following such Transaction in excess of fifty percent (50%) of the combined
voting power of the outstanding voting securities of the corporation or other
entity resulting from such Transaction (the "Surviving Corporation") in
substantially the same proportion as their ownership of the voting securities of
the Company immediately before such Transaction and (2) the individuals who were
members of the Company's Board of Trustees immediately prior to the execution of
the agreement providing for such Transaction constitute at least a majority of
the members of the board of directors or the board of trustees, as the case may
be, of the Surviving Corporation, or of a corporation or other entity
beneficially directly or indirectly owning a majority of the outstanding voting
securities of the Surviving Corporation; or
(iii) the Company acquires assets of another company or a
subsidiary of the Company merges or consolidates with another company (each, an
"Other Transaction") and (a) the shareholders of the Company, immediately before
such Other Transaction own, directly or indirectly, immediately following such
Other Transaction 50% or less of the combined voting power of the outstanding
voting securities of the corporation or other entity resulting from such Other
Transaction (the "Other Surviving Corporation") in substantially the same
proportion as their ownership of the voting securities of the Company
immediately before such Other Transaction or (b) the individuals who were
members of the Company's Board of Trustees immediately prior to the execution of
the agreement providing for such Other Transaction constitute less than a
majority of the members of the board of directors or the board of trustees, as
the case may be, of the Other Surviving Corporation, or of a corporation or
other entity beneficially directly or indirectly owning a majority of the
outstanding voting securities of the Other Surviving Corporation, provided,
however, that an Other Transaction shall not be deemed to result in a Change in
Control of the Company if immediately prior thereto the circumstances in (i)(a)
or (i)(b) above exist.
3. COMPENSATION UPON A CHANGE IN CONTROL OF THE COMPANY. If the Executive is
an employee of the Company at the moment immediately prior to a Change in
Control of the Company, the Executive shall be entitled to receive the
compensation set forth below.
(a) The Company shall pay to the Executive, not later than the third
business day following the date of any Change in Control of the Company, a lump
sum severance payment (the "Severance Payment") equal to two (2) times the Base
Amount (as defined below). For purposes of this Section 3(a), the Base Amount
shall mean the Executive's annual compensation during the calendar year period
preceding the calendar year in which the Change in Control of the Company
occurs. For purposes of determining annual compensation in the preceding
sentence, there shall be included (i) all base salary and bonuses paid or
payable to the Executive by the Company with respect to the preceding calendar
year, (ii) all grants of restricted common shares of beneficial interest of the
Company (the "Shares"), if any, with respect to such preceding calendar year,
which Shares shall be valued based on their date of grant Fair Market Value (as
defined in Section 9.2 of the Company's 1995 Incentive Plan or any other plan or
agreement pursuant to which they are issued), and (iii) the fair market value of
any other property or rights given or awarded to the Executive by the Company
with respect to such preceding calendar year.
(b) Any Shares now or hereafter issued to the Executive pursuant to any
restricted Share grant shall vest immediately prior to the date of a Change in
Control of the Company and no longer be subject to repurchase or any other
forfeiture restrictions.
(c) The Company shall maintain in full force and effect for the Executive's
continued benefit for 18 months following a Change in Control of the Company,
all life, accident, medical and dental insurance benefit plans and programs or
arrangements in which the Executive was entitled to participate immediately
prior to the date of a Change in Control of the Company; provided that the
Executive's continued participation is possible under the general terms and
provisions of such plans and programs. In the event that the Executive's
participation in any such plan or program is barred, the Company shall arrange
to provide the Executive with benefits substantially similar to those which the
Executive was entitled to receive under such plans and programs. At the end of
the period of coverage, the Executive shall have the option to have assigned to
him at no cost to the Executive and with no apportionment of prepaid premiums,
any assignable insurance policy owned by the Company and relating specifically
to the Executive.
(d) (i) The Executive shall be entitled to receive additional compensation
in the form of cash equal to, on the date of a Change in Control of the Company
and with respect to each Option to purchase Shares held by the Executive whether
or not such Option has vested or is exercisable on such date (an "Option"), the
number of Shares underlying the Option, multiplied by the amount, if any, that
the exercise price of the Option or the Closing Share Value (as defined below),
whichever is less, exceeds the Initial Share Value (as defined below).
(ii) With respect to each Option, in the event that the Closing
Share Value is greater than the exercise price of such Option, then the
Executive can (1) retain the Option, or (2) forfeit the Option and receive, in
exchange therefor, a cash payment equal to the number of Shares underlying the
Option multiplied by the amount that the Closing Share Value exceeds the
exercise price of the Option.
(iii) For purposes of this subsection (d), the "Initial Share Value"
of an Option shall mean the average of the Closing Prices of the Shares for the
period commencing on the 180th day prior to the date of the Change in Control of
the Company and ending on the 150th day prior to the date of the Change in
Control of the Company, and the "Closing Share Value" shall mean the Closing
Price of the Shares on the date of the Change in Control of the Company. For
purposes of this subsection (d), the "Closing Price" of a Share on any date
shall mean the last sale price, regular way, or, in case no such sale takes
place on such date, the average of the closing bid and asked prices, regular
way, in either case as reported in the principal consolidated transaction
reporting system with respect to securities listed or admitted to trading on the
New York Stock Exchange or, if the Shares are not listed or admitted to trading
on the New York Stock Exchange, as reported in the principal consolidated
transaction reporting system with respect to securities listed on the principal
national securities exchange on which the Shares are listed or admitted to
trading or, if the Shares are not listed or admitted to trading on any national
securities exchange, the last quoted price, or if not so quoted, the average of
the highest bid and lowest ask prices in the over-the-counter market, as
reported by the National Association of Securities Dealers, Inc. Automated
Quotation System or, if such system is no longer used, the principal other
automated quotation system that may then be in use or, if the Shares are not
quoted by any such organization, the average of the closing bid and asked prices
as furnished by a professional market maker making the market in the Shares as
such person is selected from time to time by the Board of Trustees of the
Company.
(e) The Executive shall not be required to mitigate the amount of any
payment provided for in this Section 3 by seeking other employment or otherwise,
nor shall the amount of any payment or benefit provided for in this Section 3 be
reduced by any compensation earned by him as the result of employment by another
employer or by retirement benefits after the date of termination, or otherwise,
except as specifically provided in this Section 3.
4. SCALE-BACK. To the extent any benefits to be granted to the
Executive hereunder constitute a "parachute payment" (within the meaning of
Section 280G(b)(2) of the Code), and the Executive would otherwise be liable for
an excise tax pursuant to Code Section 4999, there shall be a reduction in the
benefits payable or available to the Executive hereunder such that the total
parachute payments will be less than three (3) times the Executive's "base
amount" (within the meaning of Section 280G(b)(3) of the Code) with the result
that the excise tax under Code Section 4999 will not be payable; provided,
however, that such reduction shall occur only if the Executive shall realize a
greater after tax economic benefit by making such reduction than if no reduction
was made.
4. EXPENSES. (a) The Company shall pay or reimburse the Executive, as the case
may be, for all legal and accounting fees and expenses incurred by the Executive
in connection with the structuring, negotiation and preparation of this
Agreement.
(b) The Company shall pay or reimburse the Executive, as the case
may be, for all legal fees and related expenses (including the costs of experts,
evidence and counsel) paid by the Executive as a result of (i) the Executive
seeking to obtain or enforce any right or benefit provided by this Agreement, or
(ii) any action taken by the Company against the Executive in enforcing the
Company's rights hereunder; provided, however, that the Company shall reimburse
the legal fees and related expenses described in this subsection 4(b) only if
and when a final judgement has been rendered in favor of the Executive and all
appeals related to any such action have been exhausted.
5. NO EMPLOYMENT RIGHTS OR OBLIGATIONS. Nothing contained herein shall confer
upon the Executive the right to continue in the employment or service of the
Company or any subsidiary or affiliate of the Company or affect any right that
the Company or any subsidiary or affiliate of the Company may have to terminate
the employment or service of the Executive at any time for any reason.
6. GOVERNING LAW; ARBITRATION. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of Maryland,
without regard to Maryland's conflicts of law principles. Any dispute or
controversy arising under this Agreement, or out of the interpretation hereof,
or based upon the breach hereof, shall be resolved by arbitration held at the
offices of the American Arbitration Association in the City of Philadelphia in
accordance with the rules and regulations of such association prevailing at the
time of the demand for arbitration by either party hereto, and the decision of
the arbitrator or arbitrators shall be final and binding upon both parties
hereto, provided, however, that the arbitrator or arbitrators shall only have
the power and authority to interpret, and not to modify or amend, the terms and
provisions hereof. Judg-ment upon an award rendered by the arbitrator or
arbitrators may be entered in any court having jurisdiction thereof.
Notwith-standing anything contained in this Section 6, either party shall have
the right to seek preliminary injunctive relief in any court in the City of
Philadelphia in aid of, and pending the final decision in, the arbitration
proceeding.
7. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement of the
parties and is intended to supersede all prior negotiations, understandings and
agree-ments with respect to the subject matter hereof. No provision of this
Agreement may be waived or changed, except by a writing signed by the party to
be charged with such waiver or change.
8. SUCCESSORS; BINDING AGREEMENT. This Agreement shall inure to the benefit
of, be binding upon and be enforceable by the Company, its successors and
assigns and the Executive, and the Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and lega-tees.
9. NOTICES. All notices provided for in this Agreement shall be in writing,
and shall be deemed to have been duly given when delivered personally to the
party to receive the same, when given by telex, telegram or mailgram, or when
mailed first class postage prepaid, by registered or certified mail, return
receipt requested, addressed to the party to receive the same at his or its
address above set forth, or such other address as the party to receive the same
shall have specified by written notice given in the manner provided for in this
Section 9. All notices shall be deemed to have been given as of the date of
personal delivery, transmittal or mailing thereof.
10. SEVERABILITY. If any provision in this Agreement is determined to be
invalid, it shall not affect the validity or enforceability of any of the other
remaining pro-visions hereof.
11. EXCULPATION. This Agreement and all documents, agreements,
understandings and arrangements relating to the matters described herein have
been executed by the undersigned in his/her capacity as an officer or trustee of
the Company which has been formed as a Maryland real estate investment trust
pursuant to an Amended and Restated Declaration of Trust of the Company, as
amended, and not individually, and neither the trustees, officers or
shareholders of the Company shall be bound or have any personal liability
hereunder or thereunder. The Executive shall look solely to the assets of the
Company for satisfaction of any liability of the Company in respect of this
Agreement and all documents, agreements, understandings and arrangements
relating to this transaction and will not seek recourse or commence any action
against any of the trustees, officers or shareholders of the Company or any of
their personal assets for the performance or payment of any obligation hereunder
or thereunder. The foregoing shall also apply to any future documents,
agreements, understandings, arrangements and transactions between the parties
hereto.
IN WITNESS WHEREOF, the parties hereto have exe-cuted this Agreement as
of the date first above written.
KRANZCO REALTY TRUST
By: /s/ Norman M. Kranzdorf
EXECUTIVE:
/s/ Robert H. Dennis
SEVERANCE BENEFITS AGREEMENT
AGREEMENT, dated as of March 28, 1997, between KRANZCO REALTY TRUST, a
Maryland real estate investment trust with offices at 128 Fayette Street,
Conshohocken, Pennsylvania 19428 (the "Company"), and Edmund Barrett, an
individual residing at 1176 St. Andrews Road, Bryn Mawr, Pennsylvania 19010 (the
"Executive").
WHEREAS, the Company has employed the Executive as an employee of the
Company to perform certain services to the Company upon terms and conditions
which the parties hereto have previously agreed (the "Services");
WHEREAS, the Company recognizes that the Executive's contributions to
the past and future growth of the Company has been substantial; and
WHEREAS, to induce the Executive to remain in the employ of the Company,
the parties hereto desire to set forth certain severance benefits which the
Company will pay to the Executive in the event of a Change in Control of the
Company (as defined in Section 2 hereof).
IT IS AGREED:
1. TERM. This Agreement shall commence on the date hereof and shall terminate
upon the earlier of (a) the date on which the Company has satisfied all of its
obligations hereunder, or (b) the date on which the Executive is no longer an
employee of the Company for any reason whatsoever including, without limitation,
termination without cause. Notwithstanding the termination of this Agreement
subsequent to a Change in Control of the Company, in the event that the
Executive is an employee of the Company at the moment immediately prior to a
Change in Control of the Company, the Executive shall be entitled to receive all
benefits described hereunder and the provisions hereof related thereto shall
survive such termination.
2. CHANGE IN CONTROL OF THE COMPANY. For purposes of this Agreement, a "Change
in Control of the Company" shall be deemed to occur if:
(i) there shall have occurred a change in control of a nature that
would be required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), as in effect on the date hereof, whether or not the
Company is then subject to such reporting requirement, provided, however, that
there shall not be deemed to be a Change in Control of the Company if
immediately prior to the occurrence of what would otherwise be a Change in
Control of the Company (a) the Executive is the other party to the transaction
(a "Control of the Company Event") that would otherwise result in a Change in
Control of the Company or (b) the Executive is an Executive officer, trustee,
director or more than 5% equity holder of the other party to the Control of the
Company Event or of any entity, directly or indirectly, controlling such other
party;
(ii) the Company merges or consolidates with, or sells all or
substantially all of its assets to, another company (each, a "Transaction"),
provided, however, that a Transaction shall not be deemed to result in a Change
in Control of the Company if (a) immediately prior thereto the circumstances in
(i)(a) or (i)(b) above exist, or (b) (1) the shareholders of the Company,
immediately before such Transaction own, directly or indirectly, immediately
following such Transaction in excess of fifty percent (50%) of the combined
voting power of the outstanding voting securities of the corporation or other
entity resulting from such Transaction (the "Surviving Corporation") in
substantially the same proportion as their ownership of the voting securities of
the Company immediately before such Transaction and (2) the individuals who were
members of the Company's Board of Trustees immediately prior to the execution of
the agreement providing for such Transaction constitute at least a majority of
the members of the board of directors or the board of trustees, as the case may
be, of the Surviving Corporation, or of a corporation or other entity
beneficially directly or indirectly owning a majority of the outstanding voting
securities of the Surviving Corporation; or
(iii) the Company acquires assets of another company or a
subsidiary of the Company merges or consolidates with another company (each, an
"Other Transaction") and (a) the shareholders of the Company, immediately before
such Other Transaction own, directly or indirectly, immediately following such
Other Transaction 50% or less of the combined voting power of the outstanding
voting securities of the corporation or other entity resulting from such Other
Transaction (the "Other Surviving Corporation") in substantially the same
proportion as their ownership of the voting securities of the Company
immediately before such Other Transaction or (b) the individuals who were
members of the Company's Board of Trustees immediately prior to the execution of
the agreement providing for such Other Transaction constitute less than a
majority of the members of the board of directors or the board of trustees, as
the case may be, of the Other Surviving Corporation, or of a corporation or
other entity beneficially directly or indirectly owning a majority of the
outstanding voting securities of the Other Surviving Corporation, provided,
however, that an Other Transaction shall not be deemed to result in a Change in
Control of the Company if immediately prior thereto the circumstances in (i)(a)
or (i)(b) above exist.
3. COMPENSATION UPON A CHANGE IN CONTROL OF THE COMPANY. If the Executive is
an employee of the Company at the moment immediately prior to a Change in
Control of the Company, the Executive shall be entitled to receive the
compensation set forth below.
(a) The Company shall pay to the Executive, not later than the third
business day following the date of any Change in Control of the Company, a lump
sum severance payment (the "Severance Payment") equal to two (2) times the Base
Amount (as defined below). For purposes of this Section 3(a), the Base Amount
shall mean the Executive's annual compensation during the calendar year period
preceding the calendar year in which the Change in Control of the Company
occurs. For purposes of determining annual compensation in the preceding
sentence, there shall be included (i) all base salary and bonuses paid or
payable to the Executive by the Company with respect to the preceding calendar
year, (ii) all grants of restricted common shares of beneficial interest of the
Company (the "Shares"), if any, with respect to such preceding calendar year,
which Shares shall be valued based on their date of grant Fair Market Value (as
defined in Section 9.2 of the Company's 1995 Incentive Plan or any other plan or
agreement pursuant to which they are issued), and (iii) the fair market value of
any other property or rights given or awarded to the Executive by the Company
with respect to such preceding calendar year.
(b) Any Shares now or hereafter issued to the Executive pursuant to any
restricted Share grant shall vest immediately prior to the date of a Change in
Control of the Company and no longer be subject to repurchase or any other
forfeiture restrictions.
(c) The Company shall maintain in full force and effect for the Executive's
continued benefit for 18 months following a Change in Control of the Company,
all life, accident, medical and dental insurance benefit plans and programs or
arrangements in which the Executive was entitled to participate immediately
prior to the date of a Change in Control of the Company; provided that the
Executive's continued participation is possible under the general terms and
provisions of such plans and programs. In the event that the Executive's
participation in any such plan or program is barred, the Company shall arrange
to provide the Executive with benefits substantially similar to those which the
Executive was entitled to receive under such plans and programs. At the end of
the period of coverage, the Executive shall have the option to have assigned to
him at no cost to the Executive and with no apportionment of prepaid premiums,
any assignable insurance policy owned by the Company and relating specifically
to the Executive.
(d) (i) The Executive shall be entitled to receive additional compensation
in the form of cash equal to, on the date of a Change in Control of the Company
and with respect to each Option to purchase Shares held by the Executive whether
or not such Option has vested or is exercisable on such date (an "Option"), the
number of Shares underlying the Option, multiplied by the amount, if any, that
the exercise price of the Option or the Closing Share Value (as defined below),
whichever is less, exceeds the Initial Share Value (as defined below).
(ii) With respect to each Option, in the event that the Closing
Share Value is greater than the exercise price of such Option, then the
Executive can (1) retain the Option, or (2) forfeit the Option and receive, in
exchange therefor, a cash payment equal to the number of Shares underlying the
Option multiplied by the amount that the Closing Share Value exceeds the
exercise price of the Option.
(iii) For purposes of this subsection (d), the "Initial Share Value"
of an Option shall mean the average of the Closing Prices of the Shares for the
period commencing on the 180th day prior to the date of the Change in Control of
the Company and ending on the 150th day prior to the date of the Change in
Control of the Company, and the "Closing Share Value" shall mean the Closing
Price of the Shares on the date of the Change in Control of the Company. For
purposes of this subsection (d), the "Closing Price" of a Share on any date
shall mean the last sale price, regular way, or, in case no such sale takes
place on such date, the average of the closing bid and asked prices, regular
way, in either case as reported in the principal consolidated transaction
reporting system with respect to securities listed or admitted to trading on the
New York Stock Exchange or, if the Shares are not listed or admitted to trading
on the New York Stock Exchange, as reported in the principal consolidated
transaction reporting system with respect to securities listed on the principal
national securities exchange on which the Shares are listed or admitted to
trading or, if the Shares are not listed or admitted to trading on any national
securities exchange, the last quoted price, or if not so quoted, the average of
the highest bid and lowest ask prices in the over-the-counter market, as
reported by the National Association of Securities Dealers, Inc. Automated
Quotation System or, if such system is no longer used, the principal other
automated quotation system that may then be in use or, if the Shares are not
quoted by any such organization, the average of the closing bid and asked prices
as furnished by a professional market maker making the market in the Shares as
such person is selected from time to time by the Board of Trustees of the
Company.
(e) The Executive shall not be required to mitigate the amount of any
payment provided for in this Section 3 by seeking other employment or otherwise,
nor shall the amount of any payment or benefit provided for in this Section 3 be
reduced by any compensation earned by him as the result of employment by another
employer or by retirement benefits after the date of termination, or otherwise,
except as specifically provided in this Section 3.
4. SCALE-BACK. To the extent any benefits to be granted to the
Executive hereunder constitute a "parachute payment" (within the meaning of
Section 280G(b)(2) of the Code), and the Executive would otherwise be liable for
an excise tax pursuant to Code Section 4999, there shall be a reduction in the
benefits payable or available to the Executive hereunder such that the total
parachute payments will be less than three (3) times the Executive's "base
amount" (within the meaning of Section 280G(b)(3) of the Code) with the result
that the excise tax under Code Section 4999 will not be payable; provided,
however, that such reduction shall occur only if the Executive shall realize a
greater after tax economic benefit by making such reduction than if no reduction
was made.
4. EXPENSES. (a) The Company shall pay or reimburse the Executive, as the case
may be, for all legal and accounting fees and expenses incurred by the Executive
in connection with the structuring, negotiation and preparation of this
Agreement.
(b) The Company shall pay or reimburse the Executive, as the case
may be, for all legal fees and related expenses (including the costs of experts,
evidence and counsel) paid by the Executive as a result of (i) the Executive
seeking to obtain or enforce any right or benefit provided by this Agreement, or
(ii) any action taken by the Company against the Executive in enforcing the
Company's rights hereunder; provided, however, that the Company shall reimburse
the legal fees and related expenses described in this subsection 4(b) only if
and when a final judgement has been rendered in favor of the Executive and all
appeals related to any such action have been exhausted.
5. NO EMPLOYMENT RIGHTS OR OBLIGATIONS. Nothing contained herein shall confer
upon the Executive the right to continue in the employment or service of the
Company or any subsidiary or affiliate of the Company or affect any right that
the Company or any subsidiary or affiliate of the Company may have to terminate
the employment or service of the Executive at any time for any reason.
6. GOVERNING LAW; ARBITRATION. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of Maryland,
without regard to Maryland's conflicts of law principles. Any dispute or
controversy arising under this Agreement, or out of the interpretation hereof,
or based upon the breach hereof, shall be resolved by arbitration held at the
offices of the American Arbitration Association in the City of Philadelphia in
accordance with the rules and regulations of such association prevailing at the
time of the demand for arbitration by either party hereto, and the decision of
the arbitrator or arbitrators shall be final and binding upon both parties
hereto, provided, however, that the arbitrator or arbitrators shall only have
the power and authority to interpret, and not to modify or amend, the terms and
provisions hereof. Judg-ment upon an award rendered by the arbitrator or
arbitrators may be entered in any court having jurisdiction thereof.
Notwith-standing anything contained in this Section 6, either party shall have
the right to seek preliminary injunctive relief in any court in the City of
Philadelphia in aid of, and pending the final decision in, the arbitration
proceeding.
7. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement of the
parties and is intended to supersede all prior negotiations, understandings and
agree-ments with respect to the subject matter hereof. No provision of this
Agreement may be waived or changed, except by a writing signed by the party to
be charged with such waiver or change.
8. SUCCESSORS; BINDING AGREEMENT. This Agreement shall inure to the benefit
of, be binding upon and be enforceable by the Company, its successors and
assigns and the Executive, and the Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and lega-tees.
9. NOTICES. All notices provided for in this Agreement shall be in writing,
and shall be deemed to have been duly given when delivered personally to the
party to receive the same, when given by telex, telegram or mailgram, or when
mailed first class postage prepaid, by registered or certified mail, return
receipt requested, addressed to the party to receive the same at his or its
address above set forth, or such other address as the party to receive the same
shall have specified by written notice given in the manner provided for in this
Section 9. All notices shall be deemed to have been given as of the date of
personal delivery, transmittal or mailing thereof.
10. SEVERABILITY. If any provision in this Agreement is determined to be
invalid, it shall not affect the validity or enforceability of any of the other
remaining pro-visions hereof.
11. EXCULPATION. This Agreement and all documents, agreements,
understandings and arrangements relating to the matters described herein have
been executed by the undersigned in his/her capacity as an officer or trustee of
the Company which has been formed as a Maryland real estate investment trust
pursuant to an Amended and Restated Declaration of Trust of the Company, as
amended, and not individually, and neither the trustees, officers or
shareholders of the Company shall be bound or have any personal liability
hereunder or thereunder. The Executive shall look solely to the assets of the
Company for satisfaction of any liability of the Company in respect of this
Agreement and all documents, agreements, understandings and arrangements
relating to this transaction and will not seek recourse or commence any action
against any of the trustees, officers or shareholders of the Company or any of
their personal assets for the performance or payment of any obligation hereunder
or thereunder. The foregoing shall also apply to any future documents,
agreements, understandings, arrangements and transactions between the parties
hereto.
IN WITNESS WHEREOF, the parties hereto have exe-cuted this Agreement as
of the date first above written.
KRANZCO REALTY TRUST
By: /s/ Norman M. Kranzdorf
EXECUTIVE:
/s/ Edmund Barrett
SEVERANCE BENEFITS AGREEMENT
AGREEMENT, dated as of March 28, 1997, between KRANZCO REALTY TRUST, a
Maryland real estate investment trust with offices at 128 Fayette Street,
Conshohocken, Pennsylvania 19428 (the "Company"), and Bengt Danielsson, an
individual residing at 1151 Maplecrest Drive, Gladwyne, Pennsylvania 19035 (the
"Executive").
WHEREAS, the Company has employed the Executive as an employee of the
Company to perform certain services to the Company upon terms and conditions
which the parties hereto have previously agreed (the "Services");
WHEREAS, the Company recognizes that the Executive's contributions to
the past and future growth of the Company has been substantial; and
WHEREAS, to induce the Executive to remain in the employ of the Company,
the parties hereto desire to set forth certain severance benefits which the
Company will pay to the Executive in the event of a Change in Control of the
Company (as defined in Section 2 hereof).
IT IS AGREED:
1. TERM. This Agreement shall commence on the date hereof and shall terminate
upon the earlier of (a) the date on which the Company has satisfied all of its
obligations hereunder, or (b) the date on which the Executive is no longer an
employee of the Company for any reason whatsoever including, without limitation,
termination without cause. Notwithstanding the termination of this Agreement
subsequent to a Change in Control of the Company, in the event that the
Executive is an employee of the Company at the moment immediately prior to a
Change in Control of the Company, the Executive shall be entitled to receive all
benefits described hereunder and the provisions hereof related thereto shall
survive such termination.
2. CHANGE IN CONTROL OF THE COMPANY. For purposes of this Agreement, a "Change
in Control of the Company" shall be deemed to occur if:
(i) there shall have occurred a change in control of a nature that
would be required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), as in effect on the date hereof, whether or not the
Company is then subject to such reporting requirement, provided, however, that
there shall not be deemed to be a Change in Control of the Company if
immediately prior to the occurrence of what would otherwise be a Change in
Control of the Company (a) the Executive is the other party to the transaction
(a "Control of the Company Event") that would otherwise result in a Change in
Control of the Company or (b) the Executive is an Executive officer, trustee,
director or more than 5% equity holder of the other party to the Control of the
Company Event or of any entity, directly or indirectly, controlling such other
party;
(ii) the Company merges or consolidates with, or sells all or
substantially all of its assets to, another company (each, a "Transaction"),
provided, however, that a Transaction shall not be deemed to result in a Change
in Control of the Company if (a) immediately prior thereto the circumstances in
(i)(a) or (i)(b) above exist, or (b) (1) the shareholders of the Company,
immediately before such Transaction own, directly or indirectly, immediately
following such Transaction in excess of fifty percent (50%) of the combined
voting power of the outstanding voting securities of the corporation or other
entity resulting from such Transaction (the "Surviving Corporation") in
substantially the same proportion as their ownership of the voting securities of
the Company immediately before such Transaction and (2) the individuals who were
members of the Company's Board of Trustees immediately prior to the execution of
the agreement providing for such Transaction constitute at least a majority of
the members of the board of directors or the board of trustees, as the case may
be, of the Surviving Corporation, or of a corporation or other entity
beneficially directly or indirectly owning a majority of the outstanding voting
securities of the Surviving Corporation; or
(iii) the Company acquires assets of another company or a
subsidiary of the Company merges or consolidates with another company (each, an
"Other Transaction") and (a) the shareholders of the Company, immediately before
such Other Transaction own, directly or indirectly, immediately following such
Other Transaction 50% or less of the combined voting power of the outstanding
voting securities of the corporation or other entity resulting from such Other
Transaction (the "Other Surviving Corporation") in substantially the same
proportion as their ownership of the voting securities of the Company
immediately before such Other Transaction or (b) the individuals who were
members of the Company's Board of Trustees immediately prior to the execution of
the agreement providing for such Other Transaction constitute less than a
majority of the members of the board of directors or the board of trustees, as
the case may be, of the Other Surviving Corporation, or of a corporation or
other entity beneficially directly or indirectly owning a majority of the
outstanding voting securities of the Other Surviving Corporation, provided,
however, that an Other Transaction shall not be deemed to result in a Change in
Control of the Company if immediately prior thereto the circumstances in (i)(a)
or (i)(b) above exist.
3. COMPENSATION UPON A CHANGE IN CONTROL OF THE COMPANY. If the Executive is
an employee of the Company at the moment immediately prior to a Change in
Control of the Company, the Executive shall be entitled to receive the
compensation set forth below.
(a) The Company shall pay to the Executive, not later than the third
business day following the date of any Change in Control of the Company, a lump
sum severance payment (the "Severance Payment") equal to the Base Amount (as
defined below). For purposes of this Section 3(a), the Base Amount shall mean
the Executive's annual compensation during the calendar year period preceding
the calendar year in which the Change in Control of the Company occurs. For
purposes of determining annual compensation in the preceding sentence, there
shall be included (i) all base salary and bonuses paid or payable to the
Executive by the Company with respect to the preceding calendar year, (ii) all
grants of restricted common shares of beneficial interest of the Company (the
"Shares"), if any, with respect to such preceding calendar year, which Shares
shall be valued based on their date of grant Fair Market Value (as defined in
Section 9.2 of the Company's 1995 Incentive Plan or any other plan or agreement
pursuant to which they are issued), and (iii) the fair market value of any other
property or rights given or awarded to the Executive by the Company with respect
to such preceding calendar year.
(b) Any Shares now or hereafter issued to the Executive pursuant to any
restricted Share grant shall vest immediately prior to the date of a Change in
Control of the Company and no longer be subject to repurchase or any other
forfeiture restrictions.
(c) The Company shall maintain in full force and effect for the Executive's
continued benefit for 18 months following a Change in Control of the Company,
all life, accident, medical and dental insurance benefit plans and programs or
arrangements in which the Executive was entitled to participate immediately
prior to the date of a Change in Control of the Company; provided that the
Executive's continued participation is possible under the general terms and
provisions of such plans and programs. In the event that the Executive's
participation in any such plan or program is barred, the Company shall arrange
to provide the Executive with benefits substantially similar to those which the
Executive was entitled to receive under such plans and programs. At the end of
the period of coverage, the Executive shall have the option to have assigned to
him at no cost to the Executive and with no apportionment of prepaid premiums,
any assignable insurance policy owned by the Company and relating specifically
to the Executive.
(d) (i) The Executive shall be entitled to receive additional compensation
in the form of cash equal to, on the date of a Change in Control of the Company
and with respect to each Option to purchase Shares held by the Executive whether
or not such Option has vested or is exercisable on such date (an "Option"), the
number of Shares underlying the Option, multiplied by the amount, if any, that
the exercise price of the Option or the Closing Share Value (as defined below),
whichever is less, exceeds the Initial Share Value (as defined below).
(ii) With respect to each Option, in the event that the Closing
Share Value is greater than the exercise price of such Option, then the
Executive can (1) retain the Option, or (2) forfeit the Option and receive, in
exchange therefor, a cash payment equal to the number of Shares underlying the
Option multiplied by the amount that the Closing Share Value exceeds the
exercise price of the Option.
(iii) For purposes of this subsection (d), the "Initial Share Value"
of an Option shall mean the average of the Closing Prices of the Shares for the
period commencing on the 180th day prior to the date of the Change in Control of
the Company and ending on the 150th day prior to the date of the Change in
Control of the Company, and the "Closing Share Value" shall mean the Closing
Price of the Shares on the date of the Change in Control of the Company. For
purposes of this subsection (d), the "Closing Price" of a Share on any date
shall mean the last sale price, regular way, or, in case no such sale takes
place on such date, the average of the closing bid and asked prices, regular
way, in either case as reported in the principal consolidated transaction
reporting system with respect to securities listed or admitted to trading on the
New York Stock Exchange or, if the Shares are not listed or admitted to trading
on the New York Stock Exchange, as reported in the principal consolidated
transaction reporting system with respect to securities listed on the principal
national securities exchange on which the Shares are listed or admitted to
trading or, if the Shares are not listed or admitted to trading on any national
securities exchange, the last quoted price, or if not so quoted, the average of
the highest bid and lowest ask prices in the over-the-counter market, as
reported by the National Association of Securities Dealers, Inc. Automated
Quotation System or, if such system is no longer used, the principal other
automated quotation system that may then be in use or, if the Shares are not
quoted by any such organization, the average of the closing bid and asked prices
as furnished by a professional market maker making the market in the Shares as
such person is selected from time to time by the Board of Trustees of the
Company.
(e) The Executive shall not be required to mitigate the amount of any
payment provided for in this Section 3 by seeking other employment or otherwise,
nor shall the amount of any payment or benefit provided for in this Section 3 be
reduced by any compensation earned by him as the result of employment by another
employer or by retirement benefits after the date of termination, or otherwise,
except as specifically provided in this Section 3.
4. SCALE-BACK. To the extent any benefits to be granted to the
Executive hereunder constitute a "parachute payment" (within the meaning of
Section 280G(b)(2) of the Code), and the Executive would otherwise be liable for
an excise tax pursuant to Code Section 4999, there shall be a reduction in the
benefits payable or available to the Executive hereunder such that the total
parachute payments will be less than three (3) times the Executive's "base
amount" (within the meaning of Section 280G(b)(3) of the Code) with the result
that the excise tax under Code Section 4999 will not be payable; provided,
however, that such reduction shall occur only if the Executive shall realize a
greater after tax economic benefit by making such reduction than if no reduction
was made.
4. EXPENSES. (a) The Company shall pay or reimburse the Executive, as the case
may be, for all legal and accounting fees and expenses incurred by the Executive
in connection with the structuring, negotiation and preparation of this
Agreement.
(b) The Company shall pay or reimburse the Executive, as the case
may be, for all legal fees and related expenses (including the costs of experts,
evidence and counsel) paid by the Executive as a result of (i) the Executive
seeking to obtain or enforce any right or benefit provided by this Agreement, or
(ii) any action taken by the Company against the Executive in enforcing the
Company's rights hereunder; provided, however, that the Company shall reimburse
the legal fees and related expenses described in this subsection 4(b) only if
and when a final judgement has been rendered in favor of the Executive and all
appeals related to any such action have been exhausted.
5. NO EMPLOYMENT RIGHTS OR OBLIGATIONS. Nothing contained herein shall confer
upon the Executive the right to continue in the employment or service of the
Company or any subsidiary or affiliate of the Company or affect any right that
the Company or any subsidiary or affiliate of the Company may have to terminate
the employment or service of the Executive at any time for any reason.
6. GOVERNING LAW; ARBITRATION. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of Maryland,
without regard to Maryland's conflicts of law principles. Any dispute or
controversy arising under this Agreement, or out of the interpretation hereof,
or based upon the breach hereof, shall be resolved by arbitration held at the
offices of the American Arbitration Association in the City of Philadelphia in
accordance with the rules and regulations of such association prevailing at the
time of the demand for arbitration by either party hereto, and the decision of
the arbitrator or arbitrators shall be final and binding upon both parties
hereto, provided, however, that the arbitrator or arbitrators shall only have
the power and authority to interpret, and not to modify or amend, the terms and
provisions hereof. Judg-ment upon an award rendered by the arbitrator or
arbitrators may be entered in any court having jurisdiction thereof.
Notwith-standing anything contained in this Section 6, either party shall have
the right to seek preliminary injunctive relief in any court in the City of
Philadelphia in aid of, and pending the final decision in, the arbitration
proceeding.
7. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement of the
parties and is intended to supersede all prior negotiations, understandings and
agree-ments with respect to the subject matter hereof. No provision of this
Agreement may be waived or changed, except by a writing signed by the party to
be charged with such waiver or change.
8. SUCCESSORS; BINDING AGREEMENT. This Agreement shall inure to the benefit
of, be binding upon and be enforceable by the Company, its successors and
assigns and the Executive, and the Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and lega-tees.
9. NOTICES. All notices provided for in this Agreement shall be in writing,
and shall be deemed to have been duly given when delivered personally to the
party to receive the same, when given by telex, telegram or mailgram, or when
mailed first class postage prepaid, by registered or certified mail, return
receipt requested, addressed to the party to receive the same at his or its
address above set forth, or such other address as the party to receive the same
shall have specified by written notice given in the manner provided for in this
Section 9. All notices shall be deemed to have been given as of the date of
personal delivery, transmittal or mailing thereof.
10. SEVERABILITY. If any provision in this Agreement is determined to be
invalid, it shall not affect the validity or enforceability of any of the other
remaining pro-visions hereof.
11. EXCULPATION. This Agreement and all documents, agreements,
understandings and arrangements relating to the matters described herein have
been executed by the undersigned in his/her capacity as an officer or trustee of
the Company which has been formed as a Maryland real estate investment trust
pursuant to an Amended and Restated Declaration of Trust of the Company, as
amended, and not individually, and neither the trustees, officers or
shareholders of the Company shall be bound or have any personal liability
hereunder or thereunder. The Executive shall look solely to the assets of the
Company for satisfaction of any liability of the Company in respect of this
Agreement and all documents, agreements, understandings and arrangements
relating to this transaction and will not seek recourse or commence any action
against any of the trustees, officers or shareholders of the Company or any of
their personal assets for the performance or payment of any obligation hereunder
or thereunder. The foregoing shall also apply to any future documents,
agreements, understandings, arrangements and transactions between the parties
hereto.
IN WITNESS WHEREOF, the parties hereto have exe-cuted this Agreement as
of the date first above written.
KRANZCO REALTY TRUST
By: /s/ Norman M. Kranzdorf
EXECUTIVE:
/s/ Bengt Danielsson
SEVERANCE BENEFITS AGREEMENT
AGREEMENT, dated as of March 27, 1997, between KRANZCO REALTY TRUST, a
Maryland real estate investment trust with offices at 128 Fayette Street,
Conshohocken, Pennsylvania 19428 (the "Company"), and Michael Warrington, an
individual residing at 448 Old Elm Street, Conshohocken, Pennsylvania 19428 (the
"Executive").
WHEREAS, the Company has employed the Executive as an employee of the
Company to perform certain services to the Company upon terms and conditions
which the parties hereto have previously agreed (the "Services");
WHEREAS, the Company recognizes that the Executive's contributions to
the past and future growth of the Company has been substantial; and
WHEREAS, to induce the Executive to remain in the employ of the Company,
the parties hereto desire to set forth certain severance benefits which the
Company will pay to the Executive in the event of a Change in Control of the
Company (as defined in Section 2 hereof).
IT IS AGREED:
1. TERM. This Agreement shall commence on the date hereof and shall terminate
upon the earlier of (a) the date on which the Company has satisfied all of its
obligations hereunder, or (b) the date on which the Executive is no longer an
employee of the Company for any reason whatsoever including, without limitation,
termination without cause. Notwithstanding the termination of this Agreement
subsequent to a Change in Control of the Company, in the event that the
Executive is an employee of the Company at the moment immediately prior to a
Change in Control of the Company, the Executive shall be entitled to receive all
benefits described hereunder and the provisions hereof related thereto shall
survive such termination.
2. CHANGE IN CONTROL OF THE COMPANY. For purposes of this Agreement, a "Change
in Control of the Company" shall be deemed to occur if:
(i) there shall have occurred a change in control of a nature that
would be required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), as in effect on the date hereof, whether or not the
Company is then subject to such reporting requirement, provided, however, that
there shall not be deemed to be a Change in Control of the Company if
immediately prior to the occurrence of what would otherwise be a Change in
Control of the Company (a) the Executive is the other party to the transaction
(a "Control of the Company Event") that would otherwise result in a Change in
Control of the Company or (b) the Executive is an Executive officer, trustee,
director or more than 5% equity holder of the other party to the Control of the
Company Event or of any entity, directly or indirectly, controlling such other
party;
(ii) the Company merges or consolidates with, or sells all or
substantially all of its assets to, another company (each, a "Transaction"),
provided, however, that a Transaction shall not be deemed to result in a Change
in Control of the Company if (a) immediately prior thereto the circumstances in
(i)(a) or (i)(b) above exist, or (b) (1) the shareholders of the Company,
immediately before such Transaction own, directly or indirectly, immediately
following such Transaction in excess of fifty percent (50%) of the combined
voting power of the outstanding voting securities of the corporation or other
entity resulting from such Transaction (the "Surviving Corporation") in
substantially the same proportion as their ownership of the voting securities of
the Company immediately before such Transaction and (2) the individuals who were
members of the Company's Board of Trustees immediately prior to the execution of
the agreement providing for such Transaction constitute at least a majority of
the members of the board of directors or the board of trustees, as the case may
be, of the Surviving Corporation, or of a corporation or other entity
beneficially directly or indirectly owning a majority of the outstanding voting
securities of the Surviving Corporation; or
(iii) the Company acquires assets of another company or a
subsidiary of the Company merges or consolidates with another company (each, an
"Other Transaction") and (a) the shareholders of the Company, immediately before
such Other Transaction own, directly or indirectly, immediately following such
Other Transaction 50% or less of the combined voting power of the outstanding
voting securities of the corporation or other entity resulting from such Other
Transaction (the "Other Surviving Corporation") in substantially the same
proportion as their ownership of the voting securities of the Company
immediately before such Other Transaction or (b) the individuals who were
members of the Company's Board of Trustees immediately prior to the execution of
the agreement providing for such Other Transaction constitute less than a
majority of the members of the board of directors or the board of trustees, as
the case may be, of the Other Surviving Corporation, or of a corporation or
other entity beneficially directly or indirectly owning a majority of the
outstanding voting securities of the Other Surviving Corporation, provided,
however, that an Other Transaction shall not be deemed to result in a Change in
Control of the Company if immediately prior thereto the circumstances in (i)(a)
or (i)(b) above exist.
3. COMPENSATION UPON A CHANGE IN CONTROL OF THE COMPANY. If the Executive is
an employee of the Company at the moment immediately prior to a Change in
Control of the Company, the Executive shall be entitled to receive the
compensation set forth below.
(a) The Company shall pay to the Executive, not later than the third
business day following the date of any Change in Control of the Company, a lump
sum severance payment (the "Severance Payment") equal to the Base Amount (as
defined below). For purposes of this Section 3(a), the Base Amount shall mean
the Executive's annual compensation during the calendar year period preceding
the calendar year in which the Change in Control of the Company occurs. For
purposes of determining annual compensation in the preceding sentence, there
shall be included (i) all base salary and bonuses paid or payable to the
Executive by the Company with respect to the preceding calendar year, (ii) all
grants of restricted common shares of beneficial interest of the Company (the
"Shares"), if any, with respect to such preceding calendar year, which Shares
shall be valued based on their date of grant Fair Market Value (as defined in
Section 9.2 of the Company's 1995 Incentive Plan or any other plan or agreement
pursuant to which they are issued), and (iii) the fair market value of any other
property or rights given or awarded to the Executive by the Company with respect
to such preceding calendar year.
(b) Any Shares now or hereafter issued to the Executive pursuant to any
restricted Share grant shall vest immediately prior to the date of a Change in
Control of the Company and no longer be subject to repurchase or any other
forfeiture restrictions.
(c) The Company shall maintain in full force and effect for the Executive's
continued benefit for 18 months following a Change in Control of the Company,
all life, accident, medical and dental insurance benefit plans and programs or
arrangements in which the Executive was entitled to participate immediately
prior to the date of a Change in Control of the Company; provided that the
Executive's continued participation is possible under the general terms and
provisions of such plans and programs. In the event that the Executive's
participation in any such plan or program is barred, the Company shall arrange
to provide the Executive with benefits substantially similar to those which the
Executive was entitled to receive under such plans and programs. At the end of
the period of coverage, the Executive shall have the option to have assigned to
him at no cost to the Executive and with no apportionment of prepaid premiums,
any assignable insurance policy owned by the Company and relating specifically
to the Executive.
(d) (i) The Executive shall be entitled to receive additional compensation
in the form of cash equal to, on the date of a Change in Control of the Company
and with respect to each Option to purchase Shares held by the Executive whether
or not such Option has vested or is exercisable on such date (an "Option"), the
number of Shares underlying the Option, multiplied by the amount, if any, that
the exercise price of the Option or the Closing Share Value (as defined below),
whichever is less, exceeds the Initial Share Value (as defined below).
(ii) With respect to each Option, in the event that the Closing
Share Value is greater than the exercise price of such Option, then the
Executive can (1) retain the Option, or (2) forfeit the Option and receive, in
exchange therefor, a cash payment equal to the number of Shares underlying the
Option multiplied by the amount that the Closing Share Value exceeds the
exercise price of the Option.
(iii) For purposes of this subsection (d), the "Initial Share Value"
of an Option shall mean the average of the Closing Prices of the Shares for the
period commencing on the 180th day prior to the date of the Change in Control of
the Company and ending on the 150th day prior to the date of the Change in
Control of the Company, and the "Closing Share Value" shall mean the Closing
Price of the Shares on the date of the Change in Control of the Company. For
purposes of this subsection (d), the "Closing Price" of a Share on any date
shall mean the last sale price, regular way, or, in case no such sale takes
place on such date, the average of the closing bid and asked prices, regular
way, in either case as reported in the principal consolidated transaction
reporting system with respect to securities listed or admitted to trading on the
New York Stock Exchange or, if the Shares are not listed or admitted to trading
on the New York Stock Exchange, as reported in the principal consolidated
transaction reporting system with respect to securities listed on the principal
national securities exchange on which the Shares are listed or admitted to
trading or, if the Shares are not listed or admitted to trading on any national
securities exchange, the last quoted price, or if not so quoted, the average of
the highest bid and lowest ask prices in the over-the-counter market, as
reported by the National Association of Securities Dealers, Inc. Automated
Quotation System or, if such system is no longer used, the principal other
automated quotation system that may then be in use or, if the Shares are not
quoted by any such organization, the average of the closing bid and asked prices
as furnished by a professional market maker making the market in the Shares as
such person is selected from time to time by the Board of Trustees of the
Company.
(e) The Executive shall not be required to mitigate the amount of any
payment provided for in this Section 3 by seeking other employment or otherwise,
nor shall the amount of any payment or benefit provided for in this Section 3 be
reduced by any compensation earned by him as the result of employment by another
employer or by retirement benefits after the date of termination, or otherwise,
except as specifically provided in this Section 3.
4. SCALE-BACK. To the extent any benefits to be granted to the
Executive hereunder constitute a "parachute payment" (within the meaning of
Section 280G(b)(2) of the Code), and the Executive would otherwise be liable for
an excise tax pursuant to Code Section 4999, there shall be a reduction in the
benefits payable or available to the Executive hereunder such that the total
parachute payments will be less than three (3) times the Executive's "base
amount" (within the meaning of Section 280G(b)(3) of the Code) with the result
that the excise tax under Code Section 4999 will not be payable; provided,
however, that such reduction shall occur only if the Executive shall realize a
greater after tax economic benefit by making such reduction than if no reduction
was made.
4. EXPENSES. (a) The Company shall pay or reimburse the Executive, as the case
may be, for all legal and accounting fees and expenses incurred by the Executive
in connection with the structuring, negotiation and preparation of this
Agreement.
(b) The Company shall pay or reimburse the Executive, as the case
may be, for all legal fees and related expenses (including the costs of experts,
evidence and counsel) paid by the Executive as a result of (i) the Executive
seeking to obtain or enforce any right or benefit provided by this Agreement, or
(ii) any action taken by the Company against the Executive in enforcing the
Company's rights hereunder; provided, however, that the Company shall reimburse
the legal fees and related expenses described in this subsection 4(b) only if
and when a final judgement has been rendered in favor of the Executive and all
appeals related to any such action have been exhausted.
5. NO EMPLOYMENT RIGHTS OR OBLIGATIONS. Nothing contained herein shall confer
upon the Executive the right to continue in the employment or service of the
Company or any subsidiary or affiliate of the Company or affect any right that
the Company or any subsidiary or affiliate of the Company may have to terminate
the employment or service of the Executive at any time for any reason.
6. GOVERNING LAW; ARBITRATION. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of Maryland,
without regard to Maryland's conflicts of law principles. Any dispute or
controversy arising under this Agreement, or out of the interpretation hereof,
or based upon the breach hereof, shall be resolved by arbitration held at the
offices of the American Arbitration Association in the City of Philadelphia in
accordance with the rules and regulations of such association prevailing at the
time of the demand for arbitration by either party hereto, and the decision of
the arbitrator or arbitrators shall be final and binding upon both parties
hereto, provided, however, that the arbitrator or arbitrators shall only have
the power and authority to interpret, and not to modify or amend, the terms and
provisions hereof. Judg-ment upon an award rendered by the arbitrator or
arbitrators may be entered in any court having jurisdiction thereof.
Notwith-standing anything contained in this Section 6, either party shall have
the right to seek preliminary injunctive relief in any court in the City of
Philadelphia in aid of, and pending the final decision in, the arbitration
proceeding.
7. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement of the
parties and is intended to supersede all prior negotiations, understandings and
agree-ments with respect to the subject matter hereof. No provision of this
Agreement may be waived or changed, except by a writing signed by the party to
be charged with such waiver or change.
8. SUCCESSORS; BINDING AGREEMENT. This Agreement shall inure to the benefit
of, be binding upon and be enforceable by the Company, its successors and
assigns and the Executive, and the Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and lega-tees.
9. NOTICES. All notices provided for in this Agreement shall be in writing,
and shall be deemed to have been duly given when delivered personally to the
party to receive the same, when given by telex, telegram or mailgram, or when
mailed first class postage prepaid, by registered or certified mail, return
receipt requested, addressed to the party to receive the same at his or its
address above set forth, or such other address as the party to receive the same
shall have specified by written notice given in the manner provided for in this
Section 9. All notices shall be deemed to have been given as of the date of
personal delivery, transmittal or mailing thereof.
10. SEVERABILITY. If any provision in this Agreement is determined to be
invalid, it shall not affect the validity or enforceability of any of the other
remaining pro-visions hereof.
11. EXCULPATION. This Agreement and all documents, agreements,
understandings and arrangements relating to the matters described herein have
been executed by the undersigned in his/her capacity as an officer or trustee of
the Company which has been formed as a Maryland real estate investment trust
pursuant to an Amended and Restated Declaration of Trust of the Company, as
amended, and not individually, and neither the trustees, officers or
shareholders of the Company shall be bound or have any personal liability
hereunder or thereunder. The Executive shall look solely to the assets of the
Company for satisfaction of any liability of the Company in respect of this
Agreement and all documents, agreements, understandings and arrangements
relating to this transaction and will not seek recourse or commence any action
against any of the trustees, officers or shareholders of the Company or any of
their personal assets for the performance or payment of any obligation hereunder
or thereunder. The foregoing shall also apply to any future documents,
agreements, understandings, arrangements and transactions between the parties
hereto.
IN WITNESS WHEREOF, the parties hereto have exe-cuted this Agreement as
of the date first above written.
KRANZCO REALTY TRUST
By: /s/ Norman M. Kranzdorf
EXECUTIVE:
/s/ Michael Warrington
SEVERANCE BENEFITS AGREEMENT
AGREEMENT, dated as of March 28, 1997, between KRANZCO REALTY TRUST, a
Maryland real estate investment trust with offices at 128 Fayette Street,
Conshohocken, Pennsylvania 19428 (the "Company"), and Michael Kranzdorf, an
individual residing at 505 Hughes Road, King of Prussia, Pennsylvania 19406 (the
"Executive").
WHEREAS, the Company has employed the Executive as an employee of the
Company to perform certain services to the Company upon terms and conditions
which the parties hereto have previously agreed (the "Services");
WHEREAS, the Company recognizes that the Executive's contributions to
the past and future growth of the Company has been substantial; and
WHEREAS, to induce the Executive to remain in the employ of the Company,
the parties hereto desire to set forth certain severance benefits which the
Company will pay to the Executive in the event of a Change in Control of the
Company (as defined in Section 2 hereof).
IT IS AGREED:
1. TERM. This Agreement shall commence on the date hereof and shall terminate
upon the earlier of (a) the date on which the Company has satisfied all of its
obligations hereunder, or (b) the date on which the Executive is no longer an
employee of the Company for any reason whatsoever including, without limitation,
termination without cause. Notwithstanding the termination of this Agreement
subsequent to a Change in Control of the Company, in the event that the
Executive is an employee of the Company at the moment immediately prior to a
Change in Control of the Company, the Executive shall be entitled to receive all
benefits described hereunder and the provisions hereof related thereto shall
survive such termination.
2. CHANGE IN CONTROL OF THE COMPANY. For purposes of this Agreement, a "Change
in Control of the Company" shall be deemed to occur if:
(i) there shall have occurred a change in control of a nature that
would be required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), as in effect on the date hereof, whether or not the
Company is then subject to such reporting requirement, provided, however, that
there shall not be deemed to be a Change in Control of the Company if
immediately prior to the occurrence of what would otherwise be a Change in
Control of the Company (a) the Executive is the other party to the transaction
(a "Control of the Company Event") that would otherwise result in a Change in
Control of the Company or (b) the Executive is an Executive officer, trustee,
director or more than 5% equity holder of the other party to the Control of the
Company Event or of any entity, directly or indirectly, controlling such other
party;
(ii) the Company merges or consolidates with, or sells all or
substantially all of its assets to, another company (each, a "Transaction"),
provided, however, that a Transaction shall not be deemed to result in a Change
in Control of the Company if (a) immediately prior thereto the circumstances in
(i)(a) or (i)(b) above exist, or (b) (1) the shareholders of the Company,
immediately before such Transaction own, directly or indirectly, immediately
following such Transaction in excess of fifty percent (50%) of the combined
voting power of the outstanding voting securities of the corporation or other
entity resulting from such Transaction (the "Surviving Corporation") in
substantially the same proportion as their ownership of the voting securities of
the Company immediately before such Transaction and (2) the individuals who were
members of the Company's Board of Trustees immediately prior to the execution of
the agreement providing for such Transaction constitute at least a majority of
the members of the board of directors or the board of trustees, as the case may
be, of the Surviving Corporation, or of a corporation or other entity
beneficially directly or indirectly owning a majority of the outstanding voting
securities of the Surviving Corporation; or
(iii) the Company acquires assets of another company or a
subsidiary of the Company merges or consolidates with another company (each, an
"Other Transaction") and (a) the shareholders of the Company, immediately before
such Other Transaction own, directly or indirectly, immediately following such
Other Transaction 50% or less of the combined voting power of the outstanding
voting securities of the corporation or other entity resulting from such Other
Transaction (the "Other Surviving Corporation") in substantially the same
proportion as their ownership of the voting securities of the Company
immediately before such Other Transaction or (b) the individuals who were
members of the Company's Board of Trustees immediately prior to the execution of
the agreement providing for such Other Transaction constitute less than a
majority of the members of the board of directors or the board of trustees, as
the case may be, of the Other Surviving Corporation, or of a corporation or
other entity beneficially directly or indirectly owning a majority of the
outstanding voting securities of the Other Surviving Corporation, provided,
however, that an Other Transaction shall not be deemed to result in a Change in
Control of the Company if immediately prior thereto the circumstances in (i)(a)
or (i)(b) above exist.
3. COMPENSATION UPON A CHANGE IN CONTROL OF THE COMPANY. If the Executive is
an employee of the Company at the moment immediately prior to a Change in
Control of the Company, the Executive shall be entitled to receive the
compensation set forth below.
(a) The Company shall pay to the Executive, not later than the third
business day following the date of any Change in Control of the Company, a lump
sum severance payment (the "Severance Payment") equal to the Base Amount (as
defined below). For purposes of this Section 3(a), the Base Amount shall mean
the Executive's annual compensation during the calendar year period preceding
the calendar year in which the Change in Control of the Company occurs. For
purposes of determining annual compensation in the preceding sentence, there
shall be included (i) all base salary and bonuses paid or payable to the
Executive by the Company with respect to the preceding calendar year, (ii) all
grants of restricted common shares of beneficial interest of the Company (the
"Shares"), if any, with respect to such preceding calendar year, which Shares
shall be valued based on their date of grant Fair Market Value (as defined in
Section 9.2 of the Company's 1995 Incentive Plan or any other plan or agreement
pursuant to which they are issued), and (iii) the fair market value of any other
property or rights given or awarded to the Executive by the Company with respect
to such preceding calendar year.
(b) Any Shares now or hereafter issued to the Executive pursuant to any
restricted Share grant shall vest immediately prior to the date of a Change in
Control of the Company and no longer be subject to repurchase or any other
forfeiture restrictions.
(c) The Company shall maintain in full force and effect for the Executive's
continued benefit for 18 months following a Change in Control of the Company,
all life, accident, medical and dental insurance benefit plans and programs or
arrangements in which the Executive was entitled to participate immediately
prior to the date of a Change in Control of the Company; provided that the
Executive's continued participation is possible under the general terms and
provisions of such plans and programs. In the event that the Executive's
participation in any such plan or program is barred, the Company shall arrange
to provide the Executive with benefits substantially similar to those which the
Executive was entitled to receive under such plans and programs. At the end of
the period of coverage, the Executive shall have the option to have assigned to
him at no cost to the Executive and with no apportionment of prepaid premiums,
any assignable insurance policy owned by the Company and relating specifically
to the Executive.
(d) (i) The Executive shall be entitled to receive additional compensation
in the form of cash equal to, on the date of a Change in Control of the Company
and with respect to each Option to purchase Shares held by the Executive whether
or not such Option has vested or is exercisable on such date (an "Option"), the
number of Shares underlying the Option, multiplied by the amount, if any, that
the exercise price of the Option or the Closing Share Value (as defined below),
whichever is less, exceeds the Initial Share Value (as defined below).
(ii) With respect to each Option, in the event that the Closing
Share Value is greater than the exercise price of such Option, then the
Executive can (1) retain the Option, or (2) forfeit the Option and receive, in
exchange therefor, a cash payment equal to the number of Shares underlying the
Option multiplied by the amount that the Closing Share Value exceeds the
exercise price of the Option.
(iii) For purposes of this subsection (d), the "Initial Share Value"
of an Option shall mean the average of the Closing Prices of the Shares for the
period commencing on the 180th day prior to the date of the Change in Control of
the Company and ending on the 150th day prior to the date of the Change in
Control of the Company, and the "Closing Share Value" shall mean the Closing
Price of the Shares on the date of the Change in Control of the Company. For
purposes of this subsection (d), the "Closing Price" of a Share on any date
shall mean the last sale price, regular way, or, in case no such sale takes
place on such date, the average of the closing bid and asked prices, regular
way, in either case as reported in the principal consolidated transaction
reporting system with respect to securities listed or admitted to trading on the
New York Stock Exchange or, if the Shares are not listed or admitted to trading
on the New York Stock Exchange, as reported in the principal consolidated
transaction reporting system with respect to securities listed on the principal
national securities exchange on which the Shares are listed or admitted to
trading or, if the Shares are not listed or admitted to trading on any national
securities exchange, the last quoted price, or if not so quoted, the average of
the highest bid and lowest ask prices in the over-the-counter market, as
reported by the National Association of Securities Dealers, Inc. Automated
Quotation System or, if such system is no longer used, the principal other
automated quotation system that may then be in use or, if the Shares are not
quoted by any such organization, the average of the closing bid and asked prices
as furnished by a professional market maker making the market in the Shares as
such person is selected from time to time by the Board of Trustees of the
Company.
(e) The Executive shall not be required to mitigate the amount of any
payment provided for in this Section 3 by seeking other employment or otherwise,
nor shall the amount of any payment or benefit provided for in this Section 3 be
reduced by any compensation earned by him as the result of employment by another
employer or by retirement benefits after the date of termination, or otherwise,
except as specifically provided in this Section 3.
4. SCALE-BACK. To the extent any benefits to be granted to the
Executive hereunder constitute a "parachute payment" (within the meaning of
Section 280G(b)(2) of the Code), and the Executive would otherwise be liable for
an excise tax pursuant to Code Section 4999, there shall be a reduction in the
benefits payable or available to the Executive hereunder such that the total
parachute payments will be less than three (3) times the Executive's "base
amount" (within the meaning of Section 280G(b)(3) of the Code) with the result
that the excise tax under Code Section 4999 will not be payable; provided,
however, that such reduction shall occur only if the Executive shall realize a
greater after tax economic benefit by making such reduction than if no reduction
was made.
4. EXPENSES. (a) The Company shall pay or reimburse the Executive, as the case
may be, for all legal and accounting fees and expenses incurred by the Executive
in connection with the structuring, negotiation and preparation of this
Agreement.
(b) The Company shall pay or reimburse the Executive, as the case
may be, for all legal fees and related expenses (including the costs of experts,
evidence and counsel) paid by the Executive as a result of (i) the Executive
seeking to obtain or enforce any right or benefit provided by this Agreement, or
(ii) any action taken by the Company against the Executive in enforcing the
Company's rights hereunder; provided, however, that the Company shall reimburse
the legal fees and related expenses described in this subsection 4(b) only if
and when a final judgement has been rendered in favor of the Executive and all
appeals related to any such action have been exhausted.
5. NO EMPLOYMENT RIGHTS OR OBLIGATIONS. Nothing contained herein shall confer
upon the Executive the right to continue in the employment or service of the
Company or any subsidiary or affiliate of the Company or affect any right that
the Company or any subsidiary or affiliate of the Company may have to terminate
the employment or service of the Executive at any time for any reason.
6. GOVERNING LAW; ARBITRATION. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of Maryland,
without regard to Maryland's conflicts of law principles. Any dispute or
controversy arising under this Agreement, or out of the interpretation hereof,
or based upon the breach hereof, shall be resolved by arbitration held at the
offices of the American Arbitration Association in the City of Philadelphia in
accordance with the rules and regulations of such association prevailing at the
time of the demand for arbitration by either party hereto, and the decision of
the arbitrator or arbitrators shall be final and binding upon both parties
hereto, provided, however, that the arbitrator or arbitrators shall only have
the power and authority to interpret, and not to modify or amend, the terms and
provisions hereof. Judg-ment upon an award rendered by the arbitrator or
arbitrators may be entered in any court having jurisdiction thereof.
Notwith-standing anything contained in this Section 6, either party shall have
the right to seek preliminary injunctive relief in any court in the City of
Philadelphia in aid of, and pending the final decision in, the arbitration
proceeding.
7. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement of the
parties and is intended to supersede all prior negotiations, understandings and
agree-ments with respect to the subject matter hereof. No provision of this
Agreement may be waived or changed, except by a writing signed by the party to
be charged with such waiver or change.
8. SUCCESSORS; BINDING AGREEMENT. This Agreement shall inure to the benefit
of, be binding upon and be enforceable by the Company, its successors and
assigns and the Executive, and the Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and lega-tees.
9. NOTICES. All notices provided for in this Agreement shall be in writing,
and shall be deemed to have been duly given when delivered personally to the
party to receive the same, when given by telex, telegram or mailgram, or when
mailed first class postage prepaid, by registered or certified mail, return
receipt requested, addressed to the party to receive the same at his or its
address above set forth, or such other address as the party to receive the same
shall have specified by written notice given in the manner provided for in this
Section 9. All notices shall be deemed to have been given as of the date of
personal delivery, transmittal or mailing thereof.
10. SEVERABILITY. If any provision in this Agreement is determined to be
invalid, it shall not affect the validity or enforceability of any of the other
remaining pro-visions hereof.
11. EXCULPATION. This Agreement and all documents, agreements,
understandings and arrangements relating to the matters described herein have
been executed by the undersigned in his/her capacity as an officer or trustee of
the Company which has been formed as a Maryland real estate investment trust
pursuant to an Amended and Restated Declaration of Trust of the Company, as
amended, and not individually, and neither the trustees, officers or
shareholders of the Company shall be bound or have any personal liability
hereunder or thereunder. The Executive shall look solely to the assets of the
Company for satisfaction of any liability of the Company in respect of this
Agreement and all documents, agreements, understandings and arrangements
relating to this transaction and will not seek recourse or commence any action
against any of the trustees, officers or shareholders of the Company or any of
their personal assets for the performance or payment of any obligation hereunder
or thereunder. The foregoing shall also apply to any future documents,
agreements, understandings, arrangements and transactions between the parties
hereto.
IN WITNESS WHEREOF, the parties hereto have exe-cuted this Agreement as
of the date first above written.
KRANZCO REALTY TRUST
By: /s/ Norman M. Kranzdorf
EXECUTIVE:
/s/ Michael Kranzdorf
SEVERANCE BENEFITS AGREEMENT
AGREEMENT, dated as of March 28, 1997, between KRANZCO REALTY TRUST, a
Maryland real estate investment trust with offices at 128 Fayette Street,
Conshohocken, Pennsylvania 19428 (the "Company"), and Peter J. Linneman, an
individual residing at The Wharton School, Real Estate Center, 256 South 37th
Street, Philadelphia, PA 19104 (the "Trustee").
WHEREAS, the Trustee has been a trustee of the Company to perform
certain services to the Company upon terms and conditions which the parties
hereto have previously agreed (the "Services");
WHEREAS, the Company recognizes that the Trustee's contributions to the
past and future growth of the Company has been substantial; and
WHEREAS, to induce the Trustee to remain as a trustee of the Company,
the parties hereto desire to set forth certain severance benefits which the
Company will pay to the Trustee in the event of a Change in Control of the
Company (as defined in Section 2 hereof).
IT IS AGREED:
1. TERM. This Agreement shall commence on the date hereof and shall terminate
upon the earlier of (a) the date on which the Company has satisfied all of its
obligations hereunder, or (b) the date on which the Trustee is no longer a
trustee of the Company for any reason whatsoever including, without limitation,
termination without cause. Notwithstanding the termination of this Agreement
subsequent to a Change in Control of the Company, in the event that the Trustee
is a trustee of the Company at the moment immediately prior to a Change in
Control of the Company, the Trustee shall be entitled to receive all benefits
described hereunder and the provisions hereof related thereto shall survive such
termination.
2. CHANGE IN CONTROL OF THE COMPANY. For purposes of this Agreement, a "Change
in Control of the Company" shall be deemed to occur if:
(i) there shall have occurred a change in control of a nature that
would be required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), as in effect on the date hereof, whether or not the
Company is then subject to such reporting requirement, provided, however, that
there shall not be deemed to be a Change in Control of the Company if
immediately prior to the occurrence of what would otherwise be a Change in
Control of the Company (a) the Trustee is the other party to the transaction (a
"Control of the Company Event") that would otherwise result in a Change in
Control of the Company or (b) the Trustee is an officer, trustee, director or
more than 5% equity holder of the other party to the Control of the Company
Event or of any entity, directly or indirectly, controlling such other party;
(ii) the Company merges or consolidates with, or sells all or
substantially all of its assets to, another company (each, a "Transaction"),
provided, however, that a Transaction shall not be deemed to result in a Change
in Control of the Company if (a) immediately prior thereto the circumstances in
(i)(a) or (i)(b) above exist, or (b) (1) the shareholders of the Company,
immediately before such Transaction own, directly or indirectly, immediately
following such Transaction in excess of fifty percent (50%) of the combined
voting power of the outstanding voting securities of the corporation or other
entity resulting from such Transaction (the "Surviving Corporation") in
substantially the same proportion as their ownership of the voting securities of
the Company immediately before such Transaction and (2) the individuals who were
members of the Company's Board of Trustees immediately prior to the execution of
the agreement providing for such Transaction constitute at least a majority of
the members of the board of directors or the board of trustees, as the case may
be, of the Surviving Corporation, or of a corporation or other entity
beneficially directly or indirectly owning a majority of the outstanding voting
securities of the Surviving Corporation; or
(iii) the Company acquires assets of another company or a
subsidiary of the Company merges or consolidates with another company (each, an
"Other Transaction") and (a) the shareholders of the Company, immediately before
such Other Transaction own, directly or indirectly, immediately following such
Other Transaction 50% or less of the combined voting power of the outstanding
voting securities of the corporation or other entity resulting from such Other
Transaction (the "Other Surviving Corporation") in substantially the same
proportion as their ownership of the voting securities of the Company
immediately before such Other Transaction or (b) the individuals who were
members of the Company's Board of Trustees immediately prior to the execution of
the agreement providing for such Other Transaction constitute less than a
majority of the members of the board of directors or the board of trustees, as
the case may be, of the Other Surviving Corporation, or of a corporation or
other entity beneficially directly or indirectly owning a majority of the
outstanding voting securities of the Other Surviving Corporation, provided,
however, that an Other Transaction shall not be deemed to result in a Change in
Control of the Company if immediately prior thereto the circumstances in (i)(a)
or (i)(b) above exist.
3. COMPENSATION UPON A CHANGE IN CONTROL OF THE COMPANY.
(a) (i) If the Trustee is a trustee of the Company at the moment
immediately prior to a Change in Control of the Company, the Trustee shall be
entitled to receive compensation in the form of cash equal to, on the date of a
Change in Control of the Company and with respect to each Option to purchase
common shares of beneficial interest of the Company (the "Shares") held by the
Trustee whether or not such Option has vested or is exercisable on such date (an
"Option"), the number of Shares underlying the Option, multiplied by the amount,
if any, that the exercise price of the Option or the Closing Share Value (as
defined below), whichever is less, exceeds the Initial Share Value (as defined
below).
(ii) With respect to each Option, in the event that the Closing
Share Value is greater than the exercise price of such Option, then the Trustee
can (1) retain the Option, or (2) forfeit the Option and receive, in exchange
therefor, a cash payment equal to the number of Shares underlying the Option
multiplied by the amount that the Closing Share Value exceeds the exercise price
of the Option.
(iii) For purposes of this subsection (a), the "Initial Share Value"
of an Option shall mean the average of the Closing Prices of the Shares for the
period commencing on the 180th day prior to the date of the Change in Control of
the Company and ending on the 150th day prior to the date of the Change in
Control of the Company, and the "Closing Share Value" shall mean the Closing
Price of the Shares on the date of the Change in Control of the Company. For
purposes of this subsection (a), the "Closing Price" of a Share on any date
shall mean the last sale price, regular way, or, in case no such sale takes
place on such date, the average of the closing bid and asked prices, regular
way, in either case as reported in the principal consolidated transaction
reporting system with respect to securities listed or admitted to trading on the
New York Stock Exchange or, if the Shares are not listed or admitted to trading
on the New York Stock Exchange, as reported in the principal consolidated
transaction reporting system with respect to securities listed on the principal
national securities exchange on which the Shares are listed or admitted to
trading or, if the Shares are not listed or admitted to trading on any national
securities exchange, the last quoted price, or if not so quoted, the average of
the highest bid and lowest ask prices in the over-the-counter market, as
reported by the National Association of Securities Dealers, Inc. Automated
Quotation System or, if such system is no longer used, the principal other
automated quotation system that may then be in use or, if the Shares are not
quoted by any such organization, the average of the closing bid and asked prices
as furnished by a professional market maker making the market in the Shares as
such person is selected from time to time by the Board of Trustees of the
Company.
(b) The Trustee shall not be required to mitigate the amount of any payment
provided for in this Section 3 by seeking other trusteeships or otherwise, nor
shall the amount of any payment or benefit provided for in this Section 3 be
reduced by any compensation earned by him as the result of a trusteeship for
another company or by retirement benefits after the date of termination, or
otherwise, except as specifically provided in this Section 3.
4. SCALE-BACK. To the extent any benefits to be granted to the Trustee
hereunder constitute a "parachute payment" (within the meaning of Section
280G(b)(2) of the Code), and the Trustee would otherwise be liable for an excise
tax pursuant to Code Section 4999, there shall be a reduction in the benefits
payable or available to the Trustee hereunder such that the total parachute
payments will be less than three (3) times the Trustee's "base amount" (within
the meaning of Section 280G(b)(3) of the Code) with the result that the excise
tax under Code Section 4999 will not be payable; provided, however, that such
reduction shall occur only if the Trustee shall realize a greater after tax
economic benefit by making such reduction than if no reduction was made.
4. EXPENSES. (a) The Company shall pay or reimburse the Trustee, as the case
may be, for all legal and accounting fees and expenses incurred by the Trustee
in connection with the structuring, negotiation and preparation of this
Agreement.
(b) The Company shall pay or reimburse the Trustee, as the case may
be, for all legal fees and related expenses (including the costs of experts,
evidence and counsel) paid by the Trustee as a result of (i) the Trustee seeking
to obtain or enforce any right or benefit provided by this Agreement, or (ii)
any action taken by the Company against the Trustee in enforcing the Company's
rights hereunder; provided, however, that the Company shall reimburse the legal
fees and related expenses described in this subsection 4(b) only if and when a
final judgement has been rendered in favor of the Trustee and all appeals
related to any such action have been exhausted.
5. NO RETENTION RIGHTS OR OBLIGATIONS. Nothing contained herein shall confer
upon the Trustee the right to continue as a trustee of the Company or any
subsidiary or affiliate of the Company or affect any right that the Company or
any subsidiary or affiliate of the Company may have to terminate the service of
the Trustee at any time for any reason.
6. GOVERNING LAW; ARBITRATION. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of Maryland,
without regard to Maryland's conflicts of law principles. Any dispute or
controversy arising under this Agreement, or out of the interpretation hereof,
or based upon the breach hereof, shall be resolved by arbitration held at the
offices of the American Arbitration Association in the City of Philadelphia in
accordance with the rules and regulations of such association prevailing at the
time of the demand for arbitration by either party hereto, and the decision of
the arbitrator or arbitrators shall be final and binding upon both parties
hereto, provided, however, that the arbitrator or arbitrators shall only have
the power and authority to interpret, and not to modify or amend, the terms and
provisions hereof. Judg-ment upon an award rendered by the arbitrator or
arbitrators may be entered in any court having jurisdiction thereof.
Notwith-standing anything contained in this Section 6, either party shall have
the right to seek preliminary injunctive relief in any court in the City of
Philadelphia in aid of, and pending the final decision in, the arbitration
proceeding.
7. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement of the
parties and is intended to supersede all prior negotiations, understandings and
agree-ments with respect to the subject matter hereof. No provision of this
Agreement may be waived or changed, except by a writing signed by the party to
be charged with such waiver or change.
8. SUCCESSORS; BINDING AGREEMENT. This Agreement shall inure to the benefit
of, be binding upon and be enforceable by the Company, its successors and
assigns and the Trustee, and the Trustee's personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
lega-tees.
9. NOTICES. All notices provided for in this Agreement shall be in writing,
and shall be deemed to have been duly given when delivered personally to the
party to receive the same, when given by telex, telegram or mailgram, or when
mailed first class postage prepaid, by registered or certified mail, return
receipt requested, addressed to the party to receive the same at his or its
address above set forth, or such other address as the party to receive the same
shall have specified by written notice given in the manner provided for in this
Section 9. All notices shall be deemed to have been given as of the date of
personal delivery, transmittal or mailing thereof.
10. SEVERABILITY. If any provision in this Agreement is determined to be
invalid, it shall not affect the validity or enforceability of any of the other
remaining pro-visions hereof.
11. EXCULPATION. This Agreement and all documents, agreements,
understandings and arrangements relating to the matters described herein have
been executed by the undersigned in his/her capacity as an officer or trustee of
the Company which has been formed as a Maryland real estate investment trust
pursuant to an Amended and Restated Declaration of Trust of the Company, as
amended, and not individually, and neither the trustees, officers or
shareholders of the Company shall be bound or have any personal liability
hereunder or thereunder. The Trustee shall look solely to the assets of the
Company for satisfaction of any liability of the Company in respect of this
Agreement and all documents, agreements, understandings and arrangements
relating to this transaction and will not seek recourse or commence any action
against any of the trustees, officers or shareholders of the Company or any of
their personal assets for the performance or payment of any obligation hereunder
or thereunder. The foregoing shall also apply to any future documents,
agreements, understandings, arrangements and transactions between the parties
hereto.
IN WITNESS WHEREOF, the parties hereto have exe-cuted this Agreement as
of the date first above written.
KRANZCO REALTY TRUST
By: /s/ Norman M. Kranzdorf
TRUSTEE:
/s/ Peter J. Linneman
SEVERANCE BENEFITS AGREEMENT
AGREEMENT, dated as of March 28, 1997, between KRANZCO REALTY TRUST, a
Maryland real estate investment trust with offices at 128 Fayette Street,
Conshohocken, Pennsylvania 19428 (the "Company"), and James B. Selonick, an
individual residing at James B. Selonick Company, Federated Building, 16th
Floor, Seven West Seventh Street, Cincinnati, OH 45202 (the "Trustee").
WHEREAS, the Trustee has been a trustee of the Company to perform
certain services to the Company upon terms and conditions which the parties
hereto have previously agreed (the "Services");
WHEREAS, the Company recognizes that the Trustee's contributions to the
past and future growth of the Company has been substantial; and
WHEREAS, to induce the Trustee to remain as a trustee of the Company,
the parties hereto desire to set forth certain severance benefits which the
Company will pay to the Trustee in the event of a Change in Control of the
Company (as defined in Section 2 hereof).
IT IS AGREED:
1. TERM. This Agreement shall commence on the date hereof and shall terminate
upon the earlier of (a) the date on which the Company has satisfied all of its
obligations hereunder, or (b) the date on which the Trustee is no longer a
trustee of the Company for any reason whatsoever including, without limitation,
termination without cause. Notwithstanding the termination of this Agreement
subsequent to a Change in Control of the Company, in the event that the Trustee
is a trustee of the Company at the moment immediately prior to a Change in
Control of the Company, the Trustee shall be entitled to receive all benefits
described hereunder and the provisions hereof related thereto shall survive such
termination.
2. CHANGE IN CONTROL OF THE COMPANY. For purposes of this Agreement, a "Change
in Control of the Company" shall be deemed to occur if:
(i) there shall have occurred a change in control of a nature that
would be required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), as in effect on the date hereof, whether or not the
Company is then subject to such reporting requirement, provided, however, that
there shall not be deemed to be a Change in Control of the Company if
immediately prior to the occurrence of what would otherwise be a Change in
Control of the Company (a) the Trustee is the other party to the transaction (a
"Control of the Company Event") that would otherwise result in a Change in
Control of the Company or (b) the Trustee is an officer, trustee, director or
more than 5% equity holder of the other party to the Control of the Company
Event or of any entity, directly or indirectly, controlling such other party;
(ii) the Company merges or consolidates with, or sells all or
substantially all of its assets to, another company (each, a "Transaction"),
provided, however, that a Transaction shall not be deemed to result in a Change
in Control of the Company if (a) immediately prior thereto the circumstances in
(i)(a) or (i)(b) above exist, or (b) (1) the shareholders of the Company,
immediately before such Transaction own, directly or indirectly, immediately
following such Transaction in excess of fifty percent (50%) of the combined
voting power of the outstanding voting securities of the corporation or other
entity resulting from such Transaction (the "Surviving Corporation") in
substantially the same proportion as their ownership of the voting securities of
the Company immediately before such Transaction and (2) the individuals who were
members of the Company's Board of Trustees immediately prior to the execution of
the agreement providing for such Transaction constitute at least a majority of
the members of the board of directors or the board of trustees, as the case may
be, of the Surviving Corporation, or of a corporation or other entity
beneficially directly or indirectly owning a majority of the outstanding voting
securities of the Surviving Corporation; or
(iii) the Company acquires assets of another company or a
subsidiary of the Company merges or consolidates with another company (each, an
"Other Transaction") and (a) the shareholders of the Company, immediately before
such Other Transaction own, directly or indirectly, immediately following such
Other Transaction 50% or less of the combined voting power of the outstanding
voting securities of the corporation or other entity resulting from such Other
Transaction (the "Other Surviving Corporation") in substantially the same
proportion as their ownership of the voting securities of the Company
immediately before such Other Transaction or (b) the individuals who were
members of the Company's Board of Trustees immediately prior to the execution of
the agreement providing for such Other Transaction constitute less than a
majority of the members of the board of directors or the board of trustees, as
the case may be, of the Other Surviving Corporation, or of a corporation or
other entity beneficially directly or indirectly owning a majority of the
outstanding voting securities of the Other Surviving Corporation, provided,
however, that an Other Transaction shall not be deemed to result in a Change in
Control of the Company if immediately prior thereto the circumstances in (i)(a)
or (i)(b) above exist.
3. COMPENSATION UPON A CHANGE IN CONTROL OF THE COMPANY.
(a) (i) If the Trustee is a trustee of the Company at the moment
immediately prior to a Change in Control of the Company, the Trustee shall be
entitled to receive compensation in the form of cash equal to, on the date of a
Change in Control of the Company and with respect to each Option to purchase
common shares of beneficial interest of the Company (the "Shares") held by the
Trustee whether or not such Option has vested or is exercisable on such date (an
"Option"), the number of Shares underlying the Option, multiplied by the amount,
if any, that the exercise price of the Option or the Closing Share Value (as
defined below), whichever is less, exceeds the Initial Share Value (as defined
below).
(ii) With respect to each Option, in the event that the Closing
Share Value is greater than the exercise price of such Option, then the Trustee
can (1) retain the Option, or (2) forfeit the Option and receive, in exchange
therefor, a cash payment equal to the number of Shares underlying the Option
multiplied by the amount that the Closing Share Value exceeds the exercise price
of the Option.
(iii) For purposes of this subsection (a), the "Initial Share Value"
of an Option shall mean the average of the Closing Prices of the Shares for the
period commencing on the 180th day prior to the date of the Change in Control of
the Company and ending on the 150th day prior to the date of the Change in
Control of the Company, and the "Closing Share Value" shall mean the Closing
Price of the Shares on the date of the Change in Control of the Company. For
purposes of this subsection (a), the "Closing Price" of a Share on any date
shall mean the last sale price, regular way, or, in case no such sale takes
place on such date, the average of the closing bid and asked prices, regular
way, in either case as reported in the principal consolidated transaction
reporting system with respect to securities listed or admitted to trading on the
New York Stock Exchange or, if the Shares are not listed or admitted to trading
on the New York Stock Exchange, as reported in the principal consolidated
transaction reporting system with respect to securities listed on the principal
national securities exchange on which the Shares are listed or admitted to
trading or, if the Shares are not listed or admitted to trading on any national
securities exchange, the last quoted price, or if not so quoted, the average of
the highest bid and lowest ask prices in the over-the-counter market, as
reported by the National Association of Securities Dealers, Inc. Automated
Quotation System or, if such system is no longer used, the principal other
automated quotation system that may then be in use or, if the Shares are not
quoted by any such organization, the average of the closing bid and asked prices
as furnished by a professional market maker making the market in the Shares as
such person is selected from time to time by the Board of Trustees of the
Company.
(b) The Trustee shall not be required to mitigate the amount of any payment
provided for in this Section 3 by seeking other trusteeships or otherwise, nor
shall the amount of any payment or benefit provided for in this Section 3 be
reduced by any compensation earned by him as the result of a trusteeship for
another company or by retirement benefits after the date of termination, or
otherwise, except as specifically provided in this Section 3.
4. SCALE-BACK. To the extent any benefits to be granted to the Trustee
hereunder constitute a "parachute payment" (within the meaning of Section
280G(b)(2) of the Code), and the Trustee would otherwise be liable for an excise
tax pursuant to Code Section 4999, there shall be a reduction in the benefits
payable or available to the Trustee hereunder such that the total parachute
payments will be less than three (3) times the Trustee's "base amount" (within
the meaning of Section 280G(b)(3) of the Code) with the result that the excise
tax under Code Section 4999 will not be payable; provided, however, that such
reduction shall occur only if the Trustee shall realize a greater after tax
economic benefit by making such reduction than if no reduction was made.
4. EXPENSES. (a) The Company shall pay or reimburse the Trustee, as the case
may be, for all legal and accounting fees and expenses incurred by the Trustee
in connection with the structuring, negotiation and preparation of this
Agreement.
(b) The Company shall pay or reimburse the Trustee, as the case may
be, for all legal fees and related expenses (including the costs of experts,
evidence and counsel) paid by the Trustee as a result of (i) the Trustee seeking
to obtain or enforce any right or benefit provided by this Agreement, or (ii)
any action taken by the Company against the Trustee in enforcing the Company's
rights hereunder; provided, however, that the Company shall reimburse the legal
fees and related expenses described in this subsection 4(b) only if and when a
final judgement has been rendered in favor of the Trustee and all appeals
related to any such action have been exhausted.
5. NO RETENTION RIGHTS OR OBLIGATIONS. Nothing contained herein shall confer
upon the Trustee the right to continue as a trustee of the Company or any
subsidiary or affiliate of the Company or affect any right that the Company or
any subsidiary or affiliate of the Company may have to terminate the service of
the Trustee at any time for any reason.
6. GOVERNING LAW; ARBITRATION. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of Maryland,
without regard to Maryland's conflicts of law principles. Any dispute or
controversy arising under this Agreement, or out of the interpretation hereof,
or based upon the breach hereof, shall be resolved by arbitration held at the
offices of the American Arbitration Association in the City of Philadelphia in
accordance with the rules and regulations of such association prevailing at the
time of the demand for arbitration by either party hereto, and the decision of
the arbitrator or arbitrators shall be final and binding upon both parties
hereto, provided, however, that the arbitrator or arbitrators shall only have
the power and authority to interpret, and not to modify or amend, the terms and
provisions hereof. Judg-ment upon an award rendered by the arbitrator or
arbitrators may be entered in any court having jurisdiction thereof.
Notwith-standing anything contained in this Section 6, either party shall have
the right to seek preliminary injunctive relief in any court in the City of
Philadelphia in aid of, and pending the final decision in, the arbitration
proceeding.
7. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement of the
parties and is intended to supersede all prior negotiations, understandings and
agree-ments with respect to the subject matter hereof. No provision of this
Agreement may be waived or changed, except by a writing signed by the party to
be charged with such waiver or change.
8. SUCCESSORS; BINDING AGREEMENT. This Agreement shall inure to the benefit
of, be binding upon and be enforceable by the Company, its successors and
assigns and the Trustee, and the Trustee's personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
lega-tees.
9. NOTICES. All notices provided for in this Agreement shall be in writing,
and shall be deemed to have been duly given when delivered personally to the
party to receive the same, when given by telex, telegram or mailgram, or when
mailed first class postage prepaid, by registered or certified mail, return
receipt requested, addressed to the party to receive the same at his or its
address above set forth, or such other address as the party to receive the same
shall have specified by written notice given in the manner provided for in this
Section 9. All notices shall be deemed to have been given as of the date of
personal delivery, transmittal or mailing thereof.
10. SEVERABILITY. If any provision in this Agreement is determined to be
invalid, it shall not affect the validity or enforceability of any of the other
remaining pro-visions hereof.
11. EXCULPATION. This Agreement and all documents, agreements,
understandings and arrangements relating to the matters described herein have
been executed by the undersigned in his/her capacity as an officer or trustee of
the Company which has been formed as a Maryland real estate investment trust
pursuant to an Amended and Restated Declaration of Trust of the Company, as
amended, and not individually, and neither the trustees, officers or
shareholders of the Company shall be bound or have any personal liability
hereunder or thereunder. The Trustee shall look solely to the assets of the
Company for satisfaction of any liability of the Company in respect of this
Agreement and all documents, agreements, understandings and arrangements
relating to this transaction and will not seek recourse or commence any action
against any of the trustees, officers or shareholders of the Company or any of
their personal assets for the performance or payment of any obligation hereunder
or thereunder. The foregoing shall also apply to any future documents,
agreements, understandings, arrangements and transactions between the parties
hereto.
IN WITNESS WHEREOF, the parties hereto have exe-cuted this Agreement as
of the date first above written.
KRANZCO REALTY TRUST
By: /s/ Norman M. Kranzdorf
TRUSTEE:
/s/ James B. Selonick
SEVERANCE BENEFITS AGREEMENT
AGREEMENT, dated as of March 28, 1997, between KRANZCO REALTY TRUST, a
Maryland real estate investment trust with offices at 128 Fayette Street,
Conshohocken, Pennsylvania 19428 (the "Company"), and E. Donald Shapiro, an
individual residing at New York School of Law, 57 Worth Street, New York, NY
10013 (the "Trustee").
WHEREAS, the Trustee has been a trustee of the Company to perform
certain services to the Company upon terms and conditions which the parties
hereto have previously agreed (the "Services");
WHEREAS, the Company recognizes that the Trustee's contributions to the
past and future growth of the Company has been substantial; and
WHEREAS, to induce the Trustee to remain as a trustee of the Company,
the parties hereto desire to set forth certain severance benefits which the
Company will pay to the Trustee in the event of a Change in Control of the
Company (as defined in Section 2 hereof).
IT IS AGREED:
TERM. This Agreement shall commence on the date hereof and shall terminate
upon the earlier of (a) the date on which the Company has satisfied all of its
obligations hereunder, or (b) the date on which the Trustee is no longer a
trustee of the Company for any reason whatsoever including, without limitation,
termination without cause. Notwithstanding the termination of this Agreement
subsequent to a Change in Control of the Company, in the event that the Trustee
is a trustee of the Company at the moment immediately prior to a Change in
Control of the Company, the Trustee shall be entitled to receive all benefits
described hereunder and the provisions hereof related thereto shall survive such
termination.
CHANGE IN CONTROL OF THE COMPANY. For purposes of this Agreement, a "Change
in Control of the Company" shall be deemed to occur if:
(i) there shall have occurred a change in control of a nature that
would be required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), as in effect on the date hereof, whether or not the
Company is then subject to such reporting requirement, provided, however, that
there shall not be deemed to be a Change in Control of the Company if
immediately prior to the occurrence of what would otherwise be a Change in
Control of the Company (a) the Trustee is the other party to the transaction (a
"Control of the Company Event") that would otherwise result in a Change in
Control of the Company or (b) the Trustee is an officer, trustee, director or
more than 5% equity holder of the other party to the Control of the Company
Event or of any entity, directly or indirectly, controlling such other party;
(ii) the Company merges or consolidates with, or sells all or
substantially all of its assets to, another company (each, a "Transaction"),
provided, however, that a Transaction shall not be deemed to result in a Change
in Control of the Company if (a) immediately prior thereto the circumstances in
(i)(a) or (i)(b) above exist, or (b) (1) the shareholders of the Company,
immediately before such Transaction own, directly or indirectly, immediately
following such Transaction in excess of fifty percent (50%) of the combined
voting power of the outstanding voting securities of the corporation or other
entity resulting from such Transaction (the "Surviving Corporation") in
substantially the same proportion as their ownership of the voting securities of
the Company immediately before such Transaction and (2) the individuals who were
members of the Company's Board of Trustees immediately prior to the execution of
the agreement providing for such Transaction constitute at least a majority of
the members of the board of directors or the board of trustees, as the case may
be, of the Surviving Corporation, or of a corporation or other entity
beneficially directly or indirectly owning a majority of the outstanding voting
securities of the Surviving Corporation; or
(iii) the Company acquires assets of another company or a
subsidiary of the Company merges or consolidates with another company (each, an
"Other Transaction") and (a) the shareholders of the Company, immediately before
such Other Transaction own, directly or indirectly, immediately following such
Other Transaction 50% or less of the combined voting power of the outstanding
voting securities of the corporation or other entity resulting from such Other
Transaction (the "Other Surviving Corporation") in substantially the same
proportion as their ownership of the voting securities of the Company
immediately before such Other Transaction or (b) the individuals who were
members of the Company's Board of Trustees immediately prior to the execution of
the agreement providing for such Other Transaction constitute less than a
majority of the members of the board of directors or the board of trustees, as
the case may be, of the Other Surviving Corporation, or of a corporation or
other entity beneficially directly or indirectly owning a majority of the
outstanding voting securities of the Other Surviving Corporation, provided,
however, that an Other Transaction shall not be deemed to result in a Change in
Control of the Company if immediately prior thereto the circumstances in (i)(a)
or (i)(b) above exist.
COMPENSATION UPON A CHANGE IN CONTROL OF THE COMPANY.
(i) If the Trustee is a trustee of the Company at the moment immediately
prior to a Change in Control of the Company, the Trustee shall be entitled to
receive compensation in the form of cash equal to, on the date of a Change in
Control of the Company and with respect to each Option to purchase common shares
of beneficial interest of the Company (the "Shares") held by the Trustee whether
or not such Option has vested or is exercisable on such date (an "Option"), the
number of Shares underlying the Option, multiplied by the amount, if any, that
the exercise price of the Option or the Closing Share Value (as defined below),
whichever is less, exceeds the Initial Share Value (as defined below).
(ii) With respect to each Option, in the event that the Closing
Share Value is greater than the exercise price of such Option, then the Trustee
can (1) retain the Option, or (2) forfeit the Option and receive, in exchange
therefor, a cash payment equal to the number of Shares underlying the Option
multiplied by the amount that the Closing Share Value exceeds the exercise price
of the Option.
(iii) For purposes of this subsection (a), the "Initial Share Value"
of an Option shall mean the average of the Closing Prices of the Shares for the
period commencing on the 180th day prior to the date of the Change in Control of
the Company and ending on the 150th day prior to the date of the Change in
Control of the Company, and the "Closing Share Value" shall mean the Closing
Price of the Shares on the date of the Change in Control of the Company. For
purposes of this subsection (a), the "Closing Price" of a Share on any date
shall mean the last sale price, regular way, or, in case no such sale takes
place on such date, the average of the closing bid and asked prices, regular
way, in either case as reported in the principal consolidated transaction
reporting system with respect to securities listed or admitted to trading on the
New York Stock Exchange or, if the Shares are not listed or admitted to trading
on the New York Stock Exchange, as reported in the principal consolidated
transaction reporting system with respect to securities listed on the principal
national securities exchange on which the Shares are listed or admitted to
trading or, if the Shares are not listed or admitted to trading on any national
securities exchange, the last quoted price, or if not so quoted, the average of
the highest bid and lowest ask prices in the over-the-counter market, as
reported by the National Association of Securities Dealers, Inc. Automated
Quotation System or, if such system is no longer used, the principal other
automated quotation system that may then be in use or, if the Shares are not
quoted by any such organization, the average of the closing bid and asked prices
as furnished by a professional market maker making the market in the Shares as
such person is selected from time to time by the Board of Trustees of the
Company.
The Trustee shall not be required to mitigate the amount of any payment
provided for in this Section 3 by seeking other trusteeships or otherwise, nor
shall the amount of any payment or benefit provided for in this Section 3 be
reduced by any compensation earned by him as the result of a trusteeship for
another company or by retirement benefits after the date of termination, or
otherwise, except as specifically provided in this Section 3.
4. SCALE-BACK. To the extent any benefits to be granted to the Trustee
hereunder constitute a "parachute payment" (within the meaning of Section
280G(b)(2) of the Code), and the Trustee would otherwise be liable for an excise
tax pursuant to Code Section 4999, there shall be a reduction in the benefits
payable or available to the Trustee hereunder such that the total parachute
payments will be less than three (3) times the Trustee's "base amount" (within
the meaning of Section 280G(b)(3) of the Code) with the result that the excise
tax under Code Section 4999 will not be payable; provided, however, that such
reduction shall occur only if the Trustee shall realize a greater after tax
economic benefit by making such reduction than if no reduction was made.
EXPENSES. (a) The Company shall pay or reimburse the Trustee, as the case
may be, for all legal and accounting fees and expenses incurred by the Trustee
in connection with the structuring, negotiation and preparation of this
Agreement.
(b) The Company shall pay or reimburse the Trustee, as the case may
be, for all legal fees and related expenses (including the costs of experts,
evidence and counsel) paid by the Trustee as a result of (i) the Trustee seeking
to obtain or enforce any right or benefit provided by this Agreement, or (ii)
any action taken by the Company against the Trustee in enforcing the Company's
rights hereunder; provided, however, that the Company shall reimburse the legal
fees and related expenses described in this subsection 4(b) only if and when a
final judgement has been rendered in favor of the Trustee and all appeals
related to any such action have been exhausted.
NO RETENTION RIGHTS OR OBLIGATIONS. Nothing contained herein shall confer
upon the Trustee the right to continue as a trustee of the Company or any
subsidiary or affiliate of the Company or affect any right that the Company or
any subsidiary or affiliate of the Company may have to terminate the service of
the Trustee at any time for any reason.
GOVERNING LAW; ARBITRATION. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of Maryland,
without regard to Maryland's conflicts of law principles. Any dispute or
controversy arising under this Agreement, or out of the interpretation hereof,
or based upon the breach hereof, shall be resolved by arbitration held at the
offices of the American Arbitration Association in the City of Philadelphia in
accordance with the rules and regulations of such association prevailing at the
time of the demand for arbitration by either party hereto, and the decision of
the arbitrator or arbitrators shall be final and binding upon both parties
hereto, provided, however, that the arbitrator or arbitrators shall only have
the power and authority to interpret, and not to modify or amend, the terms and
provisions hereof. Judg-ment upon an award rendered by the arbitrator or
arbitrators may be entered in any court having jurisdiction thereof.
Notwith-standing anything contained in this Section 6, either party shall have
the right to seek preliminary injunctive relief in any court in the City of
Philadelphia in aid of, and pending the final decision in, the arbitration
proceeding.
ENTIRE AGREEMENT. This Agreement sets forth the entire agreement of the
parties and is intended to supersede all prior negotiations, understandings and
agree-ments with respect to the subject matter hereof. No provision of this
Agreement may be waived or changed, except by a writing signed by the party to
be charged with such waiver or change.
SUCCESSORS; BINDING AGREEMENT. This Agreement shall inure to the benefit of,
be binding upon and be enforceable by the Company, its successors and assigns
and the Trustee, and the Trustee's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and lega-tees.
NOTICES. All notices provided for in this Agree-ment shall be in writing, and
shall be deemed to have been duly given when delivered personally to the party
to receive the same, when given by telex, telegram or mailgram, or when mailed
first class postage prepaid, by registered or certified mail, return receipt
requested, addressed to the party to receive the same at his or its address
above set forth, or such other address as the party to receive the same shall
have specified by written notice given in the manner provided for in this
Section 9. All notices shall be deemed to have been given as of the date of
personal delivery, transmittal or mailing thereof.
SEVERABILITY. If any provision in this Agreement is determined to be invalid,
it shall not affect the validity or enforceability of any of the other remaining
pro-visions hereof.
EXCULPATION. This Agreement and all documents, agreements, understandings
and arrangements relating to the matters described herein have been executed by
the undersigned in his/her capacity as an officer or trustee of the Company
which has been formed as a Maryland real estate investment trust pursuant to an
Amended and Restated Declaration of Trust of the Company, as amended, and not
individually, and neither the trustees, officers or shareholders of the Company
shall be bound or have any personal liability hereunder or thereunder. The
Trustee shall look solely to the assets of the Company for satisfaction of any
liability of the Company in respect of this Agreement and all documents,
agreements, understandings and arrangements relating to this transaction and
will not seek recourse or commence any action against any of the trustees,
officers or shareholders of the Company or any of their personal assets for the
performance or payment of any obligation hereunder or thereunder. The foregoing
shall also apply to any future documents, agreements, understandings,
arrangements and transactions between the parties hereto.
IN WITNESS WHEREOF, the parties hereto have exe-cuted this Agreement as
of the date first above written.
KRANZCO REALTY TRUST
By: /s/ Norman M. Kranzdorf
TRUSTEE:
/s/ E. Donald Shapiro
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<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<PERIOD-TYPE> 6-MOS
<CASH> 4,517,000
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<RECEIVABLES> 10,376,000
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<PP&E> 441,830,000
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41,181,000
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<SALES> 0
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