SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
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KRANZCO REALTY TRUST
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[CV Logo] [Kranzco Logo]
Dear Shareholder:
The board of directors of CV Reit, Inc. and the board of trustees of
Kranzco Realty Trust have approved a merger agreement that would result in
the tax-free combination of the businesses of CV and Kranzco into a newly
formed entity, Kramont Realty Trust, a Maryland real estate investment trust.
CV shareholders will receive one Kramont common share for each CV common
share they own. Kranzco shareholders will receive one Kramont common share
for each Kranzco common share that they own prior to the pre-merger
transactions described in the merger agreement. Each Kranzco preferred share
outstanding prior to the pre-merger transactions described in the merger
agreement will convert into one preferred share of Kramont with the same
rights.
The mergers cannot be completed without the affirmative vote of CV
shareholders owning a majority of the outstanding common shares of CV and the
affirmative vote of Kranzco shareholders owning two-thirds of the outstanding
common shares of Kranzco. Each of our companies will hold a special meeting
of its shareholders to consider and vote on the combination of the businesses
of CV and Kranzco into Kramont and the merger agreement.
The directors of CV unanimously recommend that all CV shareholders vote
for approval of the merger and the merger agreement. The trustees of Kranzco
unanimously recommend that all Kranzco shareholders vote for approval of the
merger.
The dates, times and places of the meetings are:
FOR CV SHAREHOLDERS: FOR KRANZCO SHAREHOLDERS:
June 6, 2000, 10:30 a.m., June 6, 2000, 9:30 a.m.,
local time local time
Peninsula Hotel Philadelphia Marriott West
700 Fifth Avenue, at 55th Street Matson Ford Road and Route 23
3rd floor (La Grande Salle) West Conshohocken, PA 19428
New York, NY 10019
This document provides you with detailed information about the meetings
and the proposed mergers. We encourage you to read this entire document
carefully. IN PARTICULAR, YOU SHOULD READ THE "RISK FACTORS" SECTION
BEGINNING ON PAGE 22 FOR A DESCRIPTION OF RISKS THAT YOU SHOULD CONSIDER IN
EVALUATING THE MERGERS. You may also obtain information about our companies
from publicly available documents that our companies have filed with the
Securities and Exchange Commission.
YOUR VOTE IS VERY IMPORTANT. Please take the time to complete the
enclosed proxy card and return it in the return envelope provided, even if
you plan to attend your shareholders' meeting. If you are a Kranzco
shareholder of record, you may also, by telephone or over the Internet, as
described in the enclosed joint proxy statement/prospectus, authorize a proxy
to cast your votes. You may revoke your proxy in the manner described in the
accompanying document at any time before it has been voted at your special
meeting. The solicitations are made on behalf of the board of directors of CV
with respect to the CV shareholders and on behalf of the board of trustees of
Kranzco with respect to the Kranzco shareholders.
Louis P. Meshon, Sr. Norman M. Kranzdorf
President and Chief Executive Officer President and Chief Executive Officer
CV Reit, Inc. Kranzco Realty Trust
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OF THE MERGERS OR THE SECURITIES TO BE ISSUED UNDER
THIS JOINT PROXY STATEMENT/PROSPECTUS OR DETERMINED IF THIS JOINT PROXY
STATEMENT/PROSPECTUS IS ACCURATE OR ADEQUATE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this joint proxy statement/prospectus is April 14, 2000, and
it is first being mailed to shareholders on April 14, 2000.
<PAGE>
KRANZCO REALTY TRUST
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
A special meeting of shareholders of Kranzco Realty Trust, a Maryland
real estate investment trust, will be held at the Philadelphia Marriott West,
Matson Ford Road and Route 23, West Conshohocken, PA 19428, on June 6, 2000,
at 9:30 a.m., local time, to consider and vote on the following:
1. A proposal to approve the merger of KRT Trust, a Maryland real
estate investment trust and the successor to Kranzco, with and into
Kramont Realty Trust, a Maryland real estate investment trust,
pursuant to an Agreement and Plan of Reorganization and Merger,
dated as of December 10, 1999, as amended, including the amendment
and restatement of Kramont's declaration of trust;
2. A proposal to adopt and approve the 2000 Incentive Plan of Kramont
Realty Trust; and
3. To transact other business as may properly come before the meeting
and any adjournments of the meeting.
As more fully described in the accompanying joint proxy
statement/prospectus, approval of the merger of KRT Trust into Kramont is,
together with the approval by the shareholders of CV Reit, Inc., a Delaware
corporation, of the merger of CV into Kramont, a prerequisite to the
effectiveness of certain additional transactions.
Only Kranzco common shareholders of record as of the close of business
on April 10, 2000 will be entitled to vote at the meeting and at any
adjournments or postponements that may take place.
By order of the board of trustees,
Hermina Kranzdorf
Secretary
Conshohocken, PA 19428
April 14, 2000
<PAGE>
TABLE OF CONTENTS
Page
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QUESTIONS AND ANSWERS ABOUT THE MERGERS. . . . . . . . . . . . . . . . . . 1
SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
OWNERSHIP STRUCTURE. . . . . . . . . . . . . . . . . . . . . . . . . . . .11
CV SELECTED FINANCIAL AND OPERATING DATA . . . . . . . . . . . . . . . . .12
KRANZCO SELECTED FINANCIAL AND OPERATING DATA. . . . . . . . . . . . . . .14
KRAMONT SUMMARY PRO FORMA CONSOLIDATED CONDENSED
FINANCIAL DATA (UNAUDITED) . . . . . . . . . . . . . . . . . . . . . . . .16
COMPARATIVE MARKET AND PER SHARE DATA. . . . . . . . . . . . . . . . . . .18
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS. . . . . . . . .20
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
The directors and officers of CV and trustees and officers of
Kranzco may have interests that are different from the
interests of the CV and Kranzco shareholders generally . . . . .22
The fixed exchange ratio may not reflect changes in market
values of shares . . . . . . . . . . . . . . . . . . . . . . . .22
Even though the Kranzco shareholders will receive a majority of
the Kramont shares, a majority of the Board of Trustees of
Kramont will consist of current members of the CV Board
of Directors and CV will be treated as the acquirer for
accounting purposes. . . . . . . . . . . . . . . . . . . . . . .22
Payments of fees and expenses by CV and Kranzco if the merger
fails to occur could adversely affect their ability to
engage in other transactions . . . . . . . . . . . . . . . . . .23
Other than holders of Kranzco Series A-1 preferred shares,
shareholders of CV and Kranzco have no appraisal rights. . . . .23
If the mergers are completed, the Kramont common shares to be
received by the CV common shareholders will be subject to
the rights of Kramont preferred shareholders . . . . . . . . . .23
If the mergers are completed, holders of Kramont Series B-1
preferred shares will have the right to vote their preferred
shares with the Kramont common shareholders. . . . . . . . . . .23
Holders of Partnership Units in Montgomery CV Realty L.P. will
have an opportunity to benefit from the operations of Kramont
disproportionately to Kramont common shareholders. . . . . . . .24
As a shareholder of a REIT, you may be liable for certain claims
against Kramont. . . . . . . . . . . . . . . . . . . . . . . . .24
Upon completion of the mergers, CV shareholders will lose
protections against reduction of CV's dividend . . . . . . . . .24
Combining CV and Kranzco may have potential adverse
effects on operations and savings. . . . . . . . . . . . . . . .24
The issuance of additional Kramont shares may reduce the market
price for Kramont shares . . . . . . . . . . . . . . . . . . . .25
Our combined company will depend on key personnel . . . . . . . . . .25
Financing Risks . . . . . . . . . . . . . . . . . . . . . . . . . . .25
General Real Estate Risks . . . . . . . . . . . . . . . . . . . . . .27
Federal Income Tax Risks. . . . . . . . . . . . . . . . . . . . . . .30
Certain provisions of the Maryland General Corporation Law and
Kramont's Declaration of Trust may inhibit business
combinations . . . . . . . . . . . . . . . . . . . . . . . . . .32
ABOUT THIS JOINT PROXY STATEMENT/PROSPECTUS. . . . . . . . . . . . . . . .33
THE MEETING OF CV SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . .33
Time and Place; Purposes. . . . . . . . . . . . . . . . . . . . . . .33
Voting Rights; Votes Required for Approval. . . . . . . . . . . . . .33
Solicitation. . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
Dissenters' Appraisal Rights. . . . . . . . . . . . . . . . . . . . .34
Other Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
THE MEETING OF KRANZCO SHAREHOLDERS. . . . . . . . . . . . . . . . . . . .35
Time and Place; Purposes. . . . . . . . . . . . . . . . . . . . . . .35
Voting Rights; Votes Required for Approval. . . . . . . . . . . . . .35
Solicitation. . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
Dissenters' Appraisal Rights. . . . . . . . . . . . . . . . . . . . .36
Other Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
PRE-MERGER TRANSACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . .37
Kranzco Reorganization Transactions . . . . . . . . . . . . . . . . .37
CV Trust Merger . . . . . . . . . . . . . . . . . . . . . . . . . . .38
Private Placement Offering of Kramont Operating Partnership, L.P.
Partnership Units . . . . . . . . . . . . . . . . . . . . . . . . . .38
THE MERGERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40
Terms of the Merger . . . . . . . . . . . . . . . . . . . . . . . . .40
Background of the Mergers . . . . . . . . . . . . . . . . . . . . . .40
Reasons for the Merger; Recommendation of the CV Board of Directors .46
Opinion of CV's Financial Advisor . . . . . . . . . . . . . . . . . .49
Reasons for the Mergers; Recommendation of the Kranzco Board of
Trustees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .54
Opinion of Financial Advisor to Kranzco Board . . . . . . . . . . . .56
Interests of CV Executive Officers and Directors in the Mergers . . .60
Interests of Kranzco Executive Officers and Trustees in the Mergers .62
Voting Agreements . . . . . . . . . . . . . . . . . . . . . . . . . .64
Material Federal Income Tax Consequences. . . . . . . . . . . . . . .65
Accounting Treatment. . . . . . . . . . . . . . . . . . . . . . . . .78
Appraisal Rights. . . . . . . . . . . . . . . . . . . . . . . . . . .78
MERGER AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . .79
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .79
Effective Time of the Mergers . . . . . . . . . . . . . . . . . . . .80
Exchange of Certificates for CV and KRT Trust Shares. . . . . . . . .80
Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .81
Representations and Warranties. . . . . . . . . . . . . . . . . . . .81
Certain Covenants . . . . . . . . . . . . . . . . . . . . . . . . . .83
Other Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . .84
Listing of Shares . . . . . . . . . . . . . . . . . . . . . . . . . .85
Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .85
No Solicitation of Transactions . . . . . . . . . . . . . . . . . . .85
Conditions to the Mergers . . . . . . . . . . . . . . . . . . . . . .86
Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . .89
Termination Fees and Expenses . . . . . . . . . . . . . . . . . . . .90
Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . .91
Amendment and Waiver. . . . . . . . . . . . . . . . . . . . . . . . .91
THE COMPANIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .91
CV Reit, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . .91
Kranzco Realty Trust. . . . . . . . . . . . . . . . . . . . . . . . .95
KRT Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
Kramont Realty Trust. . . . . . . . . . . . . . . . . . . . . . . . 101
MANAGEMENT OF KRAMONT FOLLOWING THE MERGERS. . . . . . . . . . . . . . . 102
Trustees and Executive Officers . . . . . . . . . . . . . . . . . . 102
Trustee Compensation. . . . . . . . . . . . . . . . . . . . . . . . 104
Board Committees. . . . . . . . . . . . . . . . . . . . . . . . . . 104
Executive Compensation. . . . . . . . . . . . . . . . . . . . . . . 104
Employment Agreements . . . . . . . . . . . . . . . . . . . . . . . 105
CERTAIN TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 107
OPERATING, ACQUISITION, FINANCING AND GENERAL INVESTMENT STRATEGIES
OF KRAMONT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
Operating Strategies. . . . . . . . . . . . . . . . . . . . . . . . 109
Acquisition Strategies. . . . . . . . . . . . . . . . . . . . . . . 109
Financing Strategies. . . . . . . . . . . . . . . . . . . . . . . . 110
General Investment Strategies . . . . . . . . . . . . . . . . . . . 110
PRINCIPAL SHAREHOLDERS OF KRAMONT. . . . . . . . . . . . . . . . . . . . 110
COMPARISON OF RIGHTS OF SHAREHOLDERS . . . . . . . . . . . . . . . . . . 112
Comparison of Rights of Holders of CV Common Shares and Holders
of Kramont Common Shares . . . . . . . . . . . . . . . . . . . 112
Comparison of Rights of Holders of Kranzco Common and Preferred
Shares and Kramont Common and Preferred Shares . . . . . . . . 120
DESCRIPTION OF KRAMONT SHARES. . . . . . . . . . . . . . . . . . . . . . 127
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
Common Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
Preferred Shares. . . . . . . . . . . . . . . . . . . . . . . . . . 128
No Preemptive Rights. . . . . . . . . . . . . . . . . . . . . . . . 142
Power to Issue Additional Common Shares and Preferred Shares. . . . 142
Restrictions on Transfer. . . . . . . . . . . . . . . . . . . . . . 142
Transfer Agent and Registrar. . . . . . . . . . . . . . . . . . . . 145
DESCRIPTION OF THE PARTNERSHIP AGREEMENTS OF KRAMONT OPERATING
PARTNERSHIP, L.P. AND MONTGOMERY CV REALTY L.P.. . . . . . . . . . . . . 146
KRAMONT PRO FORMA FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . 150
PROPOSAL TO APPROVE KRAMONT'S 2000 INCENTIVE PLAN. . . . . . . . . . . . 155
LEGAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161
EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161
FUTURE SHAREHOLDER PROPOSALS . . . . . . . . . . . . . . . . . . . . . . 162
WHERE YOU CAN FIND MORE INFORMATION. . . . . . . . . . . . . . . . . . . 162
APPENDIX A Agreement and Plan of Reorganization and
Merger, as amended. . . . . . . . . . . . . . . . . . . . A-1
APPENDIX B Opinion of Salomon Smith Barney Inc.. . . . . . . . . . . B-1
APPENDIX C Opinion of ING Barings LLC. . . . . . . . . . . . . . . . C-1
APPENDIX D Articles of Amendment and Restatement of Kramont
Realty Trust . . . . . . . . . . . . . . . . . . . . D-1
APPENDIX E Amended and Restated Agreement of Limited Partnership of
Kramont Operating Partnership, L.P.. . . . . . . . . E-1
APPENDIX F The Kramont 2000 Incentive Plan . . . . . . . . . . . . . F-1
<PAGE>
This document incorporates important business and financial information
about CV and Kranzco that is not included in or delivered with this document.
CV will provide you with copies of the incorporated documents containing
information relating to CV, without charge, upon written or oral request to:
CV REIT, INC.
100 Century Boulevard
West Palm Beach, FL 33417
Telephone: (561) 640-3155
Kranzco will provide you with copies of the incorporated documents
containing information relating to Kranzco, without charge, upon written or
oral request to:
KRANZCO REALTY TRUST
128 Fayette Street
Conshohocken, PA 19428
Telephone: (610) 941-9292
IN ORDER TO RECEIVE TIMELY DELIVERY OF THE DOCUMENTS IN ADVANCE OF YOUR
SPECIAL MEETING, YOU SHOULD MAKE YOUR REQUEST NO LATER THAN MAY 26, 2000.
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGERS
Q: WHY ARE THE SPECIAL MEETINGS BEING CALLED?
A: The special meetings are being called so that the shareholders of CV and
Kranzco can vote to approve the combination of the businesses of CV and
Kranzco into a newly formed company, Kramont.
Q: WHY ARE THE TWO COMPANIES PROPOSING TO MERGE? HOW WILL I BENEFIT?
A: CV believes that the combination will benefit the shareholders of CV for
the reasons described below.
The CV shareholders will benefit from:
o the substantial increase in the gross leasable area of the real
estate portfolio of the combined company as compared to the gross
leasable area of CV's real estate portfolio;
o the opportunity presented to CV's management, led by Louis P.
Meshon, Sr., to upgrade some of Kranzco's properties and improve
the occupancy rate of Kranzco's properties;
o the geographic and tenant diversity of the combined company's
properties;
o an expected increase in the distribution rate payable to
shareholders, at least during the first year after the mergers are
completed;
o the increased number of shares in the combined company available
for trading; and
o acquiring an equity interest in a much larger, more diversified
shopping center real estate investment trust.
Kranzco believes that the combination will benefit the shareholders of
Kranzco for the reasons described below.
The Kranzco shareholders will benefit from:
o CV's high occupancy rates and its management and leasing expertise
which is anticipated to increase the occupancy rates of Kranzco's
properties;
o the unencumbered cash from CV's unutilized borrowing capacity which
is expected to increase the capacity of the combined company to
finance the redevelopment and upgrading of existing Kranzco
properties, and potentially in the future, acquisitions of
additional properties; and
o the ownership structure of the combined company. As a result of
this structure, called an UPREIT structure, potential transferors
of property to the combined company may be able to transfer
property to Kramont on a tax-deferred basis, facilitating Kramont's
acquisition of properties.
-1-
<PAGE>
In addition, the fact that Louis P. Meshon, Sr., 59, will be the
President and Chief Executive Officer of Kramont, and Norman M.
Kranzdorf, 69, will be the Chairman of the Board of Kramont, is expected
to provide for succession of management for Kranzco shareholders.
Q. ARE THERE ANY POSSIBLE DISADVANTAGES TO THE MERGERS?
A. Although CV and Kranzco believe that the mergers will benefit their
respective shareholders, they considered the possible disadvantages
described below.
Among other things, CV and Kranzco may be disadvantaged by the mergers
because of the significant costs and management time and effort
involved.
In addition, CV considered:
o that Kramont's declaration of trust and bylaws do not include
provisions like those in CV's certificate of incorporation and
bylaws to protect against reductions in the amount of dividends;
o the Kramont shares to be received by CV's shareholders will be
subject to the prior rights of Kramont's preferred shares;
o the termination of the merger agreement under some circumstances
may require CV to pay a significant fee to Kranzco and reimburse a
significant amount of Kranzco's expenses; and
o the potential adverse financial consequences which could result
from the need to obtain material consents, waivers or approvals.
In addition, Kranzco considered:
o that it may be prohibited from combining with another party besides
CV; and
o the termination of the merger agreement under some circumstances
may require Kranzco to pay a significant fee to CV and reimburse a
significant amount of CV's expenses.
Neither CV nor Kranzco, however, believe these factors affecting its
shareholders outweigh the benefits of the mergers.
Q: WHAT WILL I RECEIVE IN THE MERGERS?
A: CV common shareholders will receive one common share of Kramont in
exchange for each of their common shares in CV.
Kranzco common shareholders will receive one common share of Kramont in
exchange for each of their common shares in Kranzco. Each Kranzco
preferred share will convert into one preferred share of Kramont with
the same rights.
-2-
<PAGE>
Q: DO I HAVE APPRAISAL RIGHTS?
A: No, unless you hold Kranzco's Series A-1 preferred shares, which
appraisal rights are described on page 78 of this joint proxy
statement/prospectus.
Q: WHEN DO YOU EXPECT THE MERGERS TO BE COMPLETED?
A: We hope to complete the mergers during the second quarter of 2000.
Q: WHAT WILL KRAMONT'S DISTRIBUTION POLICY BE FOR ITS COMMON SHAREHOLDERS?
A: Following the mergers, Kramont's board of trustees will use its
discretion to decide the amount of any distributions. In making its
decision, the board of trustees will consider various factors, including
the earnings and financial condition of Kramont and its subsidiaries.
The merger agreement provides that, subject to the exercise of its
duties under applicable law, the policy of the board of trustees of
Kramont will be to pay cash distributions on the Kramont common shares
for the first year following the effective time of the mergers on a
quarterly basis at the rate of $0.325 per quarter, which equates to
$1.30 annually for each common share. It is expected that Kramont in
any event will make distributions in a sufficient amount to continue to
qualify as a real estate investment trust. For CV shareholders, this
represents an increase of approximately 12% above the current CV
distribution rate. For Kranzco shareholders, it is the same rate that
Kranzco currently pays its shareholders.
Q: WHAT VOTE IS REQUIRED TO APPROVE THE MERGERS?
A: The merger agreement must be adopted by the affirmative vote of CV
shareholders owning a majority of the outstanding common shares of CV,
and the combination of the business of Kranzco into Kramont must be
approved by the affirmative vote of Kranzco shareholders owning two-
thirds of the outstanding common shares of Kranzco.
Q: HOW DO I VOTE?
A: Your vote is important. Shareholders can vote in person at their special
meeting or by proxy. If you are a registered holder (that is, you hold
your shares in your own name and not through a broker or other nominee),
you can authorize a proxy to cast your vote by mail by signing, dating
and mailing the enclosed proxy card in the return envelope provided. If
you prefer and you are a Kranzco shareholder, you may authorize a proxy
by telephone or over the Internet to cast your vote (the toll-free
telephone number and the Internet site are listed in this joint proxy
statement/prospectus).
If you hold your shares in "street name" with a broker, your broker will
vote your shares only if you provide your broker with instructions on
how to vote. You should follow the directions provided by your broker
regarding how to instruct your broker to vote your shares. Without
instructions, your shares will not be voted, which will have the same
effect as voting against the mergers and the merger agreement.
-3-
<PAGE>
Q: CAN I REVOKE OR CHANGE MY PROXY?
A: Yes, you may change or revoke your proxy at any time before the meeting.
To do so, you must:
o advise the Secretary of your company in writing before your shares
are voted by the proxy holders at the meeting;
o deliver later proxy instructions or, if you are a Kranzco
shareholder, you may grant your new proxy by using the toll-free
telephone number or the Internet site listed on the proxy card; or
o attend your meeting and vote your shares in person.
The powers of your proxy holder will be suspended if you attend your
meeting in person and so request, but attendance at the meeting will not
by itself revoke a previously granted proxy.
If your shares are held by a broker, to vote your shares you must follow
the directions received from your broker to change those instructions.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. After the mergers are completed, we will send you written
instructions regarding the surrender of your certificates in exchange
for certificates evidencing Kramont shares.
Q. WHO CAN HELP ANSWER YOUR QUESTIONS ABOUT THE MERGERS AND VOTING?
A. If you have additional questions about voting on the mergers, you should
contact our proxy solicitor:
D.F. King & Co., Inc.
77 Water Street
New York, NY 10005
Telephone: 1-800-290-6429
If you are a CV shareholder and have additional questions about the
mergers, you should contact:
Louis P. Meshon, Sr.
CV Reit, Inc.
100 Century Boulevard
West Palm Beach, FL 33417
(888) 642-7100 or (561) 640-5902
If you are a Kranzco shareholder and have additional questions about the
mergers, you should contact:
Norman M. Kranzdorf
Kranzco Realty Trust
128 Fayette Street
Conshohocken, PA 19428
(800) 983-9290 or (610) 941-9292
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<PAGE>
SUMMARY
The following summary highlights selected information contained
elsewhere in this joint proxy statement/prospectus and may not contain all
the information that is important to you. To better understand the business
combination fully and for a more complete description of its legal terms,
please read carefully this entire joint proxy statement/prospectus, the
appendices and the documents to which we refer you. See "Where You Can Find
More Information."
The terms of the mergers are complex. We discuss these terms in greater
detail under "The Mergers." We have included parenthetical page references
to direct you to a more complete description of each topic presented in this
summary.
The Companies (see page 91)
CV REIT, INC.
100 Century Boulevard
West Palm Beach, FL 33417
(561) 640-3155
CV is a self-administered and self-managed equity real estate investment
trust ("REIT") primarily in the business of owning, managing, operating,
leasing, acquiring, redeveloping and upgrading neighborhood and community
shopping centers. CV owns 22 properties, including two office buildings,
aggregating approximately 2 million square feet of gross leasable area, which
are principally neighborhood and community shopping centers located in the
Mid-Atlantic region and Florida with a diverse base of approximately 400
tenants. CV is organized as an UPREIT, or umbrella partnership REIT. In an
UPREIT structure, the REIT owns its properties through a limited partnership
called the operating partnership, in which the REIT is usually the general
partner and owns a substantial amount of the limited partner interests. The
name of CV's operating partnership is Montgomery CV Realty L.P. CV owns the
general partner interest and approximately 84.5% of the limited partner
interests in Montgomery CV Realty L.P. through CV's wholly owned subsidiary,
Montgomery CV Realty Trust.
KRANZCO REALTY TRUST (and KRT TRUST)
128 Fayette Street
Conshohocken, PA 19428
(610) 941-9292
Kranzco Realty Trust is a self-administered and self-managed equity REIT
engaged in the business of owning, managing, operating, leasing, acquiring
and expanding neighborhood and community shopping centers and free-standing
retail properties. Kranzco owns and operates 62 neighborhood and community
shopping centers and free-standing properties, aggregating approximately 9
million square feet of gross leasable area located primarily in the
Northeast, Mid-Atlantic and Southern regions of the United States with a
diverse base of approximately 825 tenants.
KRT Trust is a Maryland real estate investment trust and a wholly-owned
subsidiary of Kranzco which was recently created solely to effect the Kranzco
Reorganization (described under "- The Pre-Merger Transactions" below) and
the combination of the businesses of CV and Kranzco. Before the Kranzco
Reorganization, KRT Trust will have no operations. The Kranzco
Reorganization refers to a series of transactions expected to occur prior to
the combination of the businesses of CV and Kranzco into Kramont. In
connection with the Kranzco Reorganization, all of the outstanding shares of
Kranzco will convert into an equal number of shares with substantially the
same rights in KRT Trust. KRT Trust will then merge into Kramont.
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<PAGE>
KRAMONT REALTY TRUST
Plymouth Plaza
580 West Germantown Pike
Plymouth Meeting, PA 19462
(610) 825-7100
CV and Kranzco caused Kramont to be formed solely for the purpose of
effecting the mergers of CV and KRT Trust into Kramont. Following the
completion of the mergers, you will own shares in Kramont. Kramont has had
no business operations as of the date of this joint proxy
statement/prospectus. After the mergers of CV and KRT Trust into Kramont,
the shareholders of CV and the shareholders of Kranzco who become KRT Trust
shareholders in the Kranzco Reorganization will become shareholders of
Kramont, and Kramont will, through operating partnerships, own the real
estate assets currently owned directly or indirectly by CV and Kranzco. If
the mergers were completed as of the date of this joint proxy
statement/prospectus, Kramont would have 84 properties totaling approximately
11 million square feet of gross leasable area in 16 states. Kramont intends
to qualify as a real estate investment trust.
The Shareholder Meetings (see page 33 and 35)
CV
The special meeting of shareholders of CV will be held on June 6, 2000,
at 10:30 a.m., local time, at the Peninsula Hotel, 700 Fifth Avenue, at 55th
Street, 3rd floor (La Grande Salle), New York, NY 10019. Only holders of
record of CV common shares at the close of business on April 10, 2000, will
be entitled to vote at the CV special meeting. Each CV common share carries
one vote. As of the close of business on April 7, 2000, 8,111,419 shares
were eligible to be voted at the special meeting, of which 793,577 shares (or
approximately 10% of the outstanding shares of CV) (excluding 175,000 shares
where beneficial ownership is disclaimed) were owned beneficially by the
officers and directors of CV. The mergers of CV and KRT Trust into Kramont
will not be completed unless holders of a majority of the outstanding shares
of CV vote to adopt and approve the merger agreement and the mergers.
Kranzco
The special meeting of shareholders of Kranzco will be held on June 6,
2000, at 9:30 a.m., local time, at the Philadelphia Marriott West, Matson
Ford Road and Route 23, West Conshohocken, PA 19428. Only holders of record
of Kranzco common shares at the close of business on April 10, 2000, will be
entitled to vote at the Kranzco special meeting. Each Kranzco common share
carries one vote. As of the close of business on April 7, 2000, 10,566,746
shares were eligible to be voted at the special meeting, of which 317,603
shares (or approximately 3% of the outstanding shares of Kranzco) were owned
beneficially by the officers and trustees of Kranzco. The mergers of CV and
KRT Trust into Kramont will not be completed unless holders of two-thirds of
the outstanding Kranzco common shares approve the merger of KRT Trust into
Kramont pursuant to the merger agreement.
The Pre-Merger Transactions (see page 37)
Prior to consummating the mergers, Kranzco will complete the Kranzco
Reorganization. In the Kranzco Reorganization, Kranzco will reorganize into
an UPREIT structure, similar to the existing structure of CV, to facilitate
the combination of the businesses of CV and Kranzco. In an UPREIT structure,
a REIT conducts its businesses through an operating partnership, the REIT
owns a controlling interest in the operating partnership and the operating
partnership, directly or indirectly, owns all of the properties of the REIT.
Following completion of the mergers, Kramont will operate in an UPREIT
structure and will conduct its business through Kramont Operating
Partnership, L.P. Following the Kranzco Reorganization, Montgomery CV Realty
Trust will merge into CV. In a privately negotiated transaction, holders of
99.88% of the limited partner interests in Montgomery CV Realty L.P. (or the
limited partners of one of the holders) have agreed to exchange their limited
partner interests for common
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<PAGE>
units of limited partner interests in Kramont Operating Partnership, L.P.
The exchange will close contemporaneously with the closing of the mergers.
The Mergers (see page 40)
After the pre-merger transactions are completed, CV and KRT Trust (the
shares of which the former Kranzco shareholders will own after the Kranzco
Reorganization) will be merged into a newly formed company, Kramont Realty
Trust. Upon completion of the mergers, each outstanding CV common share and
each outstanding KRT Trust common share will be converted into one common
share of Kramont and each outstanding KRT Trust preferred share will be
converted into one preferred share of Kramont with the same rights.
Ownership and Voting following the Mergers
Upon completion of the mergers, there will be outstanding approximately
18,753,165 Kramont common shares and 1,317,607 units of limited partner
interests in Kramont Operating Partnership, L.P. Holders of units of limited
partner interests in Kramont Operating Partnership (other than Kramont) may
elect to redeem their partnership units for cash, and upon this election,
Kramont may, in lieu thereof, elect to issue to these holders Kramont common
shares on a one-to-one basis. Upon completion of the mergers, because Norman
M. Kranzdorf will not be a senior executive officer of Kramont, holders of
Kramont's Series B-1 preferred shares will have the right, commencing after
the mergers, to vote their preferred shares with the common shareholders on
an as converted basis (which currently would represent 1,670,116 common
shares or approximately 8% of the outstanding Kramont common shares
immediately after the mergers). Holders of Kranzco's Series A-1, Series B-1
and Series D preferred shares will not have a right to vote on the mergers.
Management of Kramont (see page 102)
Our combined company will initially have seven trustees. The board of
trustees will be made up of four current directors of CV, Louis P. Meshon,
Sr., H. Irwin Levy, Milton S. Schneider and Alan L. Shulman, and three
current trustees of Kranzco, Norman M. Kranzdorf, Bernard J. Korman and E.
Donald Shapiro. Mr. Kranzdorf will serve as chairman of the board of
trustees. The board of trustees of our combined company will be divided into
three classes serving staggered three year terms. The terms of Bernard J.
Korman and Norman M. Kranzdorf will expire at Kramont's 2001 annual meeting,
the terms of Louis P. Meshon, Sr., Milton S. Schneider and Alan L. Shulman
will expire at Kramont's 2002 annual meeting and the terms of H. Irwin Levy
and E. Donald Shapiro will expire at Kramont's 2003 annual meeting.
Louis P. Meshon, Sr., President and Chief Executive Officer of CV, will
serve as the President and Chief Executive Officer of Kramont. Other members
of CV's senior management generally, as well as George S. Demuth of Kranzco,
will continue in the same positions in the management of Kramont. All
members of Kramont's management and its other officers and employees will
report to Mr. Meshon and he will have full authority from time to time to
hire and/or terminate the employment of any member of Kramont's management or
any of Kramont's other officers and employees.
Interests of CV Management and Directors and Kranzco Management and Trustees
in the Mergers (see page 60 and 62)
In considering whether to approve the mergers and the merger agreement,
shareholders should be aware that some members of the management of CV and
Kranzco and some of the CV directors and Kranzco trustees have interests in
the mergers that are different from or in addition to the interests of CV and
Kranzco shareholders generally. These interests include entering into
employment agreements, assumption of outstanding options, acceleration of
vesting of restricted Kranzco common shares held by them and their receipt of
severance payments. In addition, if we complete the mergers of CV and KRT
Trust into Kramont, some members of senior management of each of CV and
Kranzco will continue as members of management of Kramont and, as described
above, four
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<PAGE>
directors of CV and three trustees of Kranzco will be designated as members
of the initial board of trustees of Kramont. Also, Kramont will provide
indemnification arrangements for existing directors of CV, trustees of
Kranzco, and officers of CV and Kranzco. In addition, Mr. Meshon, H. Irwin
Levy and Milton S. Schneider will exchange their limited partner interests in
Montgomery CV Realty L.P. for common units of limited partner interest in
Kramont Operating Partnership, L.P. The CV board of directors and the
Kranzco board of trustees considered these interests and deliberated upon any
resulting conflicts of interest in connection with their unanimous approval
of the mergers and the merger agreement and the benefits of the mergers to
the shareholders of CV and Kranzco.
Voting Agreements (see page 64)
Louis P. Meshon, Sr., President and Chief Executive Officer of CV, H.
Irwin Levy, Chairman of the Board of CV, Alan L. Shulman and the Claudia
Morse Evans Family Trust, who in the aggregate own approximately 18% of the
issued and outstanding CV common shares, have entered into voting agreements
with Kranzco in which they have agreed to vote all of the CV common shares
which they own or have the right to vote in favor of the merger of CV into
Kramont and the merger agreement.
Norman M. Kranzdorf, President and Chief Executive Officer of Kranzco,
and Robert H. Dennis, Chief Financial Officer of Kranzco, who in the
aggregate own approximately 2% of the issued and outstanding Kranzco common
shares, have entered into voting agreements with CV in which they have agreed
to vote all of the Kranzco common shares which they own or have the right to
vote in favor of the merger of KRT Trust into Kramont and the merger
agreement.
Material United States Federal Income Tax Consequences (see page 65)
Neither CV, Kranzco nor our respective shareholders will recognize any
gain or loss for United States federal income tax purposes as a result of the
mergers, except for taxes that may be payable by Kranzco shareholders because
of cash received for fractional shares held in Kranzco's dividend
reinvestment plan or upon the exercise of appraisal rights.
Other tax consequences of the mergers to CV and Kranzco shareholders
will depend on the particular facts of each holder's own situation.
Therefore, CV and Kranzco shareholders should consult their own tax advisors
regarding the mergers' specific tax consequences.
Accounting Treatment (see page 78)
The mergers will be treated as a purchase by CV of Kranzco for
accounting purposes.
Opinions of Financial Advisors (see page 49 and 56)
In connection with the mergers, the CV board of directors received an
opinion from CV's financial advisor, Salomon Smith Barney Inc., as to the
fairness, from a financial point of view and as of the date of the opinion,
of the CV exchange ratio to the holders of CV common shares, and the Kranzco
board of trustees received an opinion from Kranzco's financial advisor, ING
Barings LLC, as to the fairness, from a financial point of view and as of the
date of the opinion, of the KRT Trust exchange ratio to the holders of
Kranzco common shares. The full text of Salomon Smith Barney's opinion is
attached as Appendix B to this joint proxy statement/prospectus, and the full
text of the opinion of ING Barings LLC is attached as Appendix C to this
joint proxy statement/prospectus. We encourage you to read these opinions in
their entirety. The opinions of Salomon Smith Barney and ING Barings are
directed to our boards and do not constitute recommendations to any
shareholder as to any matter relating to the mergers.
-8-
<PAGE>
Recommendations to Our Shareholders (see page 46 and 54)
The CV board of directors believes that the merger agreement providing
for the merger of CV into Kramont, including the CV exchange ratio, is fair
and in the best interests of CV and its shareholders. The Kranzco board of
trustees believes that the merger of KRT Trust into Kramont, including the
KRT Trust exchange ratio, is fair and in the best interests of Kranzco and
its shareholders. The CV directors unanimously approved the merger of CV and
Kramont and the merger agreement and unanimously recommend that the CV common
shareholders vote FOR the transaction and the merger agreement. The Kranzco
trustees unanimously approved the merger of KRT Trust into Kramont following
the Kranzco Reorganization and unanimously recommend that the Kranzco common
shareholders vote FOR the merger of KRT Trust into Kramont. In making their
decisions, the CV board of directors and the Kranzco board of trustees
considered the positive and negative factors which could arise from the
business combination.
Appraisal Rights (see page 78)
CV is organized under Delaware law and Kranzco is organized under
Maryland law. Under Delaware law, no CV shareholders are entitled to
dissenters' appraisal rights in connection with the merger of CV into
Kramont. Under Maryland law, only holders of Series A-1 preferred shares of
Kranzco will be entitled to appraisal rights in connection with the Kranzco
Reorganization.
Listing of Kramont Shares (see page 85)
The Kramont common shares to be issued to CV common shareholders and KRT
Trust common shareholders are expected to be listed on the New York Stock
Exchange and its trading symbol is expected to be "KRT." The Kramont Series
B-1 preferred shares and Series D preferred shares issued to holders of KRT
Trust Series B-1 preferred shares and Series D preferred shares are expected
to be listed on The New York Stock Exchange.
The Merger Agreement (see page 79)
The merger agreement is the legal document which governs the mergers.
We encourage you to read the merger agreement which is attached as Appendix A
to this joint proxy statement/prospectus.
Conditions to the Mergers (see page 86)
The obligations of CV, Kranzco and KRT Trust to complete the mergers are
subject to the satisfaction or waiver of the conditions described in the
merger agreement. These conditions include, among others:
o obtaining the requisite approval of the shareholders of CV and
Kranzco;
o the absence of any material adverse change in the financial
condition, business or operations of CV or Kranzco;
o the receipt of specified legal opinions; and
o the receipt of material consents, authorizations, orders and
approvals of governmental agencies and third parties.
CV, Kranzco and KRT Trust each have the right to waive any conditions to
their respective obligations to complete the mergers.
-9-
<PAGE>
Termination (see page 89)
The merger agreement provides that it may be terminated in a number of
circumstances at any time prior to the completion of the mergers, whether
before or after the approval of the mergers by the shareholders of CV and
Kranzco. The merger agreement provides for the payment by CV of a $5 million
break-up fee to Kranzco, and the payment by Kranzco of a $6 million break-up
fee to CV if the agreement is terminated for various reasons. The failure of
Kranzco to obtain the vote of the holders of not less than two-thirds of its
common shares approving the mergers, and the failure of CV to obtain the vote
of the holders of not less than a majority of its common shares adopting and
approving the merger agreement, will not trigger the payment of the break-up
fee by either party.
Termination Fees (see page 90)
Depending on the reason for the merger agreement's termination, Kranzco
may be required to pay CV a break-up fee of $6 million or an expense fee of
up to $1.5 million or both, and CV may be required to pay Kranzco a break-up
fee of $5 million or an expense fee of up to $1.5 million or both.
No Solicitation of Other Transactions (see page 85)
CV and Kranzco have agreed that they will not initiate, solicit or
encourage any inquiries or offers to acquire all or any significant portion
of the assets or equity securities of CV or Kranzco, or any of their
subsidiaries, other than the mergers.
Notwithstanding the above restrictions, the merger agreement does not
prohibit CV or Kranzco from entering into discussions with respect to an
unsolicited proposal if the CV board of directors or Kranzco board of
trustees determines that the discussions are required by its duties to its
shareholders.
Conversion of Shares (see page 80)
When the mergers become effective, each common share of CV and Kranzco
outstanding immediately before the completion of the pre-merger transactions
described in the merger agreement will convert into one Kramont common share,
and each Kranzco preferred share outstanding immediately before completion of
the pre-merger transactions described in the merger agreement will convert
into one Kramont preferred share with the same rights. At the same time, all
currently outstanding Kramont common shares (all of which CV and Kranzco
hold) will be canceled. Each holder of a certificate evidencing common
shares of CV or Kranzco (which at the time of the mergers will represent KRT
Trust common shares) will cease to have any rights with respect to the CV or
KRT Trust common shares, except the right to receive (1) a certificate
evidencing common shares of Kramont, (2) cash instead of any fractional
common shares held in Kranzco's dividend reinvestment plan and (3) any
distributions declared with respect to the CV, Kranzco or KRT Trust common
shares with a record date before the completion of the mergers. You will
continue to receive distributions declared by Kramont until December 31,
2001, after that date you will be required to surrender your CV or Kranzco
certificate before receiving distributions.
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<PAGE>
<PAGE>
OWNERSHIP STRUCTURE
Ownership Structure
-------------------
The diagram set forth below illustrates the ownership of Kramont following
completion of the mergers.
Public Shareholders
Kramont Realty Trust
General and Limited
Common and
Preferred OP Units
Limited Partners
Limited Partner Kramont Operating
Partnership, L.P.
CV GP 100% Former Kranzco
LLC 99.9% Limited 100% 1 property owning
0.1% General Partner limited
Partner partnerships
and limited
100% liability
CV GP LP companies
Louis P. CV OP
Meshon, Sr. Holdings LLC
General and
0.1% limited Limited Partner
partner 99.9%
Limited Limited Limited Partners
Non-Economic Partner Partner
General Partner
CV Partner
Holdings,
L.P. Limited
Partner 100%
Montgomery CV
Realty L.P.
Montgomery CV
Realty L.P.
property
owning limited
parterships
1 A third party owns a minority interest in one of the partnerships.
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<PAGE>
<PAGE>
CV SELECTED FINANCIAL AND OPERATING DATA
(In thousands, except per share data )
The following table sets forth summary historical consolidated financial
and operating information for CV. The summary historical consolidated
financial information for the years ended December 31,1999, 1998, 1997, 1996
and 1995 is derived from the audited consolidated financial statements of CV
for such periods. The information set forth below should be read in
conjunction with the "Selected Historical Consolidated Financial Information
of CV," "CV Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Consolidated Financial Statements of CV"
incorporated by reference.
Year Ended December 31,
-----------------------
1999 1998 1997 1996 1995
------- ------- ------- ------- -------
OPERATING DATA:
Revenue:
Rents . . . . . . . . . . $25,555 $17,155 $2,703 $1,057 $686
Interest. . . . . . . . . 8,008 8,854 10,612 11,695 12,231
-------------------------------------------
Total revenue . . . . . . 33,563 26,009 13,315 12,752 12,917
-------------------------------------------
Expenses:
General and administrative,
interest and operating costs 21,132 15,232 4,830 4,461 4,924
Depreciation and
amortization. . . . . . . 4,078 2,707 409 238 144
Equity in income of
unconsolidated
affiliates. . . . . . . . 238 547 439 490 508
Gain on sale of real estate. - 2,347 - - -
Minority interests in income of
Operating Partnership . . (1,344) (1,855) - - -
Non-recurring items. . . . . - (300) - 906 -
-------------------------------------------
Income before income tax benefit$7,247 $8,809 $8,515 $9,449 $8,357
===========================================
Net income . . . . . . . . . $7,247 $15,850(2)$8,515 $9,570(2)$9,374(2)
===========================================
Per Common Share:
Net income, basic
and diluted . . . . . . . $0.91 $1.99 $1.07 $1.20 $1.18
Dividends declared. . . . 1.16 1.16 1.16 1.14 1.08
Average shares outstanding,
basic and diluted . . . . 7,967 7,967 7,967 7,967 7,967
Other Data:
Funds from operations(1). $10,823 $9,535 $9,088 $8,956 $8,679
Ratio of earnings to
fixed charges(3). . . . . 1.64 2.05 3.58 3.93 3.45
Balance Sheet Data (at end of period):
Real Estate, before
accumulated depreciation: $180,184 $145,550 $73,748 $12,503 $5,092
Total assets. . . . . . . 257,761 225,422 171,927 118,930 120,021
Borrowings. . . . . . . . 156,329 121,933 66,281 35,064 37,074
Stockholders' equity. . . 77,562 79,557 72,948 73,674 73,186
__________________
(1) Management generally considers Funds From Operations to be a useful
measure of the operating performance of an equity REIT because, together
with net income and cash flows, Funds From Operations provides investors
with an additional basis to evaluate the ability of a REIT to incur and
service debt and to fund acquisitions and other capital expenditures.
Funds From Operations has been calculated in accordance with the
definition of "funds from operations" clarified by the National
Association of Real Estate Investment Trusts, Inc. ("NAREIT") generally
as net income, computed in accordance with generally accepted accounting
principles, excluding gains from sales of property, deferred income tax
benefit, reversal of provision for losses and settlement of litigation
plus depreciation and amortization (in
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each case only on real estate related assets) and after adjustments for
unconsolidated partnerships and joint ventures. Funds From Operations
does not represent net income or cash flows from operating, investing or
financing activities as defined by GAAP. Funds From Operations should
not be considered as a substitute for net income as an indication of
CV's performance or as a substitute for cash flows as a measure of its
liquidity. Furthermore, Funds From Operations as disclosed by other
REIT's may not be comparable to CV's calculation of Funds From
Operations.
(2) Includes benefit arising from the reversal of deferred tax liability.
(3) For purposes of these computations, earnings consists of income before
extraordinary charges, if any, plus interest expense and amortization of
debt expense. Fixed charges include interest, whether expensed or
capitalized, and amortization of debt expense.
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<PAGE>
KRANZCO SELECTED FINANCIAL
AND OPERATING DATA
(In thousands, except per share data )
The following table sets forth summary historical consolidated financial
and operating information for Kranzco. The summary historical consolidated
financial information for the years ended December 31, 1999, 1998, 1997, 1996
and 1995 is derived from the audited consolidated financial statements of
Kranzco for such periods. The information set forth below should be read in
conjunction with the "Selected Historical Consolidated Financial Information
of Kranzco," "Kranzco Management's Discussion and Analysis of Financial
Condition and Results of Operations" and Consolidated Financial Statements of
Kranzco" incorporated by reference.
Year Ended December 31,
-----------------------
1999 1998 1997 1996 1995
------- ------- ------- ------- -------
OPERATING DATA:
Revenue:
Rents . . . . . . . . . . . . $63,422 $58,056 $48,742 $42,707 $41,303
Expense reimbursements. . . . 13,820 12,800 11,165 11,732 10,988
Other income. . . . . . . . . 860 486 405 741 1,179
-------------------------------------------
Total revenue . . . . . . . . 78,102 71,342 60,312 55,180 53,470
-------------------------------------------
Expenses:
General and administrative,
interest and property
operating costs . . . . . . . 49,044 44,897 36,694 35,514 32,690
Depreciation and amortization 16,863 14,582 12,534 11,194 10,903
-------------------------------------------
Income before extraordinary
charge and before preferred
distributions . . . . . . . . 12,195 11,863 11,084 8,472 9,877
Extraordinary charge from early
extinguishment of debt and
debt refinancing. . . . . . . - - 467 11,052 -
-------------------------------------------
Net income (loss). . . . . . . . $12,195 $11,863 $10,617 ($2,580) $9,877
===========================================
Income before extraordinary
items per share, basic
and diluted . . . . . . . . . $0.41 $0.37 $0.73 $0.75 $0.91
Distributions per share . . . . $1.61 $1.92 $1.92 $1.92 $1.92
Average shares outstanding:
Basic . . . . . . . . . . . . 10,551 10,479 10,342 10,328 10,319
Diluted . . . . . . . . . . . 10,551 10,485 10,348 10,328 10,319
Other Data:
Funds from operations(1) . . . . $19,943 $17,817 $19,428 $18,313 $19,278
Preferred share distributions. . 7,903 7,984 3,565 695 485
Ratio of earnings to fixed
charges(2). . . . . . . . . . 1.10 1.10 1.27 1.41 1.50
Balance Sheet Data (at end
of period):
Real estate, before accumulated
depreciation. . . . . . . . . $584,261 $584,883 $484,741 $370,491 $368,073
Total assets . . . . . . . . . . 535,625 546,516 466,220 359,157 372,983
Total debt . . . . . . . . . . . 353,208 350,141 255,124 212,590 204,247
Series C Preferred Shares. . . . - 445 2,228 - -
Beneficiaries' equity. . . . . . 171,704 184,034 198,112 137,013 159,882
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_______________
(1) Management generally considers Funds From Operations to be a useful
measure of the operating performance of an equity REIT because, together
with net income and cash flows, Funds From Operations provides investors
with an additional basis to evaluate the ability of a REIT to incur and
service debt and to fund acquisitions and other capital expenditures.
Funds From Operations has been calculated in accordance with the
definition of "funds from operations" clarified by the National
Association of Real Estate Investment Trusts, Inc. ("NAREIT") generally
as net income, computed in accordance with generally accepted accounting
principles, excluding gains or losses from debt restructuring and sales
of property, plus depreciation and amortization (in each case only on
real estate related assets) and after adjustments for unconsolidated
partnerships and joint ventures, less preferred share distributions.
Funds From Operations does not represent net income or cash flows from
operating, investing or financing activities as defined by GAAP. Funds
From Operations should not be considered as a substitute for net income
as an indication of Kranzco's performance or as a substitute for cash
flows as a measure of its liquidity. Furthermore, Funds From Operations
as disclosed by other REIT's may not be comparable to Kranzco's
calculation of Funds From Operations.
(2) For purposes of these computations, earnings consists of income before
extraordinary charges, if any, plus preferred share distributions,
interest expense and amortization of debt expense. Fixed charges
include interest, whether expensed or capitalized, amortization of debt
expense and preferred share distributions.
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<PAGE>
<PAGE>
KRAMONT SUMMARY PRO FORMA CONSOLIDATED CONDENSED FINANCIAL DATA (UNAUDITED)
The following tables set forth summary consolidated condensed pro forma
financial information of Kramont for the year ended December 31, 1999 as if
the Merger and CV's property acquisitions during its current fiscal year had
occurred on December 31, 1999 for balance sheet data and January 1, 1999 for
income statement data. The pro forma data included herein may not be
indicative of the actual results or financial position had the merger and
property acquisitions occurred on the dates indicated. The summary
consolidated condensed pro forma financial information set forth below should
be read in conjunction with, and is qualified in its entirety by, the
historical consolidated financial statements and notes thereto of CV and
Kranzco, as well as the "Unaudited Pro Forma Operating and Financial
Information" included herein.
Kramont Realty Trust
Pro Forma Consolidated Condensed Balance Sheet Data
December 31, 1999
-----------------------
(dollars in thousands)
ASSETS
Real estate, net . . . . . . . . . . . . $691,283
Cash and cash equivalents. . . . . . . . 8,515
Real estate mortgage notes receivable. . 63,385
________
Other assets . . . . . . . . . . . . . . 25,729
________
Total assets . . . . . . . . . . . . . $788,912
========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgage and other notes payable . . . $521,298
Accounts payable, accrued expenses and other
liabilities. . . . . . . . . . . . . . 16,499
________
Total liabilities. . . . . . . . . . 537,797
________
Minority interest in partnership . . . . 18,271
________
Stockholders' Equity
Paid-in capital of common
and preferred shares . . . . . . . . . 174,602
Retained earnings. . . . . . . . . . . 58,992
Unearned compensation on restricted
common shares. . . . . . . . . . . . . (750)
Total stockholders' equity . . . . . . 232,844
________
Total liabilities and stockholders' equity $788,912
========
_____________________________________________________________________________
See "Notes and Management's Assumptions to Pro Forma Consolidated Condensed
Financial Information-Unaudited" found elsewhere in this Joint Proxy
Statement/Prospectus.
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<PAGE>
<PAGE>
KRAMONT SUMMARY PRO FORMA CONSOLIDATED CONDENSED FINANCIAL DATA (UNAUDITED)
(CONTINUED)
Kramont Realty Trust
Pro Forma Consolidated Condensed Income Statement Data
Year
Ended
December 31, 1999
---------------------
(dollars in thousands,
except per share data)
Revenue:
Rents . . . . . . . . . . . . . . . . . . $ 84,559
Interest and other. . . . . . . . . . . . 28,869
--------
Total revenue . . . . . . . . . . . . . . 113,428
--------
Expenses:
General and administrative, interest
and operating costs. . . . . . . . . . . 72,371
Depreciation and amortization . . . . . . 16,343
--------
Total expenses. . . . . . . . . . . . . . 88,714
--------
Income before minority interest, real estate
sales, and other. . . . . . . . . . . . . 24,714
--------
Equity in income of unconsolidated affiliates 281
Gain on sale of real estate. . . . . . . . 535
Minority interests in income of operating
partnership . . . . . . . . . . . . . . . (1,860)
--------
Net income before preferred distributions. 23,670
Preferred distributions. . . . . . . . . . 7,903
--------
Net income applicable to common shares . . $ 15,767
========
Basic and diluted net income per common share $ 0.85
======
Pro forma basic weighted average number of
common shares outstanding . . . . . . . . 18,593
Pro forma diluted average number of common
shares outstanding. . . . . . . . . . . . 18,593
Ratio of earnings to fixed charges(1). . . 1.31
_____________________
See "Notes and Management's Assumptions to Pro Forma Consolidated Condensed
Financial Information-Unaudited" found elsewhere in this Joint Proxy
Statement/Prospectus.
(1) For purposes of these calculations, earnings consists of income before
extraordinary charges, if any, plus preferred share distributions,
interest expense and amortization of debt expense. Fixed charges
include interest, whether expensed or capitalized, and preferred share
distributions.
-17-
<PAGE>
<PAGE>
COMPARATIVE MARKET AND PER SHARE DATA
Comparative Market Data
CV common shares are listed on the New York Stock Exchange under the
symbol "CVI." Kranzco common shares are listed on the New York Stock
Exchange under the symbol "KRT."
The table below sets forth, for the calendar quarters indicated, the
reported high and low sale prices of CV and Kranzco common shares as reported
on the NYSE Composite Transaction Tape and the dividends declared on the
stock.
CV Kranzco
Common Shares Common Shares
------------- -------------
Market Price Market Price
------------ ------------
Cash Cash
Dividends Dividends
High Low Declared High Low Declared
---- --- -------- ---- --- --------
1998
First Quarter. . . . . $15.25 $13.25 $.29 $19.63 $17.38 $.48
Second Quarter . . . . 14.31 13.00 .29 18.69 17.50 .48
Third Quarter. . . . . 13.63 12.00 .29 19.00 15.00 .48
Fourth Quarter . . . . 13.00 11.50 .29 16.38 13.38 .48
1999
First Quarter. . . . . $12.69 $11.25 $.29 $15.19 $11.56 $.48
Second Quarter . . . . 13.63 10.38 .29 14.56 11.50 .48
Third Quarter. . . . . 13.06 11.75 .29 13.44 9.25 .325
Fourth Quarter . . . . 12.56 9.00 .29 10.31 7.50 .325
2000
First Quarter. . . . . $9.81 $8.75 $.29 $9.00 $8.00 $.325
Second Quarter
(through April 6,. . . $9.25 9.00 -- 8.75 8.25 --
2000)
On December 10, 1999, the last full trading day on the NYSE prior to the
public announcement of the execution of the merger agreement, CV common
shares closed at $10.75 per share on the NYSE Composite Transaction Tape and
Kranzco common shares closed at $7.75 per share on the NYSE Composite
Transaction Tape. On April 6, 2000, the most recent practicable date prior
to the printing of this joint proxy statement/prospectus, the closing price
on the NYSE Composite Transaction Tape was $9.125 per CV common share and
$8.375 per Kranzco common share.
-18-
<PAGE>
Following the consummation of the mergers, CV and Kranzco common shares
will cease to be traded on the NYSE, and Kramont common shares are expected
to be traded on the NYSE under the trading symbol, "KRT."
Unaudited Comparative Per Share Data
We present below the earnings per share, cash dividends or cash
distributions declared and book value per common share data of CV and Kranzco
on both historical and unaudited pro forma combined bases and on a per share
equivalent unaudited pro forma basis. We have derived the unaudited pro
forma combined per share information from the unaudited pro forma combined
information presented elsewhere in this document. You should read the
information below in conjunction with the financial statements and
accompanying notes of CV and Kranzco that are incorporated by reference in
this joint proxy statement/prospectus and with the unaudited pro forma
combined data included under "Kramont Pro Forma Summary Financial Data."
As of and for the
Year Ended
December 31, 1999
-----------------
CV Historical: . . . . . . . . . . . . . . . . .
Earnings per share - basic. . . . . . . . . $0.91
Earnings per share - diluted. . . . . . . . $0.91
Cash dividends declared . . . . . . . . . . $1.16
Book value per common share . . . . . . . . $9.74
Kranzco Historical:
Earnings per share - basic. . . . . . . . . $0.41
Earnings per share - diluted. . . . . . . . $0.41
Cash distributions declared . . . . . . . . $1.61
Book value per common share . . . . . . . . $16.27
Kramont Pro Forma Combined:
Earnings per share - basic. . . . . . . . . $0.85
Earnings per share - diluted. . . . . . . . $0.85
Cash distributions declared . . . . . . . . $1.30
Book value per common share . . . . . . . . $12.56
Kranzco Per Share Equivalent:
Earnings per share - basic. . . . . . . . . $0.85
Earnings per share - diluted. . . . . . . . $0.85
Cash distributions declared . . . . . . . . $1.30
Book value per common share . . . . . . . . $12.56
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<PAGE>
<PAGE>
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
We have made certain statements in the Summary and under captions "Risk
Factors," "The Mergers-Reasons for the Mergers; Recommendation of the CV
Board of Directors," "The Mergers-Positive Factors Considered by the CV Board
of Directors," "The Mergers-Negative Factors Considered by CV's Board of
Directors," "The Mergers-Opinion of CV's Financial Advisor," "The Mergers-
Reasons for the Mergers; Recommendation of the Kranzco Board of Trustees,"
"The Mergers-Positive Factors Considered by the Kranzco Board of Trustees,"
"The Mergers-Negative Factors Considered by Kranzco's Board of Trustees,"
"The Mergers-Opinion of Kranzco's Financial Advisor," and elsewhere in this
joint proxy statement/prospectus which are or may constitute "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. You may find many of these statements by looking for words such as
"believes," "expects," "anticipates," "estimates," or similar expressions in
this joint proxy statement/prospectus or in documents incorporated herein.
Shareholders are cautioned that these 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 may not even be anticipated. Prospective investors are cautioned
that these statements are not guarantees of future performance and that
actual results or developments may differ materially from those anticipated
in the forward-looking statements. Risks and other factors that might cause
these differences, some of which could be material, include, among others:
o inability to achieve anticipated cost savings and operating
efficiencies from the mergers;
o the substantial debt obligations of Kramont and potential increases
in interest rates;
o the potential adverse financial consequences which could result
from the need to obtain material consents, waivers or approvals;
o the necessity of future financings to repay the "balloon" payments
required at the maturity of some of Kramont's debt obligations;
o general and local economic and business conditions, which will,
among other things, affect demand for retail space or retail goods,
availability and creditworthiness of prospective tenants and lease
rents;
o dependence on the retail industry;
o financial condition and bankruptcy of tenants, including rejection
of leases by bankrupt tenants;
o competitive nature of the real estate leasing market;
o limitation on availability of, and the cost of, debt and equity
financing;
o compliance with federal, state and local regulatory requirements;
o environmental and safety requirements;
o qualification of Kramont as a REIT, which will not be entirely
within Kramont's control;
o legislative, judicial and administrative changes to tax laws; and
o other changes and factors referenced in this joint proxy
statement/prospectus and the documents incorporated into this joint
proxy statement/prospectus by reference.
-20-
<PAGE>
Because forward-looking statements are subject to risks and
uncertainties, actual results may differ materially from those expressed or
implied by forward-looking statements. You should not place undue reliance on
these statements, which speak only as of the date of this joint proxy
statement/prospectus or, in the case of a document incorporated by reference,
the date of the document.
-21-
<PAGE>
<PAGE>
RISK FACTORS
In considering whether to approve the mergers and the merger agreement,
you should consider the risks described in this section and in the documents
we are incorporating by reference into this joint proxy statement/prospectus.
The directors and officers of CV and trustees and officers of Kranzco may
have interests that are different from the interests of the CV and Kranzco
shareholders generally
In considering whether to approve the mergers, you should be aware that
some members of the management of CV and Kranzco and some CV directors and
Kranzco trustees have interests in the mergers that are different from or in
addition to the interests of shareholders of CV and Kranzco generally. These
interests include entering into employment agreements, assumption of
outstanding options, acceleration of vesting of restricted Kranzco common
shares held by them and their receipt of severance payments. In addition, if
we complete the mergers, some members of senior management of CV and Kranzco
will continue as members of management of Kramont, and four directors of CV
and three trustees of Kranzco will be designated as members of the initial
board of trustees of Kramont. Kramont will also provide indemnification
arrangements for existing directors of CV, trustees of Kranzco, and officers
of CV and Kranzco. In addition, Mr. Meshon, H. Irwin Levy and Milton S.
Schneider will exchange their limited partner interests in Montgomery CV
Realty L.P. (or in a limited partner of Montgomery CV Realty L.P.) for common
units of limited partner interest in Kramont Operating Partnership, L.P.
Therefore, a conflict between the interests of these individuals and the
interests of CV and Kranzco shareholders could exist. These interests are
described under "The Mergers-Interests of CV Executive Officers and
Directors in the Mergers" and "The Mergers-Interests of Kranzco Executive
Officers and Trustees in the Mergers."
The fixed exchange ratio may not reflect changes in market values of shares
The exchange ratio for the mergers is fixed at one common share of
Kramont for each CV common share and each Kranzco common share. A fixed
exchange ratio means that CV and Kranzco shareholders will receive the same
number of Kramont shares regardless of the price at which the CV and Kranzco
common shares are trading at the effective time of the mergers. Neither CV
nor Kranzco has the right to terminate the merger agreement solely because of
any change in the prevailing market price of CV or Kranzco common shares. As
a result, the number of Kramont common shares received by the CV or Kranzco
shareholders in the mergers may not reflect the market value of the shares
surrendered by the CV or Kranzco shareholders, depending on the fluctuations
in the market value of the common shares of CV or Kranzco. These
fluctuations may be the result of changes in business, operations or
prospects of CV, Kranzco or Kramont as the combined company, market
assessments of the likelihood that the mergers will be consummated and the
timing thereof, general market and economic conditions and other factors.
Even though the Kranzco shareholders will receive a majority of the Kramont
shares, a majority of the Board of Trustees of Kramont will consist of
current members of the CV Board of Directors and CV will be treated as the
acquirer for accounting purposes
The Kranzco shareholders will receive in the aggregate a majority of the
Kramont common shares to be issued in connection with the merger. However, a
majority of the Board of Trustees of Kramont will consist of current members
of the CV board of directors and because the Kramont Declaration of Trust and
Bylaws contain provisions requiring the maintenance of a three-class
staggered board, the shareholders of Kramont will be unable to overturn the
majority control of the Kramont Board by the CV designees to the Board of
Trustees for a period of at least two years. Primarily as a result of the
foregoing, as well as the fact that CV's Chief Executive Officer, Louis
-22-
<PAGE>
P. Meshon, Sr., will become the Chief Executive Officer of Kramont, the
merger will be treated as a purchase by CV of Kranzco for accounting
purposes.
Payments of fees and expenses by CV and Kranzco if the merger fails to occur
could adversely affect their ability to engage in other transactions
Depending on the reason for the merger agreement's termination, CV may
be required to pay Kranzco a break-up fee of $5 million or an expense fee of
up to $1.5 million or both, and Kranzco may be required to pay CV a break-up
fee of $6 million or an expense fee of up to $1.5 million or both. See
"Merger Agreement-Termination." The obligation to pay the break-up fee or
the expense fee or both may deter others from offering to engage in a
different transaction with either CV or Kranzco in the event the mergers are
not consummated.
Other than holders of Kranzco Series A-1 preferred shares, shareholders of CV
and Kranzco have no appraisal rights
Except for holders of Kranzco Series A-1 preferred shares, shareholders
of CV and Kranzco are not entitled to dissenting shareholders' appraisal
rights under Delaware or Maryland law. Delaware law does not provide
appraisal rights to shareholders of a corporation in connection with a merger
if their shares are listed on a national securities exchange, such as the
NYSE, on the record date for determining shareholders entitled to vote on the
merger and they will receive only shares in the surviving entity as
consideration for their shares. Maryland law does not provide appraisal
rights to shareholders of a REIT in connection with a merger if their shares
are listed on a national securities exchange, such as the NYSE, on the record
date for determining shareholders entitled to vote on the merger.
Other than Kranzco Series A-1 preferred shares, all of the CV and
Kranzco shares outstanding on the record date for determining the
shareholders entitled to vote on the mergers were listed on the NYSE. In
addition, all CV shareholders will receive only shares in Kramont in exchange
for their shares in CV in the mergers. Assertion of appraisal rights by a
significant number of the holders of the Kranzco Series A-1 preferred shares
may have a material adverse effect on Kramont.
If the mergers are completed, the Kramont common shares to be received by the
CV common shareholders will be subject to the rights of Kramont preferred
shareholders
Although CV common shareholders currently are not subject to the rights
of any preferred shareholders of CV, upon the completion of the mergers,
following the conversion of CV common shares into Kramont common shares, the
rights of CV shareholders will be subject to the rights of Kramont preferred
shareholders, including the right of Kramont preferred shareholders to
receive distributions and specified amounts upon liquidation of Kramont prior
to any payment made to Kramont common shareholders.
If the mergers are completed, holders of Kramont Series B-1 preferred shares
will have the right to vote their preferred shares with the Kramont common
shareholders
Upon the completion of the mergers, holders of Kramont Series B-1
preferred shares (former Kranzco Series B-1 preferred shareholders) will have
the right to vote together with the holders of Kramont common shares as a
single class on all actions to be taken by holders of Kramont common shares.
Each holder of Kramont Series B-1 preferred shares will be entitled to a
number of votes equal to the number of common shares into which such holder's
Kramont Series B-1 preferred shares are then convertible. As a result,
immediately following completion of the mergers, holders of Kramont Series B-
1 preferred shares will be entitled to cast 1,670,116 votes, which will
represent approximately 8% of all shares entitled to vote at a meeting of
Kramont shareholders.
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<PAGE>
Holders of Partnership Units in Montgomery CV Realty L.P. will have an
opportunity to benefit from the operations of Kramont disproportionately to
Kramont common shareholders
Present holders of limited partner interests in Montgomery CV Realty
L.P. who have not agreed to receive partnership units in Kramont Operating
Partnership, L.P. upon completion of the mergers, will have an opportunity to
benefit from the operations of the business of Kramont disproportionately to
Kramont common shareholders. One way in which these holders would receive a
disproportionate benefit is that these holders would share pro rata in
distributions from Montgomery CV Realty L.P., if the portion of the
distributions received by Kramont are first used to satisfy obligations to
Kramont's preferred shareholders prior to distributions to Kramont common
shareholders. In addition, these holders will be entitled to share
proportionately in distributions arising from the operations of the real
property assets owned by Montgomery CV Realty L.P. (which are the assets
currently owned, directly or indirectly, by CV) even if those assets produce
distributions at a better rate than the assets of Kramont as a whole. On the
other hand, if the assets of Kramont as a whole produce distributions at a
better rate, these holders would be entitled to exercise their right to have
their partnership units redeemed for an amount of cash based on the market
value of Kramont common shares or at Kramont's election, Kramont common
shares in exchange for the interests of the holders. As a result, these
holders may have an opportunity to decide in the future whether to benefit
from the rate of distributions of the Kramont business as a whole or the rate
of distributions of the portion of the business acquired from CV. This
opportunity is not available to Kramont shareholders.
As a shareholder of a REIT, you may be liable for certain claims against
Kramont
Title 8 and Kramont's Declaration of Trust expressly provide that no
Kramont shareholder shall be liable for the debts of Kramont solely by reason
of being a shareholder; Kramont's Bylaws provide that Kramont shall indemnify
and advance expenses to shareholders in connection with any asserted
liability, and Kramont maintains public liability insurance which it
considers adequate as well as a policy of including a clause in its contracts
expressly disclaiming shareholder liability. However, in some jurisdictions,
a Kramont shareholder may be liable for tort claims, contractual claims where
liability is not so negated, claims for taxes and certain other liabilities
to the extent that such claims are not satisfied out of the assets of Kramont
plus its insurance coverage. (See "Description of Kramont Shares-General".)
Shareholders of CV do not now have the risk of these liabilities.
Upon completion of the mergers, CV shareholders will lose protections against
reduction of CV's dividend
CV's current certificate of incorporation and bylaws contain provisions
which protect against reductions in CV's dividend until December 31, 2002,
including that most reductions in CV's dividend must be approved by the vote
of at least three-quarters of CV's entire board of directors. If CV's
dividend is reduced in any quarter, with exceptions relating to the payment
of indebtedness owed to CV, the base salary, deferred compensation and bonus
of CV's Chief Executive Officer must be reduced by fifty percent for that
quarter and for each subsequent quarter until CV declares and pays a
quarterly dividend of at least $0.29 per CV common share for four consecutive
quarters. Kramont's declaration of trust and bylaws upon the completion of
the mergers are not expected to have analogous protections against reductions
in Kramont's dividend.
Combining CV and Kranzco may have potential adverse effects on operations and
savings
CV and Kranzco are large enterprises with operations in a number of
different states. We cannot assure you that costs or other factors associated
with the integration of the two companies would not adversely affect future
combined results of operations or the benefits of expected cost savings.
-24-
<PAGE>
The issuance of additional Kramont shares may reduce the market price for
Kramont shares
We cannot predict the effect, if any, that future sales of Kramont
shares, or the availability of Kramont shares for future sale, will have on
the market price of the Kramont common shares. Sales of substantial amounts
of Kramont common shares in the public market or the perception that such
sales might occur could reduce the market price of the Kramont common shares
and the terms upon which Kramont may obtain additional equity financing in
the future. Upon completion of the mergers, it is expected that there will be
approximately 18,753,165 outstanding Kramont common shares. In addition,
Kramont may issue additional Kramont shares in the future to raise capital or
as a result of the following:
o The conversion of Kramont Series A-1 and Series B-1 preferred
shares into Kramont common shares.
o The issuance of common shares under the 2000 Incentive Plan or
other Kramont remuneration plans. Kramont may also issue Kramont
common shares to its employees in lieu of bonuses or to its
trustees in lieu of trustee's fees.
o The exercise of options to purchase Kramont common shares. At the
closing of the mergers, Kramont will have outstanding options to
acquire approximately 1,105,500 Kramont common shares. In
addition, Kramont may in the future issue additional options or
other securities convertible into or exercisable for Kramont common
shares under Kramont's 2000 Incentive Plan or other Kramont
remuneration plans. Kramont may also issue options or convertible
securities to its employees in lieu of bonuses or to its trustees
in lieu of trustee's fees.
o The redemption of partnership units in the operating partnerships,
Kramont Operating Partnership and/or Montgomery CV Realty L.P.
Under the terms of the operating partnerships, minority limited
partners in each partnership may elect to redeem their partnership
units in the operating partnerships for cash. Upon such election,
Kramont Realty Trust, can elect to issue Kramont common shares in
lieu of the cash payment, currently on a one-to-one basis. See
"Description of Partnership Agreement of Kramont Operating
Partnership, L.P." Immediately following completion of the
mergers, in the event all of the limited partners in both operating
partnerships elect to redeem their partnership units for cash,
Kramont may issue an aggregate of 1,317,607 common shares in
Kramont in connection with these redemptions. Kramont may in the
future issue additional partnership units in the operating
partnerships to third parties in exchange for real property.
Our combined company will depend on key personnel
The success of the business of our combined company will be dependent on
the efforts of its executive officers and trustees, particularly Louis P.
Meshon, Sr. The loss of his services could adversely affect Kramont's
business, assets or results of operations.
Financing Risks
Kramont may incur expenses in connection with obtaining material
consents
Kramont may be required to incur costs and expenses in connection with
CV's and Kranzco's obtaining of material consents, waivers and approvals.
-25-
<PAGE>
Our combined company will have substantial debt obligations which could
limit its net income and cash available for distribution
Kramont will have substantial debt obligations. The pro forma debt of
Kramont at December 31, 1999, after giving effect to the completion of the
mergers, would have been approximately $521,298,000 (including a net debt
premium of $855,000) of which approximately $443,736,000 would have been
long-term debt. The pro forma ratio of Kramont's debt to estimated value of
Kramont's real estate assets at December 31, 1999 after giving effect to the
completion of the mergers, would have been approximately 69%.
If Kramont were to borrow additional funds after completion of the
mergers, it could increase the costs that Kramont must pay to maintain its
debt and thereby increase the risk of default under its loan agreements. The
increased costs would adversely affect Kramont's net income. In addition,
payments of principal and interest made to service Kramont's debts may leave
Kramont with insufficient cash to pay the distributions that it is required
to pay to maintain its qualification as a real estate investment trust. In
addition, 80 of Kramont's properties will be security for mortgage
indebtedness of Kramont.
It may be difficult for Kramont to meet its balloon payment obligations;
balloon payment obligations may adversely affect Kramont's ability to
pay distributions to shareholders
A number of Kramont's outstanding loans after the completion of the
mergers will require lump sum or "balloon" payments for the outstanding
principal balance at maturity. Kranzco has $65.2 million outstanding on a
secured first mortgage loan facility with Salomon Brothers Realty Corp.,
which is secured by nine properties and is due in October 2008. Kranzco's
current seven-year REMIC loan in the principal amount of $181.7 million, is
secured by 27 properties and is due in June 2003. Additionally, Kranzco has
approximately $48 million outstanding on a line of credit facility with
Salomon Brothers Realty Corp. This facility is secured by 15 properties and
is due in July 2000. Kranzco has an option to extend this facility for an
additional year. In addition, GMAC Commercial Mortgage Corporation has made
four mortgage loans to CV aggregating approximately $49 million. These
mortgage loans are due in December 2000 (approximately $17 million) and in
April 2001 (approximately $32 million). The remainder of Kranzco and CV's 27
mortgages that have balloon indebtedness have due dates ranging from November
2000 to February 2009. In addition, Kramont may finance future acquisitions
with debt which may require a lump sum or "balloon" payment for the
outstanding principal balance at maturity. Kramont's ability to pay the
outstanding principal balance of its debt at maturity may depend upon its
ability to refinance the debt, or to sell properties. We cannot assure you
that Kramont will be able to refinance its payment obligations on reasonable
terms and conditions, that Kramont will be able to sell any properties or
that the amounts Kramont receives from refinancings or sales will be
sufficient to make the required balloon payment on its debt. If Kramont
cannot make a balloon payment when due, its lenders may foreclose on the
properties securing the debt, which foreclosure would have a material adverse
effect on Kramont's business, assets and results of operations.
If Kramont fails to make its debt payments, it could lose its investment
in a property
If Kramont is unable to make its debt payments on loans secured by
mortgages on its properties as required, a lender could foreclose on the
property or properties securing its debt. This could cause Kramont to lose
part or all of its investment, which could cause the value of the common
shares and the distributions payable to shareholders to be reduced.
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Floating rate debt of Kramont will be adversely affected by increases in
interest rates
Upon completion of the combination of our businesses, Kramont will have
indebtedness with an aggregate outstanding principal balance of approximately
$108 million that will bear interest at rates that are variable. This amount
includes four mortgage loans to CV aggregating approximately $49 million and
Kranzco's line of credit with Salomon Brothers Realty Corp., which currently
has an outstanding principal balance of approximately $48 million. As a
result of variable interest rates on the debt and on other debt Kramont will
incur in the future after completion of the mergers, an increase in interest
rates could have an adverse effect on Kramont's net income and cash available
for distributions.
General Real Estate Risks
Your investment in Kramont is subject to risks related to the ownership
of real estate securities generally
Your investment in Kramont will be affected by adverse economic
conditions and regulatory changes.
Your investment may be subject to risks generally incident to the
ownership of real estate, including:
o changes in general economic or local conditions;
o changes in supply of or demand for similar or competing properties
in an area;
o changes in interest rates which may render the sale and/or
refinancing of a property difficult or unattractive;
o changes in consumer spending patterns;
o increases in operating costs and expenses;
o excess supply of retail or commercial space and construction of new
shopping centers, regional malls or other retail or commercial
spaces;
o tax, real estate, environmental and zoning laws and changes in such
laws; and
o periods of high interest rates and tight money supply, which may
render it more expensive to operate.
In addition, some significant operating expenses associated with
Kramont's properties, such as debt payments, maintenance, tenant improvement
costs and taxes, generally are not reduced when gross income from properties
is reduced.
For these and other reasons, we cannot assure you that the combined
company will be profitable or that we will realize growth in the value of our
properties.
Kramont will be dependent on the retail industry
The market for retail space and, indirectly, the general economic or
local conditions of the retail sector in which Kramont will operate can
significantly affect the performance of our combined company. Consolidation
in the retail sector, the financial distress of some large retailers,
competition from e-commerce companies and the excess
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amount of retail space in some markets has adversely affected the market for
retail space. To the extent that these conditions persist, we cannot assure
you that Kramont will have sufficient net income and cash available for
distributions to shareholders and Kramont may not be able to obtain debt or
equity financing on reasonable terms and conditions.
One or more vacancies at a property may make it difficult for Kramont to
sell or re-lease that property
The ability of Kramont to rent or relet unleased space will be affected
by many factors, including the existence of covenants typically found in
shopping center tenant leases, such as covenants restricting the use of other
space at the shopping center to those which are not competitive with another
tenant. Kramont's ability to lease or relet its properties may cause
fluctuations in Kramont's cash flow, which, in turn, may affect the cash
available for distributions to shareholders.
Kramont will be dependent on the financial stability of its tenants for
revenue
Substantially all of Kramont's income will be derived from rental
payments from tenants of Kramont's properties. Therefore, the success of
Kramont's investments will be dependent to a large extent on the financial
stability of its tenants. Lease payment defaults by tenants could cause
Kramont to reduce the amount of distributions to shareholders. A default of
a tenant on its lease payments to Kramont would cause Kramont to lose revenue
from the property and require it to find an alternative source of revenue to
meet its mortgage payment obligations and prevent a foreclosure, if the
property is subject to a mortgage. In the event of a default, Kramont may
experience delays in enforcing its rights as landlord and may incur
substantial costs in protecting its investment and reletting its property.
If a lease is terminated, we cannot assure you that Kramont will be able to
lease the property for the rent previously received or sell the property
without incurring a loss. In addition, if a large number of tenants default
under their leases, it would adversely affect Kramont's net income and cash
available for distributions to its shareholders.
Kramont will succeed to several Kranzco tenants which are currently
operating under Chapter 11 of the Bankruptcy Code. These bankrupt tenants
continue to pay rent to Kranzco, have not rejected their leases and operate
their stores under Chapter 11 and, in the aggregate, will pay approximately
1% of the estimated annual rental revenue of Kramont at the effective time of
the mergers.
Kramont will rely on major tenants to pay rent, and their inability to
pay rent may substantially reduce Kramont's net income and cash
available for distributions to shareholders
Upon completion of the mergers, Kramont's four largest tenants are
expected to be Wal-Mart Stores, Inc., Kmart Corporation, Pathmark Stores,
Inc. and Stop & Shop Companies, Inc. As of January 1, 2000, on a pro forma
basis, Wal-Mart Stores, Inc. would have represented approximately 5.4% of
Kramont's annualized minimum rents, K-Mart would have represented
approximately 3.0% of Kramont's annualized minimum rents, Pathmark
Supermarkets would have represented approximately 2.6% of Kramont's
annualized minimum rents and Stop & Shop would have represented approximately
2.6% of Kramont's annualized minimum rents. As of January 1, 2000, on a pro
forma basis, no other tenant would have represented more than 2.2% of the
aggregate annualized minimum rents of Kramont's properties. Kramont's
financial position and its ability to make distributions may be adversely
affected if any of these tenants, or any other major tenants, experiences
financial difficulties, including a bankruptcy, insolvency or general
downturn in the business of any of these tenants, or if any of these tenants
does not renew its leases as they expire.
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Kramont's properties are subject to risks related to specific geographic
areas which could adversely affect net income
Following the completion of the mergers, Kramont will own properties
located in 16 states, primarily in the eastern portion of the United States.
To the extent that general economic or other relevant conditions decline in
the states in which the properties are located and result in a decrease in
consumer demand in these areas, the income from, and value of, these
properties may be adversely affected. The impact of any general decline
would affect Kramont more significantly if it affected states in which
Kramont had a significant concentration of properties, or the Eastern United
States as a whole.
Uninsured losses relating to real property may adversely affect your
returns
Kramont expects to carry comprehensive liability, fire, flood, extended
coverage and rental loss insurance for its properties with customary terms
carried for similar properties. We believe Kramont will be adequately
insured for all material risks of loss. However, we cannot assure you that
all insurance will be available in the future or will be available at
commercially reasonable rates. In addition, we cannot assure you that every
loss affecting Kramont's properties will be covered by insurance or that any
loss that Kramont incurs will not exceed the limits of policies obtained.
Kramont's net income and cash available for distributions would be adversely
affected by an uninsured loss.
Competition with other properties and other companies may increase costs
and reduce returns
The leasing of real estate is highly competitive. Most of Kramont's
properties will be located in developed retail and commercial areas and there
are generally numerous other neighborhood or community shopping centers
within a five-mile radius of any given property. In addition, there are
generally one or more regional malls within a ten-mile radius of some of the
properties.
There are numerous developers and real estate companies which will
compete with Kramont in seeking acquisition opportunities and locating
tenants to lease vacant space, some of which may have greater financial
resources than Kramont. In addition, these developers or real estate
companies may develop or acquire new shopping centers or regional malls, or
renovate, refurbish or expand existing shopping centers or regional malls, in
the vicinity of one or more of Kramont's properties. Competition from these
developers, and real estate companies could adversely and materially affect
Kramont's acquisition opportunities and ability to locate tenants to lease
vacant space.
Compliance with regulatory requirements, including the Americans with
Disabilities Act, at Kramont's properties may cause Kramont to incur
additional costs
Kramont's properties will be subject to various federal, state and local
regulatory requirements, including the Americans with Disabilities Act, which
requires that buildings be made accessible to people with disabilities.
Governmental authorities could impose fines and private litigants may be
awarded damages if Kramont fails to comply with these requirements. CV and
Kranzco each believes that its properties will be in substantial compliance
with all material federal, state and local regulatory requirements. We
cannot assure you, however, that regulatory requirements will not be changed
or that new regulatory requirements will not be imposed that would require
significant unanticipated expenditures by Kramont or the tenants. Unexpected
expenditures would adversely affect Kramont's net income and cash available
for distributions to shareholders.
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Illiquidity of real estate investments may make it difficult for Kramont
to sell properties to respond to changing market conditions
Kramont's ability to vary its portfolio in response to changes in
economic and other conditions will be limited as a result of various factors.
First, real estate investments are relatively illiquid. In addition, REIT
requirements may subject Kramont to confiscatory taxes on gain recognized
from the sale of property if such property is considered to be held primarily
for sale to customers in the ordinary course of Kramont's trade or business.
Also, Kranzco's existing $181.7 million mortgage loan will restrict Kramont's
ability to sell the 27 properties subject to the mortgage loan. Some CV
properties are subject to resale and refinancing restrictions for periods
ending on or before July 31, 2002. We cannot assure you that Kramont will be
able to promptly dispose of one or more of its properties when it wants or
needs to. Consequently, the sale price for any property may not recoup or
exceed the amount invested in the property.
Costs associated with environmental matters may adversely affect
Kramont's operating results
Under some environmental laws, a current or previous owner or operator
of real property, and parties that generate or transport hazardous substances
that are disposed of at real property, may be liable for the costs of
investigating and remediating these substances on or under the property. The
federal Comprehensive Environmental Response, Compensation & Liability Act,
as amended ("CERCLA"), and similar state laws, impose liability on a joint
and several basis, regardless of whether the owner, operator or other
responsible party was at fault for the presence of such hazardous substances.
The costs of remediating hazardous or toxic substances can be substantial and
can exceed the value of the subject property. In connection with the
ownership or operation of its properties, Kramont could be liable for such
costs in the future. The presence of hazardous or toxic substances on its
properties, or Kramont's failure to remediate such substances, also may
adversely affect Kramont's ability to sell or rent its properties or to
borrow funds as collateral. In addition, environmental laws may impose
restrictions on the manner in which Kramont uses its properties or operates
its business, and these restrictions may require expenditures for compliance.
CV is currently not aware of any material environmental claims pending
or threatened against CV, and Kranzco is currently not aware of any material
environmental claims pending or threatened against Kranzco. Neither CV nor
Kranzco believes its properties are subject to any material environmental
remediation obligations, after giving effect to available insurance.
However, we cannot assure you that a material environmental claim or
compliance obligation will not arise that either is not covered by insurance
or is in excess of such coverage. The costs of defending against any claims
of liability, of remediating a contaminated property, or of complying with
future environmental requirements could be substantial to Kramont and affect
its operating results.
Federal Income Tax Risks
Failure to qualify as a real estate investment trust could adversely
affect Kramont's operations and Kramont's ability to make distributions.
Kranzco has qualified to be taxed as a REIT commencing with its taxable
year ended December 31, 1992, and CV has qualified to be taxed as a REIT
commencing with its taxable year ended December 31, 1982, and each intends to
continue to qualify to be taxed as a REIT under the Internal Revenue Code
until consummation of the mergers. It is expected that Kramont, the
surviving entity in the combination of the businesses of CV and Kranzco, will
also qualify to be taxed as a REIT under the Code. However, we cannot assure
you that Kramont will be able to operate in a manner so as to maintain its
qualification as a REIT. Qualification as a REIT involves the application of
highly technical and complex tax law provisions for which there are only
limited interpretations. In addition,
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qualification as a REIT involves the determination of various factual matters
that will not be entirely in Kramont's control. We also cannot assure you
that new laws, regulations or interpretations will not change the applicable
REIT law.
If Kramont fails to qualify as a REIT for any taxable year, its
distributions to its shareholders would cease to qualify for the deductions
for dividends paid, with the effect that Kramont would be subject to federal
income tax on its taxable income at corporate rates. In addition, Kramont
could be disqualified from treatment as a REIT for four taxable years
following the year of losing its REIT status. Losing its REIT status would
reduce net earnings available for investment or distribution to shareholders
because of the additional tax liability. In addition, Kramont might be
required to borrow funds or liquidate some investments in order to pay the
applicable tax.
Real estate investment trust distribution requirements limit the amount
of cash Kramont will have available for other business purposes,
including amounts to fund its future growth
To maintain Kramont's qualification as a REIT under the Internal Revenue
Code, Kramont will have to distribute annually to its shareholders at least
95% (90% commencing with the 2001 taxable year) of its ordinary taxable
income, excluding net capital gains. This requirement will limit Kramont's
ability to accumulate capital for use for other business purposes. If
Kramont does not have sufficient cash or other liquid assets to meet the
distribution requirements, it may have to borrow funds or sell properties on
adverse terms in order to meet the distribution requirements. If Kramont
fails to make a required distribution, it would cease to qualify as a REIT.
Taxability of Kramont Distributions
Pursuant to the Kramont distribution policy which will take effect upon
the completion of the mergers, it is anticipated that the Kramont
distributions will be fully taxable as dividends to the Kramont shareholders.
This will differ from the treatment of distributions previously made by
Kranzco because part of those distributions constituted non-taxable
distributions.
Kramont's board may determine without shareholder approval that Kramont
should no longer qualify as a REIT
Kramont's board may determine without shareholder approval that it is in
the best interests of Kramont to cease to qualify as a REIT for federal
income tax purposes. In the event the Kramont board would make this
determination, Kramont and its shareholders would no longer be entitled to
the Federal income tax benefits that are applicable to a REIT.
Legislative or regulatory action could adversely affect investors in
Kramont
In recent years, numerous legislative, judicial and administrative
changes have been made in the provisions of the federal income tax laws
applicable to investments similar to an investment in shares of Kramont.
Changes are likely to continue to occur in the future, and we cannot assure
you that any of these changes will not adversely affect your taxation as a
Kramont shareholder. Any of these changes could have an adverse affect on an
investment in shares of Kramont or on the market value or the resale
potential of Kramont's properties. You are urged to consult with your own
tax advisor with respect to the impact that recent legislation may have on
your investment and the status of legislative, regulatory or administrative
developments and proposals and their potential effect.
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Certain provisions of the Maryland General Corporation Law and Kramont's
Declaration of Trust may inhibit business combinations
Provisions of the Maryland General Corporation Law may prevent a
business combination involving Kramont
Provisions of the Maryland General Corporation Law applicable to
Kramont prohibit business combinations with:
o any person who beneficially owns 10% or more of the voting power of
Kramont's outstanding shares or any of Kramont's affiliates or
associates who, at any time within the two year period prior to the
date in question, was the beneficial owner of 10% or more of the
voting power of Kramont's outstanding shares (an "interested
shareholder"); or
o an affiliate of an interested shareholder.
These prohibitions last for five years after the most recent date on
which the interested shareholder became an interested shareholder.
Thereafter, Maryland law provides that any business combination must be
recommended by Kramont's board of trustees and approved by the affirmative
vote of at least 80% of the votes entitled to be cast by holders of Kramont's
outstanding shares and two-thirds of the votes entitled to be cast by holders
of Kramont's shares other than shares held by the interested shareholder or
its affiliate. These requirements, as well as the ability of Kramont to
issue other classes of common and preferred shares, could inhibit a change in
control even if a change in control were in your best interest. These
provisions of Maryland law do not apply, however, to business combinations
with a person that are approved or exempted by Kramont's board of trustees
prior to the time the person becomes an interested shareholder.
Kramont's Declaration of Trust contains ownership limitations which may
discourage a takeover
To preserve Kramont's qualification as a REIT, Kramont's declaration of
trust provides that no more than 50% in value of its outstanding shares may
be owned, directly or indirectly, by five or fewer individuals. Kramont's
declaration of trust authorizes the board of trustees of Kramont to take any
action that may be required to preserve its qualification as a REIT and to
limit any direct or indirect ownership by any one person to not more than
9.8% of Kramont's common shares or of all outstanding Kramont shares. In
addition, the terms of Kramont's Series D preferred shares authorize the
Kramont board to limit any person to direct or indirect ownership of not more
than 10% of the outstanding Series D preferred shares. These restrictions
may discourage a change in control of Kramont and may deter individuals or
entities from making tender offers for shares, which offers might be
financially attractive to shareholders or which may cause a change in the
management of Kramont.
Kramont's staggered board may prevent shareholders from adopting a bid
for control
The Kramont board will be divided into three classes of trustees. The
term of the first class expires in 2001, the term of the second class expires
in 2002, and the term of the third class expires in 2003. Each year, one
class of the Kramont board is elected by the shareholders. The staggered
terms prevent the shareholders from voting on the election of more than one
class of trustees at each annual meeting and, thus may delay a change in
control of Kramont or deter a bid for control of Kramont even in a case where
the holders of a majority of the outstanding Kramont common shares believe a
change in control would be in their interest.
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ABOUT THIS JOINT PROXY STATEMENT/PROSPECTUS
This joint proxy statement/prospectus is part of a registration
statement that Kramont filed with the Securities and Exchange Commission
relating to the Kramont common shares and preferred shares being issued in
the merger. This joint proxy statement/prospectus provides you with a general
description of the securities Kramont will offer. You should read this joint
proxy statement/prospectus together with the additional information described
under the heading "Where You Can Find More Information."
THE MEETING OF CV SHAREHOLDERS
Time and Place; Purposes
The CV special meeting will be held on June 6, 2000 at 10:30 a.m., local
time, at the Peninsula Hotel, 700 Fifth Avenue, at 55th Street, 3rd floor (La
Grande Salle), New York, NY 10019. At the CV special meeting, the
shareholders of CV will be asked:
1. To consider, adopt and approve the merger agreement, including the
amendment and restatement of Kramont's declaration of trust;
2. To consider, adopt and approve the 2000 Incentive Plan of Kramont,
the combined company; and
3. To transact other business as may properly come before the special
meeting or any adjournments of the special meeting.
Voting Rights; Votes Required for Approval
The board of directors of CV has fixed the close of business on April
10, 2000, as the record date for the determination of CV shareholders
entitled to notice of and to vote at the CV special meeting. Only holders of
record of CV common shares at the close of business on April 10, 2000 will be
entitled to vote at the CV special meeting. As of the close of business on
April 7, 2000, there were 8,111,419 CV common shares eligible to be voted, of
which 793,577 (or approximately 10% of the outstanding CV common shares)
(excluding 175,000 shares where beneficial ownership is disclaimed) were
owned beneficially by the officers and directors of CV, who have indicated
their intention to vote their shares in favor of the merger of CV into
Kramont and the 2000 Incentive Plan. No CV shares other than CV common
shares are entitled to vote on either the merger agreement or the 2000
Incentive Plan. You are entitled to one vote per CV common share you own.
If you sign and return the accompanying proxy form, your CV common shares
will be voted in accordance with your direction on the proxy form, or in the
absence of a direction, your shares will be voted for the merger agreement
and the 2000 Incentive Plan. Before the special meeting, you may change your
vote or revoke your proxy at any time by:
(1) giving written notice to Elaine Hauff, 100 Century Boulevard, West
Palm Beach, FL 33417;
(2) executing and delivering a later-dated proxy; or
(3) attending the special meeting of CV shareholders and voting in
person.
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Solicitation
CV will bear the cost of the solicitation of CV common shareholders. CV
will solicit proxies initially by mail. Directors, officers, or regular
employees of CV may solicit proxies in person, by telecopy or by telephone,
but they will not be specifically compensated for these services. CV will
arrange with brokerage firms and other custodians, nominees and fiduciaries
to forward solicitation materials to the beneficial owners of CV common
shares. CV will also reimburse these brokerage firms, custodians, nominees
and fiduciaries for reasonable out-of-pocket expenses incurred by them in
connection with forwarding the solicitation materials. CV and Kranzco have
retained D.F. King & Co., Inc. to coordinate the solicitation of proxies.
Each of CV and Kranzco will pay to D.F. King a fee of $6,500 plus a charge
per telephone call plus reasonable out-of-pocket expenses in connection with
these services.
Dissenters' Appraisal Rights
Shareholders of CV are not entitled to dissenting shareholders'
appraisal rights under Delaware law. Delaware law does not provide appraisal
rights to shareholders of a corporation in connection with a merger if their
shares are listed on a national securities exchange, such as the NYSE, on the
record date for determining shareholders entitled to vote on the merger
agreement and if they will receive only shares in the resulting entity as
consideration for their shares. All of the shares of CV outstanding on the
record date for determining the shareholders entitled to vote on the merger
were listed on the NYSE, and all CV shareholders will receive only shares in
Kramont in exchange for their shares in CV in the mergers.
Other Matters
The presence, in person or by proxy, of the holders of a majority of the
outstanding CV common shares entitled to vote is necessary to constitute a
quorum under the CV Bylaws. Votes cast by proxy or in person at the meeting
will be tabulated by election inspectors appointed for the meeting who will
also determine whether or not a quorum is present. Under Delaware law, the CV
Certificate of Incorporation and the CV Bylaws, the affirmative vote of the
holders of a majority of the outstanding CV common shares is required to
adopt the merger agreement and the affirmative vote of the holders of a
majority of the CV common shares voting at a meeting at which a quorum is
present is required to approve the 2000 Incentive Plan.
You may separately mark the accompanying CV proxy to vote your shares
FOR or AGAINST, or to ABSTAIN from voting with respect to the merger
agreement and the 2000 Incentive Plan. Abstentions and broker non-votes will
be counted in determining the presence of a quorum. "Broker non-votes" are
instances where a broker holding shares of record for a beneficial owner does
not vote the shares because it is precluded by rules of a stock exchange or
the NASD from voting on a matter. Because a majority of the outstanding CV
common shares is required to adopt the merger agreement and a majority of the
CV common shares voting at a meeting at which a quorum is present is required
to approve the 2000 Incentive Plan, abstentions and broker non-votes will
have the effect of a vote against adoption of the merger agreement and the
approval of the 2000 Incentive Plan.
THE CV DIRECTORS UNANIMOUSLY RECOMMEND THAT THE CV COMMON SHAREHOLDERS
VOTE FOR THE MERGER AGREEMENT AND THE 2000 INCENTIVE PLAN.
Pursuant to the CV Bylaws, no business may be transacted at the special
meeting except the business referred to in the accompanying notice of
meeting. If, however, any other matters are properly presented at the CV
special meeting, it is intended that the persons named in the enclosed form
of proxy will have the power to vote on those matters in accordance with
their discretion.
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THE MEETING OF KRANZCO SHAREHOLDERS
Time and Place; Purposes
The Kranzco special meeting will be held on June 6, 2000, 9:30 a.m.,
local time, at the Philadelphia Marriott West, Matson Ford Road and Route 23,
West Conshohocken, PA 19428. At the Kranzco special meeting, the
shareholders of Kranzco will be asked:
1. To consider and approve the merger of KRT Trust into Kramont
including the amendment and restatement of Kramont's declaration of
trust;
2. To consider, adopt and approve the 2000 Incentive Plan of Kramont,
the combined company; and
3. To transact other business as may properly come before the special
meeting or any adjournments of the special meeting.
Voting Rights; Votes Required for Approval
The board of trustees of Kranzco has fixed the close of business on
April 10, 2000, as the record date for the determination of Kranzco
shareholders entitled to notice of and to vote at the Kranzco special
meeting. Only holders of record of Kranzco common shares at the close of
business on April 10 2000 will be entitled to vote at the Kranzco special
meeting. As of the close of business on April 7, 2000, there were 10,566,746
Kranzco common shares entitled to be voted, of which 317,603 (or
approximately 3% of the outstanding Kranzco common shares) were owned
beneficially by the officers and trustees of Kranzco, who have indicated
their intention to vote their shares in favor of the merger of KRT Trust
into Kramont and the 2000 Incentive Plan. No Kranzco shares other than
Kranzco common shares are entitled to vote on either the merger of KRT Trust
into Kramont or the 2000 Incentive Plan. You are entitled to one vote per
Kranzco common share you own. If you sign and return the accompanying proxy
form, your Kranzco common shares will be voted in accordance with your
direction on the proxy form, or in the absence of a direction, your shares
will be voted for the merger of KRT Trust into Kramont and the 2000 Incentive
Plan. In addition, if you are a shareholder of record, you can authorize a
proxy to cast your votes using the toll-free number 1-888-216-1310 or the
Internet at www.directvote.com/krt. Before the special meeting, you may
change your vote or revoke your proxy at any time by:
(1) giving written notice to Norman M. Kranzdorf, 128 Fayette Street,
Conshohocken, PA 19428;
(2) executing and delivering a later-dated proxy; or
(3) attending the special meeting of Kranzco shareholders and voting in
person.
Solicitation
Kranzco will bear the cost of the solicitation of Kranzco common
shareholders. Kranzco will solicit proxies initially by mail. Trustees,
officers, or regular employees of Kranzco may solicit proxies in person, by
telecopy or by telephone, but they will not be specifically compensated for
these services. Kranzco will arrange with brokerage firms and other
custodians, nominees and fiduciaries to forward solicitation materials to the
beneficial owners of Kranzco common shares. Kranzco will also reimburse
these brokerage firms, custodians, nominees and fiduciaries for reasonable
out-of-pocket expenses incurred by them in connection with forwarding the
solicitation materials. Kranzco and CV have retained D.F. King & Co., Inc.
to coordinate the solicitation of proxies. Each of Kranzco and
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CV will pay to D.F. King a fee of $6,500 plus a charge per telephone call
plus reasonable out-of-pocket expenses in connection with these services.
Dissenters' Appraisal Rights
Except for holders of Kranzco's Series A-1 preferred shares,
shareholders of Kranzco are not entitled to dissenting shareholders'
appraisal rights under Maryland law. Maryland law does not provide appraisal
rights to shareholders of a REIT in connection with a merger if their shares
are listed on a national securities exchange, such as the NYSE, on the record
date for determining shareholders entitled to vote on the merger. Other than
Kranzco's Series A-1 preferred shares, all of the shares of Kranzco
outstanding on the record date for determining the shareholders entitled to
vote on the Kranzco Reorganization were listed on the NYSE. The dissenters'
appraisal rights of Kranzco's Series A-1 preferred shares are described in
"The Mergers-Appraisal Rights."
Other Matters
The presence, in person or by proxy, of the holders of a majority of the
outstanding Kranzco common shares entitled to vote is necessary to constitute
a quorum under the Kranzco Bylaws. Votes cast by proxy or in person at the
meeting will be tabulated by election inspectors appointed for the meeting
who will also determine whether or not a quorum is present. Although the
approval of the Kranzco shareholders of the merger of KRT Trust into Kramont
is not required by law, the merger agreement provides that the merger of KRT
Trust into Kramont will not be completed without the approval of the holders
of two-thirds of the outstanding Kranzco common shares. Approval of the
merger of KRT Trust into Kramont is a condition to the effectiveness of the
merger of Kranzco into KRT Trust II LLC, which is a part of the Kranzco
Reorganization. Under Maryland law, the Kranzco Declaration of Trust and the
Kranzco Bylaws, the affirmative vote of the holders of a majority of the
Kranzco common shares voting at a meeting at which a quorum is present is
required to approve the 2000 Incentive Plan.
You may separately mark the accompanying Kranzco proxy to vote your
shares FOR or AGAINST, or to ABSTAIN from voting with respect to the merger
of KRT Trust into Kramont and the 2000 Incentive Plan. Abstentions and broker
non-votes will be counted in determining the presence of a quorum. "Broker
non-votes" are instances where a broker holding shares of record for a
beneficial owner does not vote the shares because it is precluded by rules of
a stock exchange or the NASD from voting on a matter. Because two-thirds of
the outstanding Kranzco common shares is required to approve the merger of
Kranzco into Kramont and a majority of the Kranzco common shares voting at a
meeting at which a quorum is present is required to approve the 2000
Incentive Plan, abstentions and broker non-votes will have the effect of a
vote against approval of the merger and the 2000 Incentive Plan.
THE KRANZCO TRUSTEES UNANIMOUSLY RECOMMEND THAT THE KRANZCO COMMON
SHAREHOLDERS VOTE FOR THE MERGERS AND THE 2000 INCENTIVE PLAN.
Pursuant to the Kranzco Bylaws, no business may be transacted at the
special meeting except the business referred to in the accompanying notice of
meeting. If, however, any other matters are properly presented at the Kranzco
special meeting, it is intended that the persons named in the enclosed form
of proxy will have discretion to vote on those matters in accordance with
their discretion.
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PRE-MERGER TRANSACTIONS
Kranzco Reorganization Transactions
In order to facilitate the combination of the businesses of CV and
Kranzco, immediately prior to the completion of the business combination,
Kranzco will reorganize into a structure similar to the existing structure of
CV. This structure is called an UPREIT structure. In an UPREIT structure, a
REIT conducts its business through an operating partnership, the REIT owns a
controlling interest in the operating partnership, and the operating
partnership directly or indirectly owns all of the properties of the REIT.
The UPREIT structure enables potential transferors of real property to
transfer property to the REIT on a tax-deferred basis, facilitating the
REIT's acquisition of properties. This section describes the steps that
Kranzco will take in order to convert into an UPREIT structure.
Conversion Transactions. Substantially all of Kranzco's properties are
currently held either by wholly-owned corporations or by limited
partnerships, all of the partnership interests of which are held by Kranzco,
either directly or through other entities.
In order to comply with applicable REIT law requirements for an UPREIT,
Kranzco will convert its existing corporate subsidiaries into either limited
liability companies or limited partnerships, depending on the state of
incorporation of each corporation. These conversions will be accomplished in
most instances by forming limited liability companies and limited
partnerships, all of the equity interests of which will be owned by Kranzco,
either directly or through other entities. After the formation of these
entities, the existing corporations will then merge with either a limited
liability company or a limited partnership.
Merger of Kranzco into its Subsidiary. If the mergers of KRT Trust and
CV into Kramont are both approved, following completion of the "conversion
transactions" described above Kranzco will merge with its indirectly wholly-
owned subsidiary, KRT Trust II LLC, a Delaware limited liability company,
and Kranzco will cease to exist. In connection with this merger, all common
shareholders of Kranzco will receive an equal number of common shares in KRT
Trust, the sole member of KRT Trust II LLC, and preferred shareholders of
Kranzco will receive an equal number of shares of a series of preferred
shares of KRT Trust having the same rights. The KRT Trust common shares will
have the same rights as the Kranzco common shares. Each holder of KRT Trust
preferred shares will have the same rights as that holder had as a preferred
shareholder of Kranzco immediately prior to the merger of Kranzco into KRT
Trust II LLC.
Approval of the merger of KRT Trust into Kramont is a condition to the
effectiveness of the merger of Kranzco into KRT Trust II LLC, and the Kranzco
Reorganization as a whole will not become effective unless and until the
mergers of CV and KRT Trust into Kramont are both approved.
Shareholders of Kranzco will not surrender certificates evidencing their
shares in Kranzco for certificates evidencing their shares in KRT Trust
because promptly following the completion of the Kranzco Reorganization, KRT
Trust will merge into Kramont. At that time, former Kranzco shareholders
will be entitled to receive certificates evidencing shares in Kramont. See
"Merger Agreement-Exchange of Certificates for CV and KRT Trust Shares."
Instead of receiving certificates evidencing KRT Trust shares, each
certificate evidencing a preferred or common share of Kranzco shall be deemed
to evidence a preferred or common share of KRT Trust after the Kranzco
Reorganization. As a result of the merger of Kranzco into KRT Trust II LLC,
KRT Trust II LLC will own all of the equity interests, directly or through
other entities, in all of the newly formed limited liability companies and
limited partnerships that own the Kranzco properties.
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Subsequent Merger. Following the merger of Kranzco into KRT Trust II
LLC, KRT Trust II LLC will merge into Kramont Operating Partnership, L.P., a
Delaware limited partnership (known as KRT Operating Partnership, L.P. prior
to the Kranzco Reorganization), and KRT Trust II LLC will cease to exist.
Kramont Operating Partnership, L.P. is a newly formed entity in which KRT
Trust holds all of the general partner interests and KRT Trust I LLC holds
all of the limited partner interests. As a result of this merger and the
merger of KRT Trust into Kramont, Kramont will be the general partner of
Kramont Operating Partnership, L.P. and Kramont Operating Partnership, L.P.
will hold all of the equity interests in all of the limited liability
companies and limited partnerships previously held by KRT Trust II LLC.
Approval Rights. Because applicable law does not require shareholder
approval for the Kranzco Reorganization, the Kranzco board of trustees will
not request the Kranzco shareholders to approve the Kranzco Reorganization.
However, if the shareholders of Kranzco do not approve the merger of KRT
Trust into Kramont, Kranzco will not complete the Kranzco Reorganization.
Appraisal Rights. Only holders of Kranzco's Series A-1 preferred shares
are entitled to appraisal rights in connection with the Kranzco
Reorganization. These rights are described on page 78 of this joint proxy
statement/prospectus.
CV Trust Merger
Also to facilitate the combination of the businesses of CV and Kranzco,
prior to the effective time of the merger of CV into Kramont, CV will
complete the CV Trust Merger, in which CV's wholly-owned subsidiary,
Montgomery CV Realty Trust, a Delaware business trust, will merge into CV,
and Montgomery CV Realty Trust will cease to exist. Montgomery CV Realty
Trust currently is the sole general partner of Montgomery CV Realty L.P. and
holds approximately 84.5% of the outstanding limited partner interests in
Montgomery CV Realty L.P. No consideration will be exchanged in connection
with this merger. After the CV Trust Merger is completed, CV will merge into
Kramont and CV will cease to exist. Because applicable law does not require
that CV's shareholders approve the CV Trust Merger or the CV Trust Merger
merger agreement, the CV board of directors will not request the CV
shareholders to approve the CV Trust Merger or the CV Trust Merger merger
agreement. However, if the CV shareholders do not adopt the merger agreement
relating to the merger of CV and Kranzco into Kramont, CV will not complete
the CV Trust Merger.
Private Placement Offering of Kramont Operating Partnership, L.P. Partnership
Units
Following the signing of the merger agreement, KRT Trust caused Kramont
Operating Partnership, L.P. (known as KRT Operating Partnership, L.P. prior
to the Kranzco Reorganization) to offer each holder of limited partner units
in Montgomery CV Realty L.P., other than CV Trust, the right to contribute
all of their limited partner units in Montgomery CV Realty L.P. to Kramont
Operating Partnership, L.P. in exchange for an equal number of common units
of partnership interest in Kramont Operating Partnership, L.P.
Alternatively, at their option, each holder of limited partner units in
Montgomery CV Realty L.P. was given the right first to contribute all of its
units to CV Partner Holdings, L.P., a Delaware limited partnership, in
exchange for units of limited partner interest in CV Partner Holdings, L.P.,
and then to contribute such limited partner interests in CV Partner Holdings,
L.P. to Kramont Operating Partnership, L.P. in exchange for an equal number
of common units of partnership interest in Kramont Operating Partnership,
L.P.
At the same time, pursuant to the current limited partnership agreement
of Montgomery CV Realty L.P., Kramont and Montgomery CV Realty L.P. offered
each holder of limited partner units in
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Montgomery CV Realty L.P., other than Montgomery CV Realty Trust, the
alternative right to exchange their limited partner units in Montgomery CV
Realty L.P. for an equal number of Kramont common shares, but subject to and
only to become effective on the completion of the mergers.
The holders of limited partner units in Montgomery CV Realty L.P. were
given the opportunity to accept each of these exchange offers until
March 27, 2000. However, Kramont Operating Partnership, L.P. and Montgomery
CV Realty L.P. have the right to extend the period during which the exchange
offers may be accepted. The accepted exchange offers will be consummated
only if the mergers are completed, and will be completed immediately
following completion of the mergers.
Holders of limited partner units representing 99.88% of the limited
partner interests in Montgomery CV Realty L.P. have irrevocably agreed to
exchange their limited partner units in Montgomery CV Realty L.P. or CV
Partner Holdings, L.P. for limited partner interests in Kramont Operating
Partnership, L.P., subject only to the completion of the mergers. No holders
of limited partner units in Montgomery CV Realty L.P. accepted the offer to
exchange their limited partner units for Kramont common shares. As a result,
if the mergers are consummated, holders of limited partner units in
Montgomery CV Realty L.P. making such exchanges will have the rights of
holders of common units of partnership interest in Kramont Operating
Partnership, L.P. See "-Kranzco Reorganization Transactions" and "Description
of Partnership Agreement of Kramont Operating Partnership". After the
mergers are completed, except for holders holding 0.12 % of the limited
partner interests, no holders of the limited partner interests in Montgomery
CV Realty L.P. on the date of this joint proxy statement/prospectus will
continue to own limited partner units in Montgomery CV Realty L.P.
The exchange of limited partner units in Montgomery CV Realty L.P. or CV
Partner Holdings, L.P. for common units of partnership interest in Kramont
Operating Partnership, L.P. or Kramont common shares will be effectuated
through privately negotiated transactions.
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<PAGE>
THE MERGERS
The following is a summary of the material terms of the mergers and the
merger agreement. To understand the mergers fully, and for a more complete
description of the legal terms of the mergers, you should carefully read this
entire document, including the merger agreement, which is attached as
Appendix A and is incorporated herein by reference.
Terms of the Merger
CV and KRT Trust (the shares of which former Kranzco shareholders will
hold after the Kranzco Reorganization) will be merged into a newly formed
entity, Kramont Realty Trust, upon satisfaction or waiver of the conditions
set forth in the merger agreement. Upon the completion of the mergers, each
outstanding common share of CV and KRT Trust will be converted into one
Kramont common share. Holders of KRT Trust preferred shares will receive an
equal number of Kramont preferred shares having the same rights as the KRT
Trust preferred shares of the same series previously outstanding. No
fractional shares of Kramont will be issued in connection with the merger.
Each Kranzco shareholder owning fractional shares held in the dividend
reinvestment plan will instead be entitled to receive a cash payment equal to
the product obtained by multiplying (A) the fractional share interest to
which the former holder would otherwise be entitled by (B) the average
closing price of Kranzco common shares on the NYSE on the effective date of
the mergers, or if the effective date is not a trading day, then on the
immediately preceding trading day.
Background of the Mergers
CV is a successor to the company that developed, built and operated the
Century Village active adult residential condominium communities in southern
Florida. CV became a REIT in January, 1982 following a restructuring which
separated the development and operating activities from the more passive real
estate investment activities. After qualifying as a REIT, CV's operating
strategy consisted of investing in real estate mortgage notes receivable,
primarily loans to developers. In the 1990's CV limited new loan
commitments, repaid all of its outstanding borrowings, other than its long-
term collateralized mortgage obligations, and began to seek real estate
investments for available cash with proven and experienced personnel to
manage and enhance such a portfolio.
In December 1997, CV acquired a number of shopping centers and an
interest in Drexel Realty, Inc., a real estate management and leasing
company. In connection with these transactions, CV created an UPREIT
structure by forming Montgomery CV Realty L.P., reorganizing ownership of its
assets and acquiring 100% of the ownership interests in nine shopping centers
and an office building, located in Pennsylvania and New Jersey, and by
acquiring from Louis P. Meshon, Sr. an approximately 95% economic interest in
Drexel. As a result, CV became the sole beneficial owner of Montgomery CV
Realty Trust, directly or indirectly owning approximately 84.5% of Montgomery
CV Realty L.P. and thus became a self-administered, self-managed equity REIT
with Mr. Meshon as President and Chief Executive Officer.
Since its conversion into an UPREIT structure, it has been CV's
operating strategy to increase its funds from operation through:
o efficient operation of properties including through active leasing
and property management;
o maintenance of high occupancy levels, increasing rental rates and
controlling operating and capital costs;
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o acquisition of additional properties which satisfy CV's criteria,
at favorable prices, including properties requiring renovation or
re-leasing;
o completion of strategic renovations and expansions to further
maximize cash available for distribution; and
o attainment of greater access to financing sources.
Although CV has acquired 10 additional shopping center properties since
January 1998, in light of the difficulty in obtaining new properties
resulting from, among other things, a lack of available equity capital and
lower REIT stock prices, which limit the ability to acquire properties using
REIT stock or operating partnership units as consideration, and the
advantages of a larger property portfolio, it considered the possibility of a
combination with another shopping center REIT with a compatible property
portfolio, management philosophies and objectives as an alternative growth
strategy to the acquisition of individual properties.
Kranzco was formed in 1992 to provide certain entities then known as The
Kranzco Group with a public vehicle for the expansion of their shopping
center ownership and management business. Upon completion of its initial
public offering in November 1992, Kranzco owned and operated 25 neighborhood
and community shopping centers located in Connecticut, New Jersey, New York,
Pennsylvania and Rhode Island. Since completion of the offering, Kranzco has
acquired 42 neighborhood and community shopping centers, sold 5 and now owns
62 shopping centers located in 16 states in the Northeast, Mid-Atlantic and
Southern region of the United States. Given Kranzco's view as to the
importance of size with respect to REITs generally, Kranzco began to consider
the possibility of a business combination with another shopping center REIT
or a substantial infusion of equity capital as a method of growing the
company at a rate faster than could otherwise be accomplished, given its
resources at that time.
Louis P. Meshon, Sr., President and Chief Executive Officer of CV, and
Norman M. Kranzdorf, President and Chief Executive Officer of Kranzco, have
known each other professionally for more than 20 years. As a result of a
call from Mr. Meshon to Mr. Kranzdorf on May 29, 1998, Mr. Meshon, H. Irwin
Levy, Chairman of CV, and Mr. Kranzdorf met on June 16, 1998. At the
meeting, the parties discussed the status of developing trends with respect
to real estate investment trusts and the shopping center industry, the
businesses of CV and Kranzco and the possibility of a business combination
involving the two companies. During the course of the meeting, the parties
noted that the strategic philosophies and objectives of the two companies
were very similar.
After additional telephone conversations in early July 1998 between
Messrs. Meshon and Kranzdorf and the execution of a confidentiality and
standstill agreement on July 7, 1998 by CV and Kranzco, on July 15, 1998,
Messrs. Meshon and Kranzdorf met to discuss a wide range of topics relating
to a business combination between their respective companies, including their
property portfolios, management philosophies, acquisition criteria, long-
range goals and strategic interests. After additional telephone
conversations toward the end of July, Messrs. Meshon and Kranzdorf met on
August 3, 1998 to discuss various operational issues relating to the
respective companies, how a merger of the two companies might be structured
and the mutual benefits of such a transaction.
On August 7, 1998, Mr. Meshon met with representatives of ING Barings,
the financial advisor to Kranzco, and the two of them spoke to Mr. Kranzdorf
by telephone to discuss the general parameters of a transaction. Messrs.
Meshon and Kranzdorf had several additional meetings and discussions between
August 19, 1998 and September 9, 1998 to discuss proposed exchange ratios,
property information, financial aspects of a merger and management of the
combined company.
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Messrs. Meshon and Levy kept the CV board informed concerning the
discussions with Kranzco throughout the summer of 1998, and obtained the CV
board's authorization to continue the discussions with Kranzco.
At a regularly scheduled Kranzco board meeting held on September 16,
1998, Mr. Kranzdorf updated the board regarding management's ongoing
discussions with CV. The Kranzco board agreed that management should proceed
with further discussions with CV.
On September 18, 1998, Messrs. Meshon and Kranzdorf met to discuss the
various issues which would need to be resolved in connection with a merger of
the two companies. On October 6, 1998, Messrs. Meshon, Kranzdorf and
representatives of ING Barings discussed the proposed management structure
and board composition of the combined company. Also in early October 1998,
CV engaged Salomon Smith Barney to assist CV in connection with CV's possible
business combination with Kranzco. During the latter part of October and
early part of November, the parties continued their discussions regarding the
composition of the board of the combined company and exchanged some financial
and property information.
On November 30, 1998, Messrs. Meshon and Levy, together with
representatives of Salomon Smith Barney, met with Mr. Kranzdorf and
representatives of ING Barings to continue discussions of the proposed terms
of a transaction. After a series of further discussions among Messrs. Meshon
and Kranzdorf, the parties were unable to agree on an exchange ratio and the
composition of the board and management of the combined company. As a
result, the parties decided to terminate formal discussions.
During March 1999, the parties reconstituted discussions regarding a
potential transaction. At a regularly scheduled board meeting held on March
10, 1999, Mr. Meshon reported to CV's board concerning his discussions with
Mr. Kranzdorf and the board authorized further discussions to explore the
possibility of a strategic combination with Kranzco.
On March 22, 1999, Messrs. Meshon and Kranzdorf met to discuss the
points of disagreement among the two parties, and they agreed to have further
discussions to try to resolve the open issues. During the balance of March
and in May 1999, the parties continued discussions in an effort to resolve
their differences.
In May 1999, during informal conversations with individual members of
the Kranzco board, Mr. Kranzdorf informally updated the board of trustees on
the status of the discussions with CV, and was authorized to continue
discussions with CV. In May 1999, counsel for the parties began to draft the
merger documentation, conduct due diligence and analyze alternative
structures of the transaction.
On May 18, 1999, Messrs. Meshon, Kranzdorf and Bernard Korman, a trustee
of Kranzco, met to discuss the positives and negatives of a merger and how
the combined companies would operate. On May 25, 1999, Messrs. Meshon and
Kranzdorf and representatives of Salomon Smith Barney and ING Barings met to
discuss the open business issues and the status of legal documentation.
On May 28, 1999, an information meeting was held between members of CV's
board, representatives of Salomon Smith Barney, and CV's legal counsel
regarding the possible merger of CV with Kranzco and the proposed terms of
that transaction. At the meeting, Mr. Meshon updated the board concerning
the discussions with Kranzco. Legal counsel informed the board regarding its
legal duties in connection with the proposed transaction. The CV board also
discussed with CV's management and legal and financial advisors the principal
terms of the proposed merger, including the proposed exchange ratio of 0.78
Kranzco common shares for each CV common share, the likely dividend of the
combined company, the proposed composition of the new board, which was
proposed to include three of CV's current directors, three of Kranzco's
current directors and one director chosen together by CV and Kranzco,
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the management of the new company by Mr. Meshon and certain employment
arrangements with Mr. Kranzdorf, and the proposed break-up fees and expense
reimbursement arrangements.
At a regularly scheduled Kranzco board meeting held on June 2, 1999, Mr.
Kranzdorf and representatives of ING Barings updated the board regarding
management's discussions with CV and the issues that still needed to be
resolved. Mr. Kranzdorf reviewed with the board Kranzco's efforts regarding
other possible strategic transactions, all of which were with a view toward
increasing the size of Kranzco in light of the relative importance of size
with respect to REITs generally. Mr. Kranzdorf indicated that given the
nature of the unresolved issues with CV and the time it would take to resolve
them, the board should reevaluate the various means by which Kranzco might
grow and accomplish its strategic objectives. The trustees discussed the
alternative methods of making Kranzco grow, including a merger, raising debt
and equity capital, the acquisition of property portfolios and the likelihood
of success with respect to each. Representatives of ING Barings then
presented a financial analysis of Kranzco and CV and a thorough analysis of
the positives and negatives of merging with CV. After a thorough discussion
of the issues, the board decided to terminate discussions with CV and explore
other possible strategic transactions. At the conclusion of the board
meeting, Mr. Kranzdorf called Mr. Meshon to inform him that the Kranzco board
of trustees had decided to terminate discussions with CV at that time and to
explore other strategic alternatives. During the summer and fall of 1999,
Kranzco continued to explore other strategic alternatives.
At a regularly scheduled board meeting held on June 7, 1999, Mr. Meshon
reported to CV's board concerning the status of the discussions with Kranzco,
including that Mr. Kranzdorf had informed him that Kranzco had decided to end
its discussions with CV and pursue other strategic combinations. At a
regularly scheduled board meeting held on August 19, 1999, Mr. Meshon
reported to CV's board regarding preliminary discussions with other parties
concerning possible business combinations between them and CV for the purpose
of increasing the size of CV's property portfolio. Mr. Meshon advised the
board that no further discussions had occurred with any of the Kranzco
representatives.
On September 29, 1999, at a regularly scheduled Kranzco board meeting,
the board reviewed Kranzco's current and anticipated cash requirements, the
reduced amount of funds from operations for the third quarter, the state of
the equity and debt markets, including the cost of capital and debt, and
Kranzco's ability to obtain additional funding from these markets. After
discussion, the board voted to reduce the distribution paid to common
shareholders from $0.48 per quarter to $0.325 per quarter. The closing share
price of Kranzco's common shares dropped from $11.75 to $9.50 on
September 29, 1999.
On October 1, 1999, following discussions among the CV directors, Mr.
Meshon proposed to Kranzco that CV and Kranzco combine in a transaction in
which each Kranzco common share would convert into 1.1 shares in the combined
company, and each CV common share would convert into one share in the
combined company. Mr. Kranzdorf informally discussed the proposal with
members of the Kranzco board of trustees, and they authorized Mr. Kranzdorf
to pursue discussions with Mr. Meshon on the basis of the proposal.
From October 8 through October 13, 1999, Messrs. Meshon and Kranzdorf
met and had a number of telephone calls to discuss the proposed structure of
the transaction, which at that time involved the merger of CV into KRT Trust,
the proposed exchange ratio, the performance of the companies since their
last discussions and the proposed board composition and management of the
combined company. On October 15, 1999, Messrs. Meshon and Kranzdorf
discussed the status of the business and legal negotiations at the time
discussions terminated in June 1999. On October 18, 1999, Mr. Meshon and
representatives of Salomon Smith Barney and ING Barings, and counsel to CV
and Kranzco met to discuss the open business and legal issues to be resolved.
Following the October 18th meeting, the parties continued to negotiate a
draft merger agreement and address employee arrangements and structural
issues related to the proposed transaction.
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During November and the beginning of December 1999, Messrs. Meshon and
Kranzdorf had numerous discussions to address the various issues that arose
in negotiations as well as the respective companies' third quarter and
projected fourth quarter financial results. During these discussions, the
parties agreed to modify the structure of the transaction to provide that
both CV and Kranzco would merge into Kramont, a newly formed entity.
At a regularly scheduled board meeting held on November 12, 1999, Mr.
Meshon reported to CV's board concerning the status of discussions with
Kranzco regarding a possible merger of the two companies. At the meeting,
the board reviewed with CV's legal and financial advisors various issues
regarding the merger, including the proposed structure, the exchange ratio,
the liquidity of the combined company, and the proposed composition of the
new board. The board also discussed the proposed transaction at length and
identified a number of issues that would need to be resolved to the board's
satisfaction before a transaction with Kranzco could be given further
consideration, including a change in the exchange ratio so that each common
share of both CV and Kranzco would convert into one share of the combined
company, and a modification of the proposed board composition so that CV
would designate four members of the new board and Kranzco would designate
three members and a modification of some closing conditions.
On November 12, 1999, a special telephonic meeting of the Kranzco board
of trustees was held to approve the execution of a merger agreement. At the
meeting, members of Kranzco's management, representatives of ING Barings and
legal counsel were present. At the meeting, Mr. Kranzdorf updated the
Kranzco board on the proposed terms of a merger with CV. Kranzco's legal
counsel informed the board of its legal duties in connection with the
transaction with CV and presented and explained the terms of the merger
agreement to the Kranzco board, including the exchange ratio, closing
conditions, termination rights and break up fees and expense reimbursement
provisions. Legal counsel and members of Kranzco management then indicated to
the board the nature and scope of the due diligence performed by legal
counsel and by Kranzco. During the board meeting, counsel to Kranzco
received a call from representatives of CV indicating that CV expected to
propose modifications to certain provisions of the proposed merger agreement.
At that point, Mr. Kranzdorf suggested that the Kranzco board meeting be
adjourned until he had been advised of the proposed modifications. Mr.
Meshon then called Mr. Kranzdorf to discuss CV's proposed modifications to
the merger agreement, including (1) a lowering of the Kranzco exchange ratio
such that each share of both CV and Kranzco would each be converted into one
share of the combined company, (2) modification of the composition of the
board of the combined company and (3) a modification to some of the closing
conditions of the merger. When the Kranzco board reconvened, they discussed
CV's proposed modifications. The board indicated that they needed more time
to review the proposed modifications and Mr. Kranzdorf then notified Mr.
Meshon of the Kranzco board's decision.
Following the November 12th Kranzco board meeting, Mr. Kranzdorf had
informal conversations with individual members of the board and
representatives of ING Barings regarding the proposed modifications. During
these discussions, they discussed the status of the REIT capital markets and
the difficulty of obtaining financing, the recent reduction of the market
price of the Kranzco common shares, as well as the reduction in Kranzco's
funds from operations.
During November, 1999, Messrs. Meshon and Kranzdorf met to discuss CV's
proposed modifications to the transaction. Believing that CV and Kranzco had
resolved the outstanding issues, Messrs. Meshon and Kranzdorf instructed
their legal counsel to finalize the merger documentation.
From December 6 through 10, 1999, legal counsel for CV and Kranzco held
discussions concerning outstanding legal issues and to finalize the legal
documentation for the transaction.
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Beginning in the morning on December 10, 1999, a special meeting of CV's
board was held to approve the proposed merger between CV and Kranzco and to
approve the execution of the merger agreement. At the meeting, members of
CV's management, representatives of Salomon Smith Barney and legal counsel
were present. The board was advised that Kranzco had accepted the
modifications identified at the November 12 board meeting with respect to
lowering the exchange ratio to 1:1, increasing to four the number of members
of the new board designated by CV, and described the new structure involving
the merger of both CV and Kranzco into a newly formed entity called Kramont
Realty Trust. The board also reviewed in detail with CV's management and
financial and legal advisors various terms of the proposed merger. In this
connection, the board discussed, among other matters, including closing
conditions, pro forma cash flows and operating results and strategic benefits
to CV and its shareholders. Legal counsel advised the board regarding their
legal duties in connection with the transaction with Kranzco and explained
provisions of the merger agreement including the closing conditions and
termination provisions. Discussion ensued concerning the background of the
proposed transaction, CV's growth strategy and possible alternatives to the
merger with Kranzco that might be available, the management of the combined
companies by Mr. Meshon, the results of due diligence concerning Kranzco,
particularly the upside potential in Kranzco's properties in light of their
occupancy rates and other considerations, and the possible benefits and
perceived risks of the proposed merger described below under "Reasons for the
Merger; Recommendation of the CV Board of Directors - Positive Factors
Considered by the CV Board of Directors," "- Negative Factors Considered by
the CV Board of Directors."
Representatives of Salomon Smith Barney reviewed its financial analysis
of the proposed exchange ratio and delivered to the CV board its opinion to
the effect that, as of the date of the opinion and based on and subject to
the matters described in the opinion, the CV exchange ratio was fair, from a
financial point of view, to the holders of CV's common shares.
After a full discussion of the proposed transaction and the merger
agreement by the board and CV's financial and legal advisors as described
above, the CV board of directors unanimously approved the merger agreement
and the transactions contemplated by the merger agreement.
Late in the afternoon on December 10, 1999, a special telephonic meeting
of the Kranzco board of trustees was held with Kranzco trustees, members of
Kranzco management, representatives of ING Barings, a representative of
Arthur Andersen LLP, Kranzco's independent public accountants, and legal
counsel. At the meeting, Mr. Kranzdorf updated the Kranzco board on the
proposed terms of a merger with CV and advised the board as to the proposed
resolution of open issues discussed at the previous meeting. Kranzco's legal
counsel informed the board of its legal duties in connection with the
transaction with CV and presented and explained the terms of the merger
agreement to the Kranzco board, including the exchange ratio, closing
conditions, termination rights and break up fees and expense reimbursement
provisions. Legal counsel and members of Kranzco management then indicated
to the board the nature and scope of the due diligence performed by legal
counsel and by Kranzco. Mr. Kranzdorf and others reviewed with the Kranzco
board of trustees (1) the background of the proposed merger and the material
terms of the transaction and the various alternatives which may be available
to Kranzco at that time or in the future with respect to the financing of
Kranzco's activities and other strategic alternatives, (2) pertinent due
diligence findings with respect to CV, with particular emphasis on the
current operations and properties of CV, and (3) the potential benefits as
well as the risks of the proposed merger transaction as described below under
"Advantages and Disadvantages of the Merger; Recommendations of the Kranzco
Board of Trustees-Positive Factors Considered by the Kranzco Board of
Trustees" and "-Negative Factors Considered by the Kranzco Board of
Trustees."
Representatives of ING Barings then made a presentation to the Kranzco
board outlining the results of the financial analyses it had conducted to
assess the fairness of the proposed exchange ratio to Kranzco under the
revised structure. The Kranzco board then asked questions of legal counsel
and ING Barings and discussed the advantages and disadvantages of the
transaction as described in "-Advantages and Disadvantages of the Merger;
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Recommendation of the Kranzco Board of Trustees." ING Barings then delivered
to the Kranzco board their written opinion that as of December 10, 1999,
based upon and subject to the facts and circumstances as they existed at that
time, and based upon and subject to certain assumptions, factors and
limitations, the Kranzco exchange ratio was fair to Kranzco shareholders from
a financial point of view to such shareholders.
After considering the fairness opinion and following a discussion of the
transaction, the Kranzco board of trustees unanimously approved the merger
agreement and all transactions contemplated by the merger agreement.
Upon approval by both companies' boards, the merger agreement was
executed by CV and Kranzco in the evening on December 10, 1999.
Reasons for the Merger; Recommendation of the CV Board of Directors
The CV board of directors believes that the terms of the merger of CV
into Kramont are fair to and in the best interests of CV and its
stockholders. Consequently, the CV board of directors unanimously approved
the merger of CV into Kramont and recommends that CV's stockholders vote FOR
the adoption of the merger agreement.
Positive Factors Considered By the CV Board of Directors
In deciding whether to approve the merger of CV into Kramont, the CV
board of directors considered a number of factors. The following are some of
the positive factors that the board considered:
o Increased Size and Geographic Diversity of Portfolio. Upon the
completion of the mergers, Kramont will own 84 properties with an
aggregate of approximately 11 million square feet of gross leasable
area in 16 states from Massachusetts to Florida. CV's board of
directors viewed this as favorable because it will give Kramont the
potential for greater financial capacity and resources to develop
and further increase the number of its properties, for critical
mass in new markets and be less subject to regional economic
influences.
o Occupancy Rates. Kranzco's occupancy rate (including, as rented,
space for which rent is being paid but is not presently occupied)-
approximately 91% for Kranzco's properties as of March 1, 2000
compared to approximately 97% for CV's properties as of that same
date-provides an opportunity to improve occupancy rates through
active portfolio and property management.
o Market Capitalization. The combined market capitalization of
Kramont resulting from the mergers is expected to be substantially
greater than the capitalization of CV alone. CV's board of
directors viewed this as favorable because it would potentially
give Kramont increased access to financing and an enhanced presence
in the REIT industry.
o Increase in the Number of Shares Available for Trading. The number
of outstanding common shares will increase from approximately
8 million CV common shares currently outstanding to approximately
18.6 million Kramont common shares anticipated to be outstanding
immediately after the mergers are completed.
o Increased Dividend. Subject to the exercise of its duties under
applicable law, the policy of Kramont's board of trustees during
the first year following the completion of the mergers will be to
pay cash distributions on Kramont's common shares on a quarterly
basis at the rate of $0.325 per
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quarter, which equates to $1.30 annually for each common share and
which, if achieved, would be $.14 per share greater than CV's
current annual targeted dividend per share.
o Broader Research Coverage. The CV board of directors considered it
a positive factor that, while no research analysts currently follow
CV, four research analysts currently follow Kranzco and,
accordingly, may follow Kramont after the completion of the
mergers.
o Potential For Upgrading Properties. Upon the completion of the
merger, Louis P. Meshon, Sr., CV's chief executive officer, will
become the president and chief executive officer of Kramont, and
Kramont's board of trustees will be composed of 7 members, 4 of
which have been designated by CV. It is anticipated that the
application of CV's management team in the operation of Kramont's
business will upgrade some of Kranzco's properties.
o Terms of the Merger. The CV board of directors concluded that the
terms of the merger agreement are fair to CV and its stockholders.
o Tax-free Nature of the Merger. The mergers are expected to be
treated as a tax-free reorganization for U.S. federal income tax
purposes.
o Fixed Exchange Ratio. The fixed exchange ratio provided in the
merger agreement provides certainty to CV 's stockholders regarding
the number of Kramont common shares they will be issued in the
mergers.
o Opinion of Financial Advisor. The financial presentation of
Salomon Smith Barney, including its opinion as to the fairness from
a financial point of view and as of the date of the opinion, of the
CV exchange ratio to the holders of CV common shares, as described
under "Opinion of CV's Financial Advisor."
o CV Exchange Ratio. In approving the CV exchange ratio, which
equates to paying to Kranzco shareholders a premium over the market
value of their shares, the CV board considered the merger as
consistent with its strategic objective since, among other things,
CV will have four out of the seven seats on the Kramont board of
trustees and Louis P. Meshon, Sr., the President and Chief
Executive Officer of CV, will be the President and Chief Executive
Officer of Kramont.
Negative Factors Considered By the CV Board of Directors
In addition to the foregoing positive factors, CV's board of directors
also considered the potential adverse impact of other factors on the proposed
mergers. These included the following:
o Cost of the Mergers. The significant cost involved to complete the
mergers and the substantial management time and effort required.
o Financing Risks. The potential that the obligation to repay
certain indebtedness of Kranzco and CV will be accelerated upon the
completion of the mergers or, if consents are obtained from the
holders of such indebtedness, additional costs may be incurred in
order to obtain such consents.
o Dividend Protections. Upon the completion of the mergers,
Kramont's Declaration of Trust will not include certain protections
included in CV's certificate of incorporation generally intended to
protect
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CV's ability to make quarterly distributions of $.29 per common
share and annual distributions of $1.16 per common share.
o Preferred Shares. Currently, CV's common stockholders are not
subject to the rights of any class of preferred stock including
with respect to the payment of dividends and liquidation
preference. Upon completion of the mergers, Kramont's common
shares will be subject to the prior rights of Kramont's Series A-1,
Series B-1 and Series D preferred shares with respect to such
matters.
o Expense of Regulatory Compliance. The potential expenses of
compliance with regulatory requirements applicable to Kranzco
properties, including the Americans with Disabilities Act and
applicable environmental regulations, the availability of insurance
with respect to expenses of this kind, and the likelihood that
these expenses would not be material to Kramont.
o Occupancy Rates. The challenge of improving Kranzco's current
occupancy rate of approximately 91% following the completion of the
mergers, especially in light of the number of Kranzco's significant
tenants operating while in Chapter 11 bankruptcy proceedings.
o Combining CV and Kranzco. The challenge of combining CV's 22
properties and Kranzco's 62 properties into a combined company with
84 properties with an aggregate of approximately 11 million square
feet of gross leasable area in 16 states.
o Fixed Exchange Ratio. The CV board of directors considered the
possibility that, after the announcement of the mergers, the market
price of CV's common shares might rise and the market price of
Kranzco's common shares might fall, which might have the result
that CV common shareholders might not receive a sufficient number
of Kramont common shares to adequately reflect the market value of
the CV common shares they would be surrendering in the mergers.
o Payment of Fees. CV may be required to pay Kranzco a fee of $5
million and/or reimburse Kranzco for up to $1.5 million in expenses
incurred in connection with the mergers if the merger agreement is
terminated under some circumstances.
o Benefits Not Realized. The possibility that the mergers would not
be consummated or, if consummated, that the anticipated benefits
would not be fully realized.
Other Considerations
The CV board of directors viewed as adequate the conditions to the
completion of the mergers included in the merger agreement, including the
condition that no change in the financial condition, business or operations
of Kranzco and its subsidiaries taken as a whole will have occurred that
would have or would be reasonably likely to have a material adverse effect on
Kranzco.
The foregoing discussion of the information and factors considered by
the CV board of directors is not meant to be exhaustive, but is believed to
include all material factors that the CV board of directors considered. The
CV board of directors did not quantify or attach any particular weight to any
of the various factors that it considered in reaching its determination.
Instead, the CV board of directors viewed its position and recommendation to
be based on the totality of the information presented to it. Additionally,
the individual members of the CV board of directors may have given different
weight to different factors in reaching their own individual conclusions
regarding the mergers and the merger agreement.
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Opinion of CV's Financial Advisor
CV retained Salomon Smith Barney to act as its financial advisor in
connection with the proposed mergers. In connection with its engagement, CV
requested that Salomon Smith Barney evaluate the fairness, from a financial
point of view, to the holders of CV common shares of the CV exchange ratio
provided for in the merger agreement. On December 10, 1999, at a meeting of
the CV board of directors held to evaluate the proposed mergers and the
proposed merger agreement, Salomon Smith Barney delivered to the CV board of
directors an oral opinion to the effect that, as of that date and based on
and subject to the matters described in its opinion, the CV exchange ratio
was fair, from a financial point of view, to the holders of CV common shares.
Salomon Smith Barney confirmed its oral opinion by delivery of a written
opinion dated December 10, 1999.
In arriving at its opinion, Salomon Smith Barney:
o reviewed the merger agreement and related documents;
o held discussions with senior officers, directors and other
representatives and advisors of CV and with senior officers and
other representatives and advisors of Kranzco concerning the
businesses, operations and prospects of CV and Kranzco;
o examined publicly available business and financial information
relating to CV and Kranzco;
o examined financial forecasts and other information and data for CV
and Kranzco which were provided to or otherwise discussed with
Salomon Smith Barney by the managements of CV and Kranzco,
including information relating to strategic implications and
operational benefits anticipated to result from the mergers;
o reviewed the financial terms of the mergers as described in the
merger agreement in relation to, among other things, current and
historical market prices and trading volumes of CV common shares
and Kranzco common shares, the historical and projected earnings
and other operating data of CV and Kranzco, and the capitalization
and financial condition of CV and Kranzco;
o analyzed financial, stock market and other publicly available
information relating to the businesses of other companies whose
operations it considered relevant in evaluating those of CV and
Kranzco;
o evaluated the potential pro forma financial impact of the mergers
on CV and Kranzco; and
o conducted other analyses and examinations and considered other
financial, economic and market criteria as it deemed appropriate in
arriving at its opinion.
In rendering its opinion, Salomon Smith Barney assumed and relied on,
without independent verification, the accuracy and completeness of all
financial and other information and data that it reviewed or considered.
With respect to these financial forecasts and other information and data, the
managements of CV and Kranzco advised Salomon Smith Barney that they were
reasonably prepared on bases reflecting the best currently available
estimates and judgments as to the future financial performance of CV and
Kranzco and the strategic implications and operational benefits anticipated
to result from the mergers.
Salomon Smith Barney assumed, with CV's consent, that the mergers will
be treated as tax-free mergers for federal income tax purposes and that the
pre-merger transactions would be consummated in all material respects in
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accordance with their terms. Salomon Smith Barney also assumed, with CV's
consent, that CV and Kranzco were organized and have operated in conformity
with the requirements for qualification as a REIT for federal income tax
purposes and that none of the mergers, the pre-merger transactions or the
other transactions contemplated by the mergers would adversely affect the
REIT status or operations of CV and Kranzco.
Salomon Smith Barney's opinion relates to the relative values of CV and
Kranzco and the CV exchange ratio of CV common shares for Kramont common
shares provided for in the merger agreement. Salomon Smith Barney did not
express any opinion as to what the value of the Kramont common shares
actually will be when issued to the holders of CV common shares in the
mergers or the prices at which the Kramont common shares will trade or
otherwise be transferable after the mergers. Salomon Smith Barney did not
make and was not provided with an independent evaluation or appraisal of the
assets or liabilities, contingent or otherwise, of CV or Kranzco, and Salomon
Smith Barney did not make any physical inspection of the properties or assets
of CV or Kranzco.
Salomon Smith Barney was not requested to, and did not, solicit third
party indications of interest in the possible acquisition of all or a part of
CV. Salomon Smith Barney expressed no view as to, and its opinion does not
address, the relative merits of the mergers as compared to any alternative
business strategies that might exist for CV or the effect of any other
transaction in which CV might engage. Salomon Smith Barney's opinion was
necessarily based on information available, and financial, stock market and
other conditions and circumstances existing and disclosed to Salomon Smith
Barney, as of the date of its opinion. Although Salomon Smith Barney
evaluated the CV exchange ratio from a financial point of view, Salomon Smith
Barney was not asked to and did not recommend the specific consideration
payable in the mergers, which was determined through negotiations between CV
and Kranzco. No other instructions or limitations were imposed by CV on
Salomon Smith Barney with respect to the investigations made or procedures
followed by Salomon Smith Barney in rendering its opinion.
The full text of Salomon Smith Barney's written opinion dated December
10, 1999, which describes the assumptions made, matters considered and
limitations on the review undertaken, is attached to this joint proxy
statement/prospectus as Appendix B and is incorporated into this joint proxy
statement/prospectus by reference. Salomon Smith Barney's opinion is
directed to the CV board of directors and relates only to the fairness of the
CV exchange ratio from a financial point of view, does not address any other
aspect of the mergers or any related transaction and does not constitute a
recommendation to any shareholder with respect to any matter relating to the
proposed mergers.
In preparing its opinion, Salomon Smith Barney performed a variety of
financial and comparative analyses, including those described below. The
summary of these analyses is not a complete description of the analyses
underlying Salomon Smith Barney's opinion. The preparation of a fairness
opinion is a complex analytical process involving various determinations as
to the most appropriate and relevant methods of financial analysis and the
application of those methods to the particular circumstances and, therefore,
a fairness opinion is not readily susceptible to summary description.
Accordingly, Salomon Smith Barney believes that its analyses must be
considered as a whole and that selecting portions of its analyses and factors
or focusing on information presented in tabular format, without considering
all analyses and factors or the narrative description of the analyses, could
create a misleading or incomplete view of the processes underlying its
analyses and opinion.
In its analyses, Salomon Smith Barney considered industry performance,
general business, economic, market and financial conditions and other matters
existing as of the date of its opinion, many of which are beyond the control
of CV and Kranzco. No company, transaction or business used in those
analyses as a comparison is identical to CV, Kranzco or the proposed mergers,
and an evaluation of those analyses is not entirely mathematical. Rather,
the analyses involve complex considerations and judgments concerning
financial and operating characteristics and other
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factors that could affect the acquisition, public trading or other values of
the companies, business segments or transactions being analyzed.
The estimates contained in Salomon Smith Barney's analyses and the
valuation ranges resulting from any particular analysis are not necessarily
indicative of actual values or predictive of future results or values, which
may be significantly more or less favorable than those suggested by its
analyses. In addition, analyses relating to the value of businesses or
securities do not necessarily purport to be appraisals or to reflect the
prices at which businesses or securities actually may be sold. Accordingly,
Salomon Smith Barney's analyses and estimates are inherently subject to
substantial uncertainty.
Salomon Smith Barney's opinion and analyses were only one of many
factors considered by the CV board of directors in its evaluation of the
mergers and should not be viewed as determinative of the views of the CV
board of directors or management with respect to the CV exchange ratio or the
proposed mergers.
The following is a summary of the material financial analyses performed
by Salomon Smith Barney in connection with the rendering of its opinion dated
December 10, 1999. The financial analyses summarized below include
information presented in tabular format. In order to fully understand
Salomon Smith Barney's financial analyses, the tables must be read together
with the text of each summary. The tables alone do not constitute a complete
description of the financial analyses. Considering the data set forth in the
tables below without considering the full narrative description of the
financial analyses, including the methodologies and assumptions underlying
the analyses, could create a misleading or incomplete view of Salomon Smith
Barney's financial analyses.
Net Asset Value Analysis
Salomon Smith Barney performed a net asset value analysis of CV's and
Kranzco's assets by adding the gross estimated values of CV's and Kranzco's
real estate assets and other assets, including current assets, other
properties and notes receivables, and subtracting CV's and Kranzco's
outstanding long-term debt and other current outstanding liabilities. The
gross estimated values of CV's and Kranzco's assets were estimated by
capitalizing CV's and Kranzco's year 2000 estimated net operating income,
commonly known as NOI. For purposes of this analysis, Salomon Smith Barney
used capitalization rates of 9.32% to 9.82% for CV and 9.67% to 10.18% for
Kranzco based on market conditions and discussions with CV's management.
Estimated financial data for CV were based on internal estimates of CV's
management and estimated financial data for Kranzco were based on internal
estimates of Kranzco's management as adjusted by CV's management. This
analysis resulted in an implied exchange ratio range of 0.90x to 1.10x, as
compared to the CV exchange ratio provided for in the merger agreement of
1.0x.
Public Market Analysis
Using publicly available information, Salomon Smith Barney analyzed the
market values and trading multiples of CV and the following seven publicly
traded REITS:
o First Washington Realty Trust, Inc.
o IRT Property Co.
o Malan Realty Investors, Inc.
o Mid-Atlantic Realty Trust
o Pennsylvania Real Estate Investment Trust
o Philips International Realty Corp.
o Saul Centers, Inc.
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Using publicly available information, Salomon Smith Barney also analyzed
the market values and trading multiples of Kranzco and the following seven
publicly traded REITS:
o Burnham Pacific Properties Inc.
o Center Trust, Inc.
o Developers Diversified Realty Corp.
o IRT Property Co.
o Konover Property Trust, Inc.
o New Plan Excel Realty Trust, Inc.
o Pennsylvania Real Estate Investment Trust
All multiples were based on closing stock prices on December 7, 1999.
Estimated financial data for the selected companies were based on publicly
available research analysts' estimates, estimated financial data for CV were
based on internal estimates of CV's management and estimated financial data
for Kranzco were based on internal estimates of Kranzco's management as
adjusted by CV's management.
Salomon Smith Barney compared equity values of CV, Kranzco and the
selected companies as a multiple of, among other things, calendar years 1999
and 2000 estimated funds from operations, commonly known as FFO. Salomon
Smith Barney then applied a range of selected multiples derived from the CV
selected companies of calendar years 1999 and 2000 estimated FFO to
corresponding financial data of CV and a range of selected multiples derived
from the Kranzco selected companies of calendar years 1999 and 2000 estimated
FFO to corresponding financial data of Kranzco. This analysis resulted in an
implied exchange ratio range of 0.75x to 0.92x, as compared to the CV
exchange ratio provided for in the merger agreement of 1.0x.
Contribution Analysis
Salomon Smith Barney analyzed the relative contributions of CV and
Kranzco to Kramont's estimated NOI and FFO for calendar years 1999 and 2000.
Estimated financial data for CV were based on internal estimates of CV's
management and estimated financial data for Kranzco were based on internal
estimates of Kranzco's management as adjusted by CV's management. This
analysis indicated the following contributions of NOI and FFO for CV and
Kranzco for calendar years 1999 and 2000, as compared to the pro forma equity
ownership in Kramont of CV's and Kranzco's shareholders based on the CV and
Kranzco exchange ratios provided for in the merger agreement of 1.0x:
CV Kranzco
----- -------
Estimated 1999 NOI 42.4% 57.6%
Estimated 2000 NOI 44.2% 55.8%
Estimated 1999 FFO 39.4% 60.6%
Estimated 2000 FFO 41.4% 58.6%
Pro Forma Equity
Ownership in Kramont 47.2% 52.8%
Salomon Smith Barney also calculated an implied exchange ratio range based on
the percentage contributions of CV and Kranzco to Kramont's calendar year
1999 and 2000 estimated NOI and FFO described above. This analysis resulted
in an implied exchange ratio range of 0.73x to 0.89x, as compared to the CV
exchange ratio provided for in the merger agreement of 1.0x.
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Pro Forma Analysis
Salomon Smith Barney analyzed potential pro forma financial effects
resulting from the mergers, including the impact of the mergers on CV's and
Kranzco's estimated FFO, funds available for distribution, commonly known as
FAD, and dividends per share, commonly known as DPS, for calendar years 2000
and 2001. Estimated financial data for CV were based on internal estimates
of CV's management and estimated financial data for Kranzco were based on
internal estimates of Kranzco's management as adjusted by CV's management.
The results of this analysis indicated that the mergers could be accretive to
CV's estimated FFO, FAD and DPS, dilutive to Kranzco's estimated FFO and FAD
and neutral to Kranzco's estimated DPS in calendar years 2000 and 2001. The
actual results achieved by Kramont may vary from projected results and the
variations may be material.
Other Factors
In rendering its opinion, Salomon Smith Barney also reviewed and
considered other factors, including:
o historical trading prices and trading volumes for CV common shares
and Kranzco common shares and a comparison of the trading volumes
of the CV common shares and the trading volumes of the CV selected
companies;
o the relationship between movements in CV common shares and
movements in the common shares of the CV selected companies and the
relationship between movements in Kranzco common shares and
movements in the Kranzco selected companies;
o the relationship between the CV exchange ratio and the implied
historical exchange ratios for CV common shares and Kranzco common
shares for the period January 1, 1999 to December 7, 1999; and
o selected analysts' reports on Kranzco, including calendar years
1999 and 2000 estimated FFO of those analysts.
Miscellaneous
Under the terms of its engagement, CV has agreed to pay Salomon Smith
Barney for its financial advisory services upon completion of the mergers an
aggregate fee of $2.5 million. CV also has agreed to reimburse Salomon Smith
Barney for reasonable travel and other out-of-pocket expenses incurred by
Salomon Smith Barney in performing its services, including the fees and
expenses of its legal counsel, and to indemnify Salomon Smith Barney and
related persons against liabilities, including liabilities under the federal
securities laws, arising out of its engagement.
In the ordinary course of business, Salomon Smith Barney and its
affiliates may actively trade or hold the securities of CV and Kranzco for
their own account or for the account of customers and, accordingly, may at
any time hold a long or short position in those securities. Salomon Smith
Barney and its affiliates have in the past provided financial services to
Kranzco unrelated to the proposed mergers, including the issuance of a credit
facility and a mortgage to Kranzco, for which services Salomon Smith Barney
and its affiliates have received compensation. In addition, Salomon Smith
Barney and its affiliates, including Citigroup Inc. and its affiliates, may
maintain relationships with CV, Kranzco and their affiliates.
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Salomon Smith Barney is an internationally recognized investment banking
firm and was selected by CV based on its experience and expertise. Salomon
Smith Barney regularly engages in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive bids, secondary distributions of listed and
unlisted securities, private placements and valuations for estate, corporate
and other purposes.
Reasons for the Mergers; Recommendation of the Kranzco Board of Trustees
The Kranzco board of trustees believes that the merger of KRT Trust into
Kramont, including the KRT Trust exchange ratio, is fair and in the best
interests of Kranzco and its shareholders. Accordingly, the Kranzco board of
trustees unanimously approved the merger of KRT Trust into Kramont and
unanimously recommends that Kranzco shareholders vote for the merger of KRT
Trust into Kramont.
Positive Factors Considered by the Kranzco Board of Trustees
In reaching this determination, the Kranzco board of trustees reviewed
information provided by Kranzco management, legal counsel and accountants and
considered a number of factors. The following are some of the positive
factors that the board considered:
o Increase in Market Capitalization. Upon completion of the mergers,
the combined market capitalization of Kramont is expected to be
substantially greater than the capitalization of Kranzco alone.
Kranzco's board viewed this as favorable because the combined
company will have increased ability to obtain financing and the
flexibility to pursue a more comprehensive range of strategic
options.
o Occupancy Rates; CV Expertise in Leasing. The occupancy rate at
March 1, 2000 for CV's properties was approximately 97%, as opposed
to approximately 91% (including, as rented, space for which rent is
being paid but is not presently occupied) for Kranzco. Kranzco's
board believed that CV's management and leasing expertise would
increase occupancy rates at Kranzco's properties.
o Continued Management. Kranzco's board believed the fact that
Louis P. Meshon, Sr., 59, would be President and CEO of Kramont,
and Norman M. Kranzdorf, 69, would be Chairman of the Board of
Kramont will provide for succession of management for Kranzco
shareholders.
o Financing Capacity. Kranzco's board believed that unencumbered
cash and CV's unutilized borrowing capacity will increase the
capacity of the combined company to finance acquisitions of
additional properties.
o Costs Savings. Kranzco's board believed that the combination of
the business of CV and Kranzco would increase operating
efficiencies through economies of scale and that the combined
entity would realize savings in overhead and expenses.
o Terms of the Merger Agreement. Kranzco's board believed that the
terms of the merger agreement are fair to Kranzco and its
shareholders.
o Tax-free Nature of the Mergers. The mergers are expected to be
treated as a tax-free reorganization for U.S. federal income tax
purposes. The Kranzco board of trustees viewed this as favorable
because no gain or loss will be recognized in the mergers by either
Kranzco or the shareholders of
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Kranzco except for cash received for fractional shares held in
Kranzco's dividend reinvestment plan and except for shareholders
who elect to exercise appraisal rights.
o Fixed Exchange Ratio. The fixed exchange ratio in the merger
agreement provides certainty to Kranzco shareholders as to the
number of common shares of the combined company to be issued in the
mergers.
o Opinion of Financial Advisor. The opinion of ING Barings to the
Kranzco board that the Kranzco exchange ratio was fair from a
financial point of view to the holders of Kranzco common shares.
See "-Opinion of Kranzco's Financial Advisor."
Negative Factors Considered by the Kranzco Board of Trustees
The Kranzco board of trustees also considered some potentially negative
factors which could result from the mergers. These included:
o Cost of the Mergers. The significant cost involved to complete the
mergers and the substantial management time and effort required to
complete the mergers.
o Prohibition on Solicitation. The Kranzco board of trustees
considered that under the terms of the merger agreement, Kranzco
would be prohibited from initiating, soliciting, encouraging,
participating in negotiations or otherwise facilitating a proposal
of an acquisition by or business combination with any other party
unless, among other things, the Kranzco board of trustees
determines, after consultation with outside counsel, that the
action is required for the Kranzco board of trustees to comply with
its duties under applicable law.
o Payment of Fees. The Kranzco board of trustees considered the
possibility that Kranzco may be required to pay CV a termination
fee of $6.0 million and/or to reimburse CV for up to $1.5 million
of its out-of-pocket expenses if the merger agreement is terminated
under some circumstances. The Kranzco board of trustees
recognized that the inclusion of a provision in the merger
agreement providing for payment of these fees would render it
unlikely that a more attractive transaction would be presented to
Kranzco and its shareholders; however, the Kranzco board of
trustees believed that the merger with CV represents the best offer
reasonably available to Kranzco and its shareholders.
o Fixed Exchange Ratio. The Kranzco board of trustees considered the
possibility that following the announcement of the mergers the
market price of Kranzco common shares would rise, and the market
price for CV common shares would fall. If such an event occurred,
the number of Kramont common shares received by Kranzco common
shareholders would not adequately reflect the actual value of the
shares surrendered by Kranzco common shareholders.
o Combining the Businesses of CV and Kranzco. The Kranzco board
considered the challenge of combining CV's and Kranzco's businesses
into a combined company with 84 properties with an aggregate of
approximately 11 million square feet of gross leasable area in 16
states.
o Benefits Not Fully Realized. The risk that the anticipated
benefits of the mergers might not be fully realized.
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The Kranzco board of trustees did not believe that the negative factors
were sufficient, either individually or in the aggregate, to outweigh the
advantages of the merger.
Other Considerations
The Kranzco board of trustees viewed as adequate the conditions to the
completion of the mergers included in the merger agreement, including the
condition that no change in the financial condition, business or operations
of Kranzco and its subsidiaries taken as a whole will have occurred that
would have or would be reasonably likely to have a material adverse effect on
Kranzco.
The foregoing discussion of the information and factors considered by
the Kranzco board of trustees is not meant to be exhaustive, but is believed
to include all material factors that the Kranzco board of trustees
considered. The Kranzco board of trustees did not quantify or attach any
particular weight to any of the various factors that it considered in
reaching its determination. Instead, the Kranzco board of trustees viewed
its position and recommendation to be based on the totality of the
information presented to it. Additionally, the individual members of the
Kranzco board of trustees may have given different weight to different
factors in reaching their own individual conclusions regarding the mergers
and the merger agreement.
Opinion of Financial Advisor to Kranzco Board
ING Barings was retained by Kranzco to act as its financial advisor in
connection with the proposed combination of the businesses of CV and Kranzco
and to render a fairness opinion to the Kranzco board regarding the KRT Trust
exchange ratio. At the meeting of the Kranzco board held on December 10,
1999, ING Barings delivered a written opinion to the Kranzco board stating
that, as of such date, and based upon the assumptions made, matters
considered and limits of review set forth in the ING Barings opinion, the KRT
Trust exchange ratio was fair to Kranzco and to the holders of its common
shares from a financial point of view. This analysis, as presented to the
Kranzco board, is summarized below. All except one of the members of the
Kranzco board were present at the meeting on December 10, 1999 and had an
opportunity to ask questions regarding ING Barings' presentation.
The full text of the ING Barings opinion, which sets forth the
assumptions made, matters considered and certain limitations on the scope of
review undertaken by ING Barings, is attached as Appendix C to this joint
proxy statement/prospectus. Each holder of Kranzco common shares is urged to
read the opinion in its entirety. The ING Barings opinion was intended for
the use and benefit of the Kranzco board, was directed only to the fairness
of the exchange ratio to Kranzco and the holders of Kranzco common shares
from a financial point of view, and does not address Kranzco's underlying
business decision to approve the mergers or constitute a recommendation to
any shareholder as to how such shareholder should vote with respect to the
mergers or any transaction related thereto. The exchange ratio was determined
on the basis of negotiations between Kranzco and CV and was approved by the
Kranzco board. The summary of the ING Barings opinion set forth in this joint
proxy statement/prospectus is qualified in its entirety by reference to the
full text of such opinion.
In arriving at their opinion, ING Barings, among other things: (i)
reviewed certain publicly available business and financial information
relating to Kranzco and CV which ING Barings deemed to be relevant; (ii)
reviewed certain information, including financial forecasts, relating to the
business, earnings, FFO, cash flow, assets, liabilities and prospects of
Kranzco and CV furnished to ING Barings by Kranzco and CV, (iii) conducted
discussions with members of senior management of Kranzco and CV concerning
the matters described in clauses (i) and (ii) above, as well as their
respective businesses and prospects before and after giving effect to the
merger; (iv) reviewed the market prices and valuation multiples for Kranzco
common shares and the CV common shares and compared them
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with those of certain publicly traded companies that ING Barings deemed
relevant; (v) reviewed the results of operations of Kranzco and CV and
compared them with those of certain publicly traded companies that ING
Barings deemed relevant; (vi) participated in certain discussions among
representatives of Kranzco and CV and their financial and legal advisors;
(vii) reviewed the merger agreement; and (viii) reviewed such other financial
studies and analyses and took into account such other matters as ING Barings
deemed necessary, including ING Barings' assessment of general economic,
market and monetary conditions.
The ING Barings opinion relates to the relative values of Kranzco and CV
common shares and the exchange ratio of Kranzco shares for Kramont Realty
Trust common shares as provided in the merger agreement. ING Barings did not
express any opinion as to what the value of Kramont common shares actually
will be when issued to the holders of the Kranzco common shares in the
mergers or the prices at which Kramont common shares will trade or otherwise
be transferable after the mergers.
In preparing their opinion, ING Barings assumed and relied on the
accuracy and completeness of all information supplied or otherwise made
available to ING Barings, discussed with or reviewed by or for ING Barings,
or publicly available. ING Barings also did not assume any responsibility for
independently verifying such information or for undertaking an independent
evaluation or appraisal of any of the assets or liabilities of Kranzco or CV,
and ING Barings has not been furnished with any such evaluation or appraisal.
In addition, ING Barings did not assume any obligation to conduct any
physical inspection of the properties or facilities of Kranzco or CV. ING
Barings expressed no view as to, and its opinion does not address, the
relative merits of the mergers as compared to any alternative business
strategies that might exist for Kranzco or the effect of any other
transaction in which Kranzco might engage. With respect to the financial
forecast information furnished to or discussed with ING Barings by Kranzco
and CV, ING Barings assumed that they have been reasonably prepared and
reflect the best currently available estimates and judgment of Kranzco's or
CV's management as to the expected future financial performance of Kranzco or
CV.
The ING Barings opinion is necessarily based upon market, economic and
other conditions as they exist and can be evaluated on the basis of the
information made available to ING Barings as of the date of the ING Barings
opinion. ING Barings assumed that in the course of obtaining the necessary
regulatory or other consents or approvals (contractual or otherwise) for the
mergers, no restrictions, including any divestiture requirements or
amendments or modifications, will be imposed that would have a material
adverse effect on the contemplated benefits of the mergers. Furthermore, ING
Barings assumed that none of the mergers, the pre-merger transactions or
other transactions contemplated by the mergers will adversely affect the REIT
status or operations of Kranzco and CV.
The following is a summary of the material financial and comparative
analyses performed by ING Barings in arriving at the ING Barings opinion.
ING Barings applied the KRT Trust exchange ratio to CV's closing share
price of $10.56 on December 8, 1999 and calculated an aggregate value for the
Kranzco common shares (the "Kranzco Value") of $111.6 million. Using an
estimation of Kranzco's debt balances and the liquidation preferences of its
preferred stock as of September 30, 1999 provided by Kranzco's management,
ING Barings also calculated an aggregate transaction value of $541.6 million
which consisted of the Kranzco Value plus debt of $353.1 million, preferred
stock of $85.7 million, less an estimation of Kranzco's cash balance at
September 30, 1999 of $8.8 million. With respect to the Kranzco Value, ING
Barings calculated FFO multiples for 1999 and 2000 of 5.7x and 6.0x,
respectively.
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Historical Exchange Ratio Analysis
ING Barings reviewed the historical implied ratios of the market prices
of CV common shares to Kranzco common shares and compared these to the KRT
Trust exchange ratio. ING Barings observed that the average ratio for the
twelve calendar months ended December 8, 1999 was 1.01x and the range was
0.74x to 1.46x. ING Barings observed that the average ratio for the six
calendar months ended December 8, 1999 was 1.13x and the range was 0.93x to
1.46x. ING Barings observed that the average ratio for the 90 trading days
ended December 8, 1999 was 0.97x and the range was 0.73x to 1.46x. ING
Barings observed that the average ratio for the 30 trading days ended
December 8, 1999 was 1.39x and the range was 1.31x to 1.46x. ING Barings
observed that the average ratio for the 10 trading days ended December 8,
1999 was 1.42x and the range was 1.36x to 1.46x.
Analysis of Selected Comparable Publicly Traded Companies
Using publicly available information and estimates of future financial
results published by First Call (an industry service provider of earnings
estimates based on an average of earnings estimates published by various
investment banking firms), ING Barings compared certain financial and
operating information and ratios for Kranzco with the corresponding financial
and operating information for a group of similarly sized publicly traded
REITs engaged primarily in the ownership, management, operation and
acquisition of shopping centers. For the purpose of its analysis, the
following companies were used: CenterTrust Retail Properties, Inc.,
Pennsylvania Real Estate Investment Trust, Ramco-Gershenson Properties Trust,
Saul Centers, Inc., IRT Property Company, Western Investment Real Estate
Trust and Equity One, Inc.
ING Barings' calculations resulted in the following relevant ranges for
the Kranzco comparable companies and for Kranzco as of December 8, 1999: a
range of ratios of debt to total market capitalization of 49.6% to 72.9%,
with a median of 54.1% (as compared to Kranzco's ratio of 67.8%); a range of
market value as a multiple of projected 1999 FFO of 5.1x to 8.1x, with a
median of 6.5x (as compared to Kranzco's multiple of 4.1x); a range of market
value as a multiple of projected 2000 FFO of 4.8x to 7.7x, with a median of
6.3x (as compared to Kranzco's multiple of 4.4x). Based upon the range of
projected 2000 FFO multiples, the implied per share valuation of the Kranzco
common shares is between $8.44 and $13.53. This analysis resulted in an
implied exchange ratio of 1.25x to 0.78x.
Net Asset Valuation Analysis
ING Barings performed a net asset valuation analysis for Kranzco based
on an asset-by-asset real estate valuation of Kranzco's properties, an
estimation of the current value for Kranzco's other assets and liabilities,
and an estimation for Kranzco's debt and preferred stock balances as of
September 30, 1999. The real estate valuation utilized property specific
projections prepared by Kranzco's management for the calendar year 2000. For
the operating shopping center portfolio of Kranzco, the valuation utilized
the direct capitalization method on projected 2000 property net operating
income, adjusted for estimated recurring capital expenditures, tenant
improvements and leasing commission costs. For those shopping centers with
physically occupied anchor tenant spaces ING Barings utilized weighted-
average capitalization rates of 9.75% to 10.75%. For Kranzco's other
shopping centers, called the dark anchor centers, ING Barings utilized a
capitalization rate of 14%. These calculations indicated a per share net
asset valuation range for Kranzco's common shares of approximately $6.48 to
$10.66. This analysis resulted in an implied exchange ratio of 1.63x to
0.99x.
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Discounted Cash Flow Analyses
ING Barings performed discounted cash flow analyses (i.e., an analysis
of the present value of the projected levered cash flows for the periods
using the discount rates indicated) of Kranzco based upon projections
provided by Kranzco's management for the years 1999 through 2004, inclusive,
using discount rates reflecting an equity cost of capital ranging from 15.0%
to 20.0% and terminal value multiples of calendar year 2004 FFO ranging from
5.0x to 7.0x. The range of implied present values per Kranzco common share
was approximately $8.81 to $12.71 using the discounted dividend method and
approximately $10.51 to $14.79 based upon the discounted FFO method. These
analyses resulted in implied exchange ratios of 1.20x to 0.83x using the
discounted dividend method and 1.01x and 0.71x using the discounted FFO
method.
Contribution Analysis
ING Barings observed that Kranzco common shareholders would own 52.7% of
Kramont common shares outstanding after the mergers (without giving effect to
the potential conversion of any of Kranzco's preferred shares into Kramont
common shares). ING Barings reviewed certain actual and projected operating
and financial information, including, among other things, actual book values
of debt and preferred stock outstanding and projected FFO and property
revenues for Kranzco, CV, and the pro forma Kramont without giving effect to
potential transaction synergies. ING Barings noted that based on balances
outstanding as of September 30, 1999, Kranzco and CV had total debt to total
market capitalization ratios of 67.8% and 61.2%, respectively, and total debt
plus preferred stock to total market capitalization ratios of 84.3% and
61.2%, respectively. ING Barings observed that in 1999 and 2000 Kranzco
would contribute (without giving effect to potential transaction synergies)
60.5% and 59.9% to Kramont's FFO, respectively, and 75.3% and 73.5% to
Kramont's property revenue. ING Barings also reviewed the relative
contributions to the pro forma combined net asset valuation. The analysis
indicated that Kranzco would contribute 50.1% of the net asset value of
Kramont based upon a 10% weighted-average capitalization rate for both the
Kranzco (excluding its dark anchor centers) and CV shopping center
properties. Projected financial and other information concerning Kranzco and
CV and the impact of the mergers upon the holders of Kranzco common shares
are not necessarily indicative of future results. All projected financial
information is subject to numerous contingencies, many of which are beyond
the control of management of Kranzco and CV.
Pro Forma Merger Analysis
ING Barings analyzed the potential pro forma effects resulting from the
mergers, including the potential impact of the mergers on Kranzco's and CV's
projected FFO and dividends per share and FFO payout ratios (dividends per
share divided by FFO per share) for the calendar years 2000 and 2001.
Estimated financial data for Kranzco were prepared by management of Kranzco
and estimated financial data for CV were based on estimates provided by CV
management as adjusted by Kranzco management. The results of this analysis
indicated that the mergers would be dilutive to Kranzco's estimated FFO per
share, would not affect Kranzco's estimated dividends per share and would
increase Kranzco's estimated FFO payout ratio. The analysis also indicated
that the mergers would be accretive to CV's estimated FFO and dividends per
share and would decrease CV's estimated FFO payout ratio. The actual results
achieved by Kramont may vary from the projected results and the variations
may be material.
The summary set forth above does not purport to be a complete
description of the analysis performed by ING Barings in arriving at their
opinion. The preparation of a fairness opinion is a complex process and not
necessarily susceptible to partial or summary description. ING Barings
believes that its analyses must be considered as a whole and that selecting
portions of its analyses and of the factors considered by it, without
considering all factors and analyses, could create a misleading view of the
process underlying the ING Barings opinion. In its analyses, ING Barings made
numerous assumptions with respect to industry performance, general business
and economic conditions
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and other matters, many of which are beyond Kranzco's, CV's and ING Barings'
control. Any estimates contained in ING Barings' analyses are not necessarily
indicative of actual values, which may be significantly more or less
favorable than as set forth therein. Estimated values do not purport to be
appraisals and do not necessarily reflect the prices at which businesses or
companies may be sold in the future, and such estimates are inherently
subject to uncertainty.
The Kranzco board selected ING Barings to render a fairness opinion
because ING Barings is an internationally recognized investment banking firm
with substantial experience in transactions similar to the mergers and
because it is familiar with Kranzco and its business. ING Barings is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, leveraged buyouts, negotiated
underwritings, secondary distributions of listed and unlisted securities and
private placements.
Pursuant to a letter agreement dated December 8, 1999, Kranzco has
agreed to pay ING Barings a fee of $2 million for its financial advisory
services and the delivery of the ING Barings opinion. In addition, Kranzco
has agreed to reimburse ING Barings for reasonable travel and other out-of-
pocket expenses incurred by ING Barings in performing its services, including
the fees and expenses of its legal counsel and under certain circumstances to
indemnify ING Barings and certain related persons against certain
liabilities, including certain liabilities under the federal securities laws,
arising out of its engagement.
ING Barings has, in the past, provided financial advisory services to
Kranzco and may continue to do so and has received, and may receive, fees for
the rendering of such services. Since 1998, ING Barings has provided
assistance to Kranzco in the solicitation and evaluation of third party
indications of interest to invest in, acquire or merge with Kranzco and in
December 1998, ING Barings acted as financial advisor to Kranzco in
connection with adopting a shareholder rights plan. In addition, in the
ordinary course of its business, ING Barings may actively trade in the
securities of Kranzco, CV or Kramont for its own account and for the accounts
of customers and, accordingly, may at any time hold a long or short position
in such securities.
Interests of CV Executive Officers and Directors in the Mergers
In considering whether to adopt the merger agreement, CV common
shareholders should be aware that some members of CV's management and some of
CV's directors have interests in the merger that are different from or in
addition to the interests of CV's common shareholders generally. If the
mergers are completed, Louis P. Meshon, Sr., CV's President and Chief
Executive Officer, will enter into an employment agreement with Kramont,
other members of CV's management will continue as members of Kramont's
management, Kramont will assume all outstanding options to purchase CV common
shares previously granted to CV's officers and directors, and four of CV's
directors will be members of Kramont's board of trustees and, as a result,
also are expected to participate in Kramont's 2000 Incentive Plan. In
addition, Mr. Meshon, H. Irwin Levy and Milton S. Schneider will exchange
their limited partner interests in Montgomery CV Realty L.P. or in CV Partner
Holdings, L.P. for common units of limited partner interests in Kramont
Operating Partnership, L.P. Additionally, some indemnification arrangements
for existing CV officers and directors are to be continued by Kramont.
Employment Agreement
Kramont will enter into an employment agreement with Mr. Meshon as of
the completion of the mergers pursuant to which he will serve as Kramont's
president and chief executive officer. Mr. Meshon's employment agreement is
to have a five year term and will continue for successive one year periods
thereafter unless otherwise terminated. Mr. Meshon is to be paid an annual
base salary of $325,000 and Kramont's board of trustees, in their discretion,
may increase Mr. Meshon's annual base salary or other compensation. Mr.
Meshon is to be paid an annual
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performance bonus and he will be entitled to participate in Kramont's 2000
Incentive Plan. See "Management of Kramont Following the Mergers -Executive
Compensation" and "-Employment Agreements."
Membership on Kramont's Board of Trustees
Upon the completion of the mergers, Messrs. Meshon, H. Irwin Levy,
Milton S. Schneider and Alan L. Shulman will become members of Kramont's
board of trustees. The terms of Mr. Meshon, Mr. Schneider and Mr. Shulman
will end at Kramont's annual shareholders meeting in 2002, and Mr. Levy's
term will end at Kramont's annual shareholders meeting in 2003.
Assumption and Issuance of Options
(a) Assumed Options. Over the years, options were granted to purchase
CV common shares to CV's directors and officers in connection with services
they had rendered. Under the terms of the merger agreement, Kramont will
assume all options to purchase CV common shares under the applicable CV
option plan which shall be assumed by Kramont. Each assumed option will be
subject to and exercisable on the same terms and conditions, including the
number of shares underlying the option, exercise price, vesting and
expiration, as currently exist under the CV options, except that it will
apply to Kramont common shares. The following number of CV common shares are
subject to options that will be assumed by Kramont for each of the
individuals listed below.
Name Number of Shares Exercise Price
---- ---------------- --------------
Louis P. Meshon, Sr. 150,000 $13.69
H. Irwin Levy 0 0
Milton S. Schneider 15,000 $8.9375-$14.50
Alan L. Shulman 15,000 $8.9375-$14.50
Allyn L. Levy 15,000 $8.9375-$14.50
Stanley S. Cohen 15,000 $8.9375-$14.50
Stanley Brenner 15,000 $8.9375-$14.50
Etta Strehle 10,000 $13.69
(b) New Options. In connection with the mergers, Kramont will cause
the following number of options to be issued under the 2000 Incentive Plan to
the individuals listed below, who are officers or directors of CV and some of
its subsidiaries and affiliates and who will continue in a similar capacity
with Kramont. All of the options listed below will be exercisable at an
exercise price equal to the fair market value of a Kramont common share on
the date of grant as follows:
Name Number of Options
---- -----------------
Louis P. Meshon, Sr. 25,000
Etta Strehle 3,500
Exchange of OP Units
Mr. Meshon, H. Irwin Levy and Milton S. Schneider will exchange their
limited partner interests in Montgomery CV Realty L.P. or in CV Partner
Holdings, L.P. for common units of limited partner interests in Kramont
Operating Partnership, L.P.
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Indemnification
The merger agreement requires that Kramont indemnify to the fullest
extent permitted by the Maryland General Corporation Law each person who is
now, later becomes or has been in the past an officer or director of CV or
its subsidiaries. Additionally, Kramont will indemnify each of its officers
and trustees to the fullest extent permitted by Maryland law.
Interests of Kranzco Executive Officers and Trustees in the Mergers
In considering whether to approve the merger of KRT Trust into Kramont,
Kranzco shareholders should be aware that some members of Kranzco management
and some of Kranzco's trustees have interests in the mergers that are
different from or in addition to the interests of Kranzco shareholders
generally. These interests include entering into employment agreements,
acceleration of vesting of restricted Kranzco common shares held by them and
their receipt of severance payments. In addition, if we complete the mergers
of CV and KRT Trust into Kramont, some members of senior management of
Kranzco will continue as members of management of Kramont and, as described
above, three trustees of Kranzco will be designated as members of the initial
board of trustees of Kramont. In addition, some indemnification arrangements
for existing trustees of Kranzco, and officers of Kranzco will be continued
by Kramont.
Severance Agreements
Some of the executive officers and trustees of Kranzco are parties to
severance agreements with Kranzco. These severance agreements are designed
to provide severance payments to individuals as a result of a change in
control of Kranzco, such as the mergers. Kranzco officers and trustees who
will continue in similar capacities with Kramont will waive their rights to
payments under these severance agreements as a condition to their continued
association with Kramont, provided that the waiver by an officer will be null
and void retroactive to the date of waiver in the event the employment of the
waiving officer is terminated for any reason, other than cause, within one
year of the completion of the mergers.
The Kranzco executive officers and trustees who are not waiving their
rights under the severance agreement will receive lump sum cash severance
payments. These payments are expected to be made upon completion of the
mergers. Assuming that waivers of payments under the severance agreements
will not be null and void, as described in the previous paragraph, Edmund
Barrett will receive a lump sum severance payment of approximately $400,000
upon completion of the mergers, and Robert H. Dennis will receive a lump sum
severance payment of approximately $451,000 upon completion of the mergers.
Gerald Finn and Peter D. Linneman, trustees of Kranzco, will each be entitled
to receive cash compensation equal to, on the date of a change in control,
the amount obtained by multiplying the number of shares underlying such
trustee's options, whether or not the option is then vested or exercisable,
by the amount that the exercise price of the option or the closing share
price on the date of change in control, whichever is less, exceeds the
average of the closing prices of the shares during a thirty day period
commencing 180 days prior to the change in control. With respect to each
option, if the closing share price on the date of change in control exceeds
the exercise price of such option, then the trustee can (1) retain the
option, or (2) forfeit the option and receive a cash payment equal to the
number of shares underlying the option multiplied by the amount that the
closing share price on the date of change in control exceeds the exercise
price of the option.
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Vesting of Restricted Shares
Kranzco has previously made restricted share grants to executive
officers of Kranzco, portions of which have vested and portions of which
remain subject to forfeiture. The portions of the grants that remain subject
to forfeiture will automatically vest upon consummation of the mergers. The
following number of Kranzco common shares will vest (and will therefore
convert into Kramont common shares) upon completion of the mergers for each
of the executive officers listed below:
Name Number of Vesting Kranzco Common Shares
---- ---------------------------------------
Norman M. Kranzdorf 6,694
Robert H. Dennis 3,774
George S. Demuth 1,382
Edmund Barrett 3,408
Hermina Kranzdorf 605
Membership on Board of Trustees of Kramont. At the effective time of
the mergers, Bernard J. Korman, Norman M. Kranzdorf and E. Donald Shapiro
will become members of the board of trustees of Kramont. The terms of
Bernard J. Korman and Norman M. Kranzdorf will end at Kramont's annual
shareholders meeting in 2001 and the term of E. Donald Shapiro will end at
Kramont's annual shareholders meeting in 2003. Pursuant to an employment
agreement with Mr. Kranzdorf, Kramont will agree to cause Mr. Kranzdorf to be
nominated to serve as a trustee of Kramont for at least an additional 4
years.
Indemnification. The merger agreement requires that Kramont indemnify
to the fullest extent permitted by Maryland law, each person who is now,
later becomes or has been in the past an officer or trustee of Kranzco or its
subsidiaries. Additionally, Kramont will indemnify each officer and trustee
of Kramont to the fullest extent permitted by Maryland law.
Employment Agreements. Kramont will enter into an employment agreement
as of the effective time of the mergers with Norman M. Kranzdorf. Mr.
Kranzdorf will enter into a five-year employment agreement with Kramont,
pursuant to which he will serve as Chairman of the Board and be paid a base
salary of $350,000 per annum for the first three years of the employment
agreement and a base salary of $175,000 per annum for the remaining two years
of the employment agreement. Mr. Kranzdorf will have duties that are not
inconsistent with his status as Chairman of the Board, as may be assigned to
him by the Kramont board of trustees. He is not required to devote all of his
time to such duties, but may devote only such time as is necessary to carry
out his responsibilities under his employment agreement. The board of
trustees of Kramont in its discretion may increase Mr. Kranzdorf's
compensation as it may determine. See "Management of Kramont Following the
Mergers-Employment Agreements."
Assumption and Issuance of Options
(a) Assumed Options. Over the years, Kranzco granted share options to
its executive officers and trustees in connection with services they had
previously rendered. Under the terms of the merger agreement, Kramont will
assume all options to purchase Kranzco common shares under the applicable
Kranzco option plan which shall be assumed by Kramont (which will be
converted prior to the mergers into options to purchase KRT Trust common
shares in the Kranzco Reorganization). Each assumed option will be subject
to and exercisable upon the same terms and conditions, including the number
of shares underlying the option, exercise price, vesting and expiration, as
currently exist under the Kranzco options, except that it will apply to
Kramont common shares. The
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following number of Kranzco common shares are subject to options that will be
assumed by Kramont for each of the executive officers and trustees listed
below.
Name Number of Shares Exercise Price
---- ---------------- --------------
Norman M. Kranzdorf 381,800 $14.25 - $20.00
Robert H. Dennis 73,000 $15.50 - $21.50
Edmund Barrett 37,000 $13.44 - $20.00
George S. Demuth 7,500 $19.06
Hermina Kranzdorf 21,250 $16.25
Peter D. Linneman 18,000 $8.88 - $20.00
E. Donald Shapiro 15,000 $8.88 - $21.50
Bernard J. Korman 9,000 $8.88 - $19.19
Gerald Finn 6,000 $8.88 - $18.31
(b) New Options. In connection with the mergers, Kramont will cause
the following number of options to be issued under the 2000 Incentive Plan to
current executive officers of Kranzco. All such options will be exercisable
at an exercise price equal to the fair market value of a Kramont common share
on the date of grant as follows:
Name Number of Options
---- -----------------
Norman M. Kranzdorf 25,000
George S. Demuth 3,000
Voting Agreements
Voting Agreements with CV Shareholders
Concurrently with the execution and delivery of the merger agreement,
Louis P. Meshon, Sr., President and Chief Executive Officer of CV, H. Irwin
Levy, Chairman of the Board of CV, Alan L. Shulman, a director of CV, and the
Claudia Morse Evans Family Trust have entered into voting agreements with
Kranzco. These shareholders own in the aggregate approximately 18% of the
issued and outstanding CV common shares. Pursuant to these agreements, the
shareholders agreed:
o to vote all of the shares of CV owned by the shareholders
(including any shares acquired after the voting agreement was executed) or
that they have the right to vote in favor of the merger agreement and the
merger of CV into Kramont and against any other proposed business combination
involving CV.
o not to dispose of any shares of CV owned by them.
o to exchange, directly or indirectly in accordance with the Unit
Contribution Agreement described under "Pre-Merger Transactions-Private
Placement Offering of Kramont Operating Partnership, L.P. Partnership Units,"
with some exceptions, all of the operating partnership units held by them in
Montgomery CV Realty L.P. for operating partnership units in Kramont
Operating Partnership, L.P.
These agreements automatically terminate upon termination of the merger
agreement or upon the effective time of the merger of CV into Kramont.
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Voting Agreements with Kranzco Shareholders
Concurrently with the execution and delivery of the merger agreement,
Norman M. Kranzdorf, President and Chief Executive Officer of Kranzco, and
Robert H. Dennis, Chief Financial Officer of Kranzco, have entered into
voting agreements with CV. Messrs. Kranzdorf and Dennis own in the aggregate
approximately 2% of the issued and outstanding Kranzco common shares.
Pursuant to these agreements, the shareholders agreed:
o to vote all of the shares of Kranzco owned by the shareholders
(including any shares acquired after the voting agreement was executed) or
that they have the right to vote in favor of the merger agreement and the
merger of KRT Trust into Kramont and against any other proposed business
combination involving Kranzco.
o not to dispose of any shares of Kranzco owned by them.
These agreements automatically terminate upon termination of the merger
agreement or upon the effective time of the merger of KRT Trust into Kramont.
Material Federal Income Tax Consequences
The following is a general summary of the material United States Federal
income tax consequences both to CV and its shareholders and to Kranzco and
its shareholders resulting from the respective mergers of CV into Kramont and
of KRT Trust into Kramont. The following discussions were prepared based on
consultation with both Roberts & Holland LLP, special tax counsel to CV, and
Robinson Silverman Pearce Aronsohn & Berman LLP, counsel to Kranzco. In the
opinion of Roberts & Holland LLP, as it relates to CV and CV's shareholders,
and Robinson Silverman Pearce Aronsohn & Berman LLP, as it relates to KRT
Trust and Kranzco's shareholders, the following discussion, to the extent it
constitutes matters of law or legal conclusions (assuming the facts,
representations and assumptions upon which the discussion is based are
accurate) are accurate in all material respects. However, the IRS is not
bound by these opinions and we cannot assure you that the IRS will agree with
this discussion and with the positions described below. Additionally, we
cannot assure you that the IRS would not seek to challenge these positions,
or that such challenges would not be sustained in the courts.
The tax discussion set forth below is not intended to be, and should not
be construed to be legal or tax advice to any particular holder of CV shares
or Kranzco shares. The following summary is based upon current provisions of
the Internal Revenue Code, existing temporary and final regulations and
current administrative rulings and court decisions. All of these are subject
to change (possibly on a retroactive basis). No attempt has been made to
comment on all of the possible relevant United States federal income tax
consequences of the mergers to any particular holder of CV shares or Kranzco
shares, or to anyone who holds Kramont shares. For example, this discussion
does not address the special tax rules which may apply to dealers in
securities, mutual funds, insurance companies, tax-exempt entities, foreign
corporations, foreign partnerships, foreign estates or trusts or individuals
who are treated as non-resident aliens under the U.S. tax laws (except as may
be set forth herein). Moreover, this discussion does not address the tax
consequences to Kranzco shareholders who exercise appraisal rights. Because
each holder of shares of CV or Kranzco may have different tax attributes, the
consequences of the mergers may differ for each. Therefore, each shareholder
of either CV or Kranzco is urged to consult with his own legal and tax
advisers regarding the federal, state, local or foreign tax consequences of
the mergers or of holding Kramont shares.
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Tax Consequences of the Mergers
Roberts & Holland LLP, special counsel to CV in connection with the
merger of CV into Kramont, will render an opinion to CV that, on the basis of
the facts, representations and assumptions set forth in such opinion, the
merger of CV into Kramont will constitute a reorganization within the meaning
of Section 368(a) of the Internal Revenue Code, and that CV and Kramont will
each be a party to the reorganization, within the meaning of Section 368(b)
of the Internal Revenue Code. In addition, Robinson Silverman Pearce
Aronsohn & Berman LLP, counsel to Kranzco in connection with the merger of
KRT Trust into Kramont will render an opinion to Kranzco that on the basis of
the facts, representations and assumptions set forth in such opinion, the
merger of KRT Trust into Kramont will constitute a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code, and that KRT Trust
and Kramont will each be a party to that reorganization, within the meaning
of Section 368(b) of the Internal Revenue Code.
Shareholders of Kranzco and CV should be aware that such opinions of
counsel are not binding on the IRS, and no assurance is or will be given that
the IRS will not adopt a contrary position or that the IRS position would not
be sustained by a court.
This tax discussion does not specifically describe the details of the
Kranzco Reorganization because there are no material tax consequences thereof
to the Kranzco shareholders. This summary describes the tax consequences of
the merger of KRT Trust into Kramont to Kranzco shareholders who will become,
successively, KRT Trust shareholders and Kramont shareholders. This summary
refers to such shareholders in each capacity as Kranzco shareholders. This
discussion does not address the details of the CV Trust Merger because there
are no material tax consequences thereof to the CV shareholders.
The following is a summary of the Federal income tax consequences to CV
and its shareholders of the merger of CV into Kramont. This discussion
assumes that the merger of CV into Kramont constitutes a reorganization
within the meaning of Internal Revenue Code Section 368(a), and that CV and
Kramont are each a party to this reorganization, within the meaning of
Internal Revenue Code Section 368(b):
o No gain or loss will be recognized by CV or Kramont as a
result of the merger of CV into Kramont;
o No gain or loss will be recognized by the holders of CV common
shares upon the exchange of their CV common shares solely for
Kramont common shares pursuant to the merger of CV into
Kramont;
o The tax basis of the Kramont common shares received by any CV
shareholder in exchange for CV common shares will be the same
as the tax basis of the CV common shares exchanged therefor;
and
o The holding period for Kramont common shares received in
exchange for CV common shares pursuant to the merger of CV
into Kramont will include the period during which the
shareholder held the CV shares, provided that the CV shares
were held as capital assets by such holder at the time of the
merger of CV into Kramont.
The following is a summary of the Federal income tax consequences to KRT
Trust and the Kranzco shareholders resulting from the merger of KRT Trust
into Kramont. This discussion assumes that the merger of KRT Trust into
Kramont constitutes a reorganization within the meaning of Internal Revenue
Code Section 368(a), and
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that KRT Trust and Kramont are each a party to such reorganization within the
meaning of Internal Revenue Code Section 368(b):
o No gain or loss will be recognized by Kramont or Kranzco as a
result of the merger of KRT Trust into Kramont;
o No gain or loss will be recognized by the holders of Kranzco
common shares upon the exchange of these shares solely for
Kramont common shares (including fractional shares of Kramont
common shares deemed issued as described below) pursuant to
the merger of KRT Trust into Kramont;
o No gain or loss will be recognized by the holders of Kranzco
preferred shares upon the exchange of these preferred shares
solely for Kramont preferred shares pursuant to the merger of
KRT Trust into Kramont (This conclusion is based on the
assumption that the likelihood that any class of Kranzco
preferred shares would be redeemed (based on the facts on
their respective dates of issuance) is not materially
different than the likelihood that the corresponding class of
Kramont preferred shares will be redeemed (based on the facts
on their date of issuance));
o The tax basis of the Kramont common shares (including
fractional shares deemed issued as described below) received
by any Kranzco shareholder in exchange for his Kramont common
shares pursuant to the merger of KRT Trust into Kramont will
be the same as the tax basis of the Kranzco common shares
exchanged;
o The tax basis of the Kramont preferred shares received by any
Kranzco shareholder in exchange for such shareholder's Kranzco
preferred shares pursuant to the merger of KRT Trust into
Kramont will be the same as the tax basis of such Kranzco
preferred shares exchanged;
o The holding period for Kramont common shares received in
exchange for Kranzco common shares and for Kramont preferred
shares received in exchange for Kranzco preferred shares,
pursuant to the merger of KRT Trust into Kramont will include
the period that the Kranzco common and preferred shares
exchanged were held by the holder, provided that the Kranzco
common and preferred shares were held as capital assets by the
holder at the time of the merger of KRT Trust into Kramont;
and
o A holder of Kranzco common shares who receives cash instead of
a fractional share of Kramont common shares pursuant to the
merger of KRT Trust into Kramont will be treated as if he
received a fractional share of Kramont common shares pursuant
to the merger and then redeemed the fractional share for cash.
The shareholder will recognize gain or loss equal to the
difference, if any, between his basis in the fractional share
and the amount of cash received.
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Qualification of Kramont as a REIT
Prior History
CV elected REIT status commencing with its taxable year ending December
31, 1982. In the opinion of Roberts & Holland LLP, special counsel to CV, CV
has been and is organized in conformity with the Internal Revenue Code
requirements for qualification and taxation as a REIT, for its taxable year
ending December 31, 1991 and thereafter. At all times since that taxable
year, CV's method of operation has enabled it (and, provided such method of
operation is continued, will continue to enable it, until the time of the
merger of CV into Kramont) to meet the requirements for qualification and
taxation as a REIT under the Internal Revenue Code. For Federal income tax
purposes, both the taxable year of CV and its separate status as a REIT will
terminate at the time of the merger into Kramont. Certain of CV's tax
attributes will be inherited by Kramont. However, new depreciation periods
will be required to be begun for the assets of Montgomery CV Realty L.P.
Kranzco elected REIT status commencing with its taxable year ending
December 31, 1992. In the opinion of Robinson Silverman Pearce Aronsohn &
Berman LLP, counsel to Kranzco, commencing with its taxable year ending
December 31, 1992, Kranzco was organized in conformity with the requirements
for qualification and taxation as a REIT under the Internal Revenue Code. At
all times since that taxable year, its method of operation has enabled it
(and, provided such method of operation is continued, will continue to enable
Kranzco and KRT Trust up until the time of the merger of KRT Trust into
Kramont) to meet the requirements for qualification and taxation as a REIT
under the Internal Revenue Code. For Federal income tax purposes, both the
taxable year of KRT Trust (and Kranzco), and its separate status as a REIT
will terminate at the time of the merger of KRT Trust into Kramont. Certain
of Kranzco's tax attributes will be inherited by Kramont.
It must be emphasized that both the opinion by Roberts & Holland LLP and
the opinion by Robinson Silverman Pearce Aronsohn & Berman LLP are based on
various assumptions relating to the organization and operation of various
entities. Roberts & Holland LLP's opinion is conditioned upon certain
representations made by CV as to factual matters relating to its
organization, operation, income, assets, distributions and share ownership.
Robinson Silverman Pearce Aronsohn & Berman LLP's opinion is conditioned upon
certain representations made by Kranzco as to factual matters relating to its
organization, operation, income, assets, distributions and share ownership.
Additionally, each of these opinions relies upon certain representations
regarding the various Internal Revenue Code qualification tests described
below. Neither Roberts & Holland LLP nor Robinson Silverman Pearce Aronsohn
& Berman LLP has reviewed or will review the results of these qualification
tests. A corporation's qualification as a REIT depends on its having met and
continuing to meet -through actual operating results, distribution levels and
diversity of stock ownership -the various qualification tests imposed by the
Code. Therefore, no assurance can be given that the actual results of either
CV's or Kranzco's operations for any particular taxable year have satisfied
or will satisfy these requirements.
General
Kramont will elect REIT status commencing with a taxable year ending
December 31, 2000. Kramont was organized to enable it to be in conformity
with the Internal Revenue Code requirements for qualification and taxation as
a REIT. As represented by Kramont, Kranzco and CV, its proposed method of
operation described in this joint proxy statement/prospectus will enable it
to meet the requirements for qualification and taxation as a REIT.
Provided that Kramont qualifies for taxation as a REIT, it generally
will not be subject to Federal income tax on that portion of its net income
which is distributed currently to its shareholders. This treatment
substantially eliminates the "double taxation" at the corporate and
shareholder levels which generally results from the use of
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corporate investment vehicles. Kramont may, however, be subject to tax at
normal corporate rates upon any taxable income or capital gain not
distributed.
If Kramont failed to satisfy either the 75% or the 95% gross income
test, each described below, but nonetheless continued to maintain its
qualification as a REIT because certain other requirements were met, it would
be subject to a 100% tax on the greater of the amount by which it failed the
75% or the 95% test, respectively, multiplied by a fraction intended to
reflect Kramont's profitability. In addition, if Kramont failed to
distribute during each calendar year at least the sum of (A) 85% of its REIT
ordinary income for such year, (B) 95% of its REIT capital gain net income
for such year, and (C) any undistributed taxable income from prior years, it
would be subject to a 4% excise tax on the excess of such required
distribution over the amounts actually distributed. Notwithstanding the
foregoing, a REIT may elect to retain, rather than distribute, all or a
portion of its net long term capital gains and pay the tax on the gains at
normal corporate capital gains tax rates. In such a case, a REIT may elect
to have its shareholders include their proportionate share of the
undistributed long term capital gains in income and receive a credit for
their share of the tax paid by the REIT. For purposes of the 4% excise tax
described above, any retained amounts would be treated as having been
distributed.
Kramont may also be subject to the corporate "alternative minimum tax."
Additionally, Kramont could be subject to tax on the disposition of certain
assets during a 10-year period following their acquisition (if acquired from
a C corporation in a non-taxable exchange), including certain assets acquired
from Kranzco. Kramont will use the calendar year both for Federal income tax
purposes and for financial reporting purposes.
Finally, Kramont will be subject to a 100% tax on net income derived
from any "prohibited transaction." "Prohibited transactions" generally are
sales or other dispositions of property held as inventory or primarily for
sale to customers in the ordinary course of business. Such prohibited
transactions, however, would exclude sales of certain dealer property held by
Kramont for at least four years, as well as foreclosure property.
In order to qualify as a REIT, Kramont must meet, among others, the
following requirements:
Share Ownership Test
Shares of beneficial interest of Kramont must be held by a minimum of
100 persons for at least 335 days of a taxable year that is 12 months, or
during a proportionate part of a taxable year which lasts less than 12
months. In addition, no more than 50% in value of the shares of beneficial
interest of Kramont may be owned, directly or indirectly by applying certain
constructive ownership rules, by five or fewer individuals (and certain tax
exempt organizations considered to be individuals) during the last half of
each taxable year. Kramont believes it will satisfy both of these tests. In
order to help comply with the second of these tests, and prevent greater
concentration of share ownership, Kramont has placed certain restrictions on
the transfer of shares of either Kramont preferred or common shares.
To monitor their compliance with the share ownership requirements, REITs
are required to maintain records regarding the actual ownership of their
shares. To do so, REITs must demand written statements each year from
specified record holders of their shares in which the record holders are to
disclose the beneficial owners of the shares, which are the persons required
to include in gross income the REIT dividends. A list of those persons
failing or refusing to comply with this demand is required to be maintained
by the REIT. Kramont represents that it will comply with this requirement.
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Asset Tests
At the close of each quarter of its taxable year, Kramont must satisfy
tests relating to the nature of its assets. First, at least 75% of the value
of Kramont's total assets must be represented by any combination of interests
in real property, interests in mortgages on real property, shares in other
REITs, cash, cash items, stock or debt instruments held not more than one
year purchased with the proceeds of a stock offering or long-term debt
offering (lasting at least five years) and certain government securities.
Second, although the remaining 25% of Kramont's assets generally may be
invested without restriction, securities in this class may not exceed either
(a) 5% of the value of Kramont's total assets as to any one issuer, or (b)
10% of the outstanding voting securities of any one issuer. See also "-
Recent Legislation," below.
By virtue of its partnership interest in Kramont Operating Partnership,
Kramont will be deemed to own its pro rata share of the assets of Kramont
Operating Partnership, and of any other partnership, including Montgomery CV
Realty L.P., in which Kramont Operating Partnership is directly or indirectly
a partner. Qualified REIT subsidiaries are not treated as entities separate
from their parent REIT for federal tax purposes. Instead, all assets,
liabilities and items of income, deduction and credit of each qualified REIT
subsidiary will be treated as the assets, liabilities and items of Kramont.
The general restrictions against ownership of more than 10% of the voting
securities of any one issuer or investment of more than 5% of the value of
the REIT's total assets in any one issuer do not apply to the ownership of
voting securities of, or investment in, a qualified REIT subsidiary. It is
not anticipated, however, that Kramont will own any qualified REIT
subsidiaries that have material assets or liabilities.
Gross Income Tests
There are two separate percentage tests relating to the sources of
Kramont's gross income which must be satisfied for each taxable year. For the
purposes of these tests, where Kramont invests in a partnership, it will be
treated as receiving its share of the income and loss of the partnership.
Additionally, the gross income of the partnership will retain the same
character in the hands of Kramont as it has in the hands of the partnership.
1. The 75% Test. At least 75% of Kramont's gross income for each
taxable year must be "qualifying income." Qualifying income generally
includes (a) rents from real property (except as modified below); (b)
interest on obligations collateralized by mortgages on, or interests in, real
property; (c) gains from the sale or other disposition of interests in real
property and real estate mortgages, other than gain from property held
primarily for sale to customers in the ordinary course of Kramont's trade or
business ("dealer property"); (d) distributions on shares in other REITs, as
well as gain from the sale of such shares; (e) abatements and refunds of real
property taxes; (f) income from the operation, and gain from the sale, of
property acquired at or in lieu of a foreclosure of a mortgage collateralized
by such property ("foreclosure property"); (g) commitment fees received for
agreeing to make loans collateralized by mortgages on real property or to
purchase or lease real property; and (h) certain qualified temporary
investment income attributable to the investment of new capital received by
Kramont in exchange for its shares (including the securities offered pursuant
to this prospectus) during the one-year period following the receipt of such
new capital.
Rents received by a REIT will qualify as "rents from real property" in
satisfying the gross income requirements for either the 75% test described
above or the 95% test described below, only if the following conditions are
met. First, in order to qualify as rents from real property, the rents
received may not be based in whole or in part on the income or profits of any
person. The rents may, however, qualify if they are based on a fixed
percentage or percentages of receipts or sales. Second, rents received from
a tenant of which Kramont owns at least 10%, either directly or
constructively, will not qualify as rents from real property. Third, if more
than 15% of rent in connection with a lease of real property is attributable
to personal property, the amounts attributable to the lease of personal
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property do not qualify as rents from real property. Fourth, for rents
received to qualify as rents from real property, Kramont generally must not
operate or manage the property or furnish or render services to tenants,
other than through an "independent contractor" (as defined in Section 856 of
the Code) from whom Kramont derives no revenue (and who, in certain
circumstances, must bear the cost for such services and receive and retain an
adequate separate charge therefor). The "independent contractor"
requirements, however, do not apply to the extent the services provided by
Kramont are "usually or customarily rendered" in connection with the rental
of space for occupancy only and are not otherwise considered "rendered to the
occupant." In addition, Kramont (or its affiliate) may provide non-customary
services to tenants of its properties without disqualifying all of the rent
from the property if the amount received for the services does not exceed 1%
of the total gross income from the property. For purposes of this test, the
amount received from any non-customary services is deemed to be at least 150%
of the direct cost of providing the services.
2. The 95% Test. At least 95% of Kramont's gross income for the
taxable year must be derived either from the qualifying income described
above, or from dividends, interest or gains from the sale or disposition of
stock or other securities that are not dealer property. Income which
qualifies for the 95% test but not for the 75% test includes dividends,
interest on any obligations not collateralized by an interest in real
property and any payments made on Kramont's behalf by a financial institution
pursuant to a rate protection agreement. Finally, income derived from
"prohibited transactions," described above does not qualify for either the
75% test or the 95% test.
Income derived from Kramont's investment in its properties through
Kramont Operating Partnership, will qualify in major part under both the 75%
and 95% gross income tests. Furthermore, Kramont's share of gains on sales of
the properties owned, directly or indirectly, by Kramont Operating
Partnership or of Kramont's interest in Kramont Operating Partnership will
generally qualify under both the 75% and 95% gross income tests. Kramont
believes that the income on its other investments will not cause Kramont to
fail the 75% or 95% gross income test for any year. Kramont anticipates that
this will continue to be the case.
Even if Kramont fails to satisfy one or both of the 75% or 95% gross
income tests for any taxable year, it may still qualify as a REIT for such
year if it is entitled to relief under the following conditions. Relief
generally will be available if: (a) Kramont's failure to comply was due to
reasonable cause and not to willful neglect; (b) Kramont reports the nature
and amount of each item of its income included in the tests on a schedule
attached to its tax return; and (c) any incorrect information on this
schedule is due to reasonable cause and is not due to fraud with intent to
evade tax. Even if these relief provisions apply, however, Kramont, will
still be subject to a 100% tax based upon the greater of the amount by which
it fails either the 75% or the 95% gross income test, respectively,
multiplied by a fraction intended to reflect Kramont's profitability for that
year, less certain adjustments.
Annual Distribution Requirements
In order to qualify as a REIT, Kramont is required to make distributions
of dividends (other than capital gain dividends) to its shareholders each
year in an amount at least equal to (A) the sum of (1) 95% of Kramont's REIT
taxable income (computed without regard to the dividends paid deduction and
Kramont's net capital gain) and (2) 95% of the net income (after tax), if
any, from foreclosure property, and possibly (3) 95% of the "net recognized
built-in gain" minus the tax imposed thereon, minus (B) the sum of certain
items of non-cash income. Such distributions generally must be paid in the
taxable year to which they relate. However, Kramont may make the
distributions in the following taxable year if it declares the dividends
before it timely files its tax return for the prior year, and pays the
dividends before the first regular dividend payment after the declaration is
made. To the extent that Kramont does not distribute all of its net capital
gain or distributes at least 95%, but less than 100%, of its REIT taxable
income as adjusted, it will be subject to tax on the undistributed amount at
regular capital gains or ordinary corporate tax rates, as the case may be.
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Kramont intends to make timely distributions sufficient to satisfy the
annual distribution requirements. In this regard, the partnership agreement
of Kramont Operating Partnership authorizes Kramont, as general partner, to
take such steps as may be necessary to cause Kramont Operating Partnership to
distribute to its partners an amount sufficient to permit Kramont to meet
these distribution requirements. It is possible that Kramont may not have
sufficient cash or other liquid assets to meet the 95% dividend requirement,
due either to the payment of principal on debt or to timing differences
between the actual receipt of income and actual payment of expenses on the
one hand, and the inclusion of such income and deduction of such expenses in
computing Kramont's REIT taxable income on the other hand. To avoid any
problem with the 95% distribution requirement, Kramont will closely monitor
the relationship between its REIT taxable income and cash flow and, if
necessary, will borrow funds (or cause Kramont Operating Partnership or other
affiliates to borrow funds) in order to satisfy the distribution requirement.
Failure to Qualify
If Kramont failed to qualify for taxation as a REIT in any taxable year
and the relief provisions did not apply, Kramont would be subject to tax
(including any applicable alternative minimum tax) on its taxable income at
regular corporate rates. Distributions to shareholders in any year in which
Kramont failed to qualify would not be required and, if made, would not be
deductible by Kramont. In such event, to the extent of current and
accumulated earnings and profits, all distributions to shareholders would be
taxable as ordinary income. In addition, corporate distributees could be
eligible for the dividends received deduction. Finally, unless Kramont were
entitled to relief under specific statutory provisions, Kramont would be
ineligible for qualification as a REIT for the four taxable years following
the year during which qualification was lost.
Tax Aspects of Kramont's Investment in Partnerships
General
Kramont will hold direct or indirect interests in Kramont Operating
Partnership. Kramont Operating Partnership qualifies as a partnership for
Federal income tax purposes. Further, Kranzco will receive an opinion of
Roberts & Holland LLP that Montgomery CV Realty L.P. is a partnership for
Federal income tax purposes. If any entity directly or indirectly owned by
Kramont were to be treated as an association, such entity would be taxable as
a corporation, and, therefore, subject to an entity-level tax on its income.
In such a situation, the character of Kramont's assets and items of gross
income would change, which could preclude Kramont from satisfying the asset
tests and possibly the income tests (see "-Qualification of Kramont as a
REIT-Asset Tests" and "-Gross Income Tests"), and in turn would prevent
Kramont from qualifying as a REIT.
Publicly Traded Partnerships
Internal Revenue Code Section 7704 provides that publicly traded
partnerships will be taxed as corporations, unless a certain percentage of
their income consists of "qualifying income." A partnership is "a publicly
traded partnership" if interests in the partnership are either traded on an
established securities market or are "readily tradable on a secondary market
(or the substantial equivalent thereof)." Under the Treasury Regulations
promulgated under Internal Revenue Code Section 7704, interests in a
partnership are readily tradable on a secondary market or substantial
equivalent thereof if, "taking into account all of the facts and
circumstances, the partners are readily able to buy, sell, or exchange their
partnership interests in a manner that is comparable, economically, to
trading on an established securities market." Furthermore, interests in a
partnership are tradable as such if (a) interests in the partnership are
regularly quoted by any person, such as a broker or dealer, making a market
in the interests; (b) any person regularly makes available to the public
(including customers or subscribers) bid or offer quotes with respect to
interests in the partnership and stands ready to effect buy or sell
transactions at the quoted prices for itself or on
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behalf of others; (c) the holder of an interest in the partnership has a
readily available, regular, and ongoing opportunity to sell or exchange the
interest through a public means of obtaining or providing information of
offers to buy, sell, or exchange interests in the partnership; or (d)
prospective buyers and sellers otherwise have the opportunity to buy, sell,
or exchange interests in the partnership in a time frame and with the
regularity and continuity that is comparable to that described in (a), (b),
or (c). Kramont Operating Partnership believes that it will not be a publicly
traded partnership at the time of the respective mergers of CV and KRT Trust
into Kramont.
Even if Kramont Operating Partnership were deemed to be a publicly
traded partnership, depending on circumstances at the time, it still might
avoid taxation as a corporation under Internal Revenue Code Section 7704,
based on the nature of its income. A publicly traded partnership is not taxed
as a corporation if at least 90% of its gross income for each taxable year
consists of passive income, including interest, dividends, real property
rents, and gains from the sale or other disposition of real property.
Kramont Operating Partnership expects to earn predominantly these types of
income.
If Kramont Operating Partnership were at any time considered a publicly
traded partnership and did not satisfy the qualifying income test, then it
would be considered to have transferred its assets at that time to a
corporation, and would be taxed as a corporation for Federal income tax
purposes. This would jeopardize Kramont's status as a REIT for Federal
income tax purposes. This deemed transfer of assets to a corporation could
also cause Kramont Operating Partnership and its partners (including Kramont)
to recognize taxable income, to the extent that its liabilities at that time
exceed the adjusted tax bases of its assets, without the receipt of any cash
with which to pay the income tax liability resulting from such income.
Tax Allocations with Respect to the Properties
The Internal Revenue Code and Treasury Regulations provide that income,
gain, loss and deduction attributable to appreciated or depreciated property
that is contributed to a partnership in exchange for an interest in the
partnership must be allocated in a manner so that the contributing partner is
charged with or benefits from the unrealized gain or unrealized loss
associated with the property at the time of the contribution. Certain of the
properties contributed to Kramont in connection with the mergers of CV and
KRT Trust into Kramont may include such unrealized appreciation or
depreciation at the time of contribution. The amount of unrealized gain or
unrealized loss is generally equal to the "book-tax difference," the
difference between the fair market value and the adjusted tax basis of
contributed property at the time of contribution. Such allocations are solely
for Federal income tax purposes and do not affect the book capital accounts
or other economic or legal arrangements among the partners.
The Kramont Operating Partnership Agreement requires these allocations
be made in a manner consistent with the Internal Revenue Code and Treasury
Regulations. As a result, certain limited partners of Kramont Operating
Partnership will be allocated lower amounts of depreciation deductions for
tax purposes and increased taxable income and gain on sale by these
partnerships of assets which were contributed with unrealized appreciation
and depreciation. These allocations will tend to eliminate the differences
between the partner's book capital account and his adjusted tax basis
associated with those assets over the lives of the partnerships. However,
these special allocation rules as applied by Kramont will not always entirely
rectify the difference between the partner's book capital account and his
adjusted tax basis on an annual basis or with respect to a specific taxable
transaction such as a sale. The carryover basis of the contributed assets in
the hands of these partnerships will cause Kramont to be allocated lower
depreciation and other deductions. It may additionally cause Kramont to be
allocated amounts of taxable income in excess of the economic or book income
allocated to it in the event of a sale of these assets. Kramont will also
have contributed to Kramont Operating Partnership assets the tax basis of
which is lower than their fair market value, with the result that Kramont
will be allocated a disproportionately small share of the depreciation, or a
disproportionately large share of the gain, with respect to such assets. As
a result of all the foregoing, Kramont may recognize taxable
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income in excess of cash proceeds, which could adversely affect Kramont's
ability to comply with the REIT distribution requirements. See "--
Qualification of Kramont as a REIT -- Annual Distribution Requirements."
Sale of Properties
Kramont's share of any gain realized by Kramont Operating Partnership on
the sale of any dealer property generally will be treated as income from a
prohibited transaction that is subject to a 100% penalty tax. See "--
Qualification of Kramont as a REIT -- General." Under existing law, whether
property is dealer property is a question of fact that depends on all the
facts and circumstances with respect to the particular transaction. Kramont
believes that, in general, the properties it owns, directly and indirectly,
should not be considered dealer property, and that the amount of income from
prohibited transactions, if any, will not be material.
Taxation of Shareholders
Taxation of Taxable U.S. Shareholders
General. As long as Kramont qualifies as a REIT, "U.S. Shareholders,"
defined below, are required to treat distributions with respect to their
shares out of current or accumulated earnings as ordinary income, to the
extent that the distributions are not designated as capital gain dividends.
For purposes of determining whether distributions on the shares of Kramont
are out of current or accumulated earnings and profits, the earnings and
profits of Kramont generally will be allocated first to the holders of
Kramont preferred shares and second to the holders of Kramont common shares.
Corporate shareholders will not be eligible for the dividend received
deduction with respect to dividends received from Kramont.
Dividends that are designated as capital gain dividends will be taxed as
long-term capital gains to the extent that they do not exceed Kramont's
actual net capital gain for the taxable year, regardless of the period for
which the shareholder has held its shares. However, corporate shareholders
may be required to treat up to a portion of certain capital gain dividends as
ordinary income. On November 10, 1997, the IRS released Notice 97-64
describing forthcoming temporary regulations that would permit a REIT to
designate different classes of capital gain dividends. Notice 97-64 serves as
guidance until such regulations are issued and applies to taxable years
ending on or after May 7, 1997. In general, under Notice 97-64, if a REIT
designates a dividend as a capital gain dividend for such a taxable year, it
may further designate such dividend as a 20% rate gain distribution or an
unrecaptured Section 1250 gain distribution (subject to a 25% rate).
For the purposes of this discussion, the term "U.S. Shareholder" means a
holder of Kramont common or preferred shares who (for United States Federal
income tax purposes) is (a) a citizen or resident of the United States; (b)
a corporation, partnership, or other entity created or organized in or under
the laws of the United States or of any political subdivision thereof, except
to the extent otherwise provided in Treasury Regulations with respect to an
entity treated as a partnership for Federal tax purposes; (c) an estate, the
income of which is subject to United States Federal income taxation
regardless of its source; or (d) a trust, if (A) a court within the United
States is able to exercise primary supervision over the administration of the
trust and (B) one or more United States persons have the authority to control
all substantial decisions of the trust.
To the extent that Kramont makes distributions in excess of current and
accumulated earnings and profits, (including the accumulated earnings and
profits of CV and Kranzco, which will carry over to Kramont in the mergers)
these distributions are treated first as a tax-free return of capital to the
shareholder. Any such distributions reduce the tax basis of a shareholder's
shares by the amount of such distribution (but not below zero). The excess
of any distributions over the shareholder's tax basis is taxable as capital
gain, if the shares are held as a capital asset.
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It is expected that Kramont will not make distributions in excess of its
current and accumulated earnings and profits; thus, all distributions by
Kramont will be taxable as ordinary dividends or as capital gain dividends.
Any dividend declared by Kramont in October, November or December of any
year and payable to a shareholder of record on a specific date in any such
month will be treated as both paid by Kramont and received by the shareholder
on December 31 of such year, provided that the dividend is actually paid by
Kramont during January of the following calendar year. Shareholders may not
include in their individual income tax returns any net operating losses or
capital losses of Kramont.
The current earnings and profits of Kramont for its taxable year ending
December 31, 2000 will include all earnings and profits of Kramont, as the
surviving entity in each of the mergers of CV into Kramont, and of KRT Trust
into Kramont, for the period beginning on the date of these mergers, and
ending on December 31, 2000. No dividends declared and paid by CV or Kranzco
prior to the time of the mergers will constitute distributions by Kramont for
Federal tax purposes.
In general, any loss upon a sale or exchange of securities by a
shareholder who has held such securities for six months or less (after
applying certain holding period rules) will be treated as a long-term capital
loss, to the extent of distributions from Kramont received by such
shareholder that are required to be treated by such shareholder as long-term
capital gains.
Election to Retain Net Long-Term Capital Gain
Pursuant to the Taxpayer Relief Act of 1997, if Kramont retains and pays
income tax on its net long-term capital gain attributable to a taxable year,
its shareholders may be required to include in their income as long-term
capital gain their proportionate share of such amount, as designated by
Kramont. A Kramont shareholder will be treated as having paid his or her
share of the tax paid by Kramont in respect of the amount designated by
Kramont, for which the Kramont shareholder will be entitled to a credit or
refund. Additionally, each Kramont shareholder's adjusted basis in Kramont
shares will be increased by the excess of the amount includable in income
over the tax deemed paid on that amount. Kramont must pay tax on its
designated long-term capital gain within 30 days of the close of any taxable
year in which it designates long-term capital gain pursuant to this rule, and
it must mail a written notice of its designation to its shareholders within
60 days of the close of the taxable year.
Taxation of Tax-Exempt Shareholders
Most tax-exempt employees' pension trusts are not subject to Federal
income tax except to the extent of their receipt of "unrelated business
taxable income" as defined in Internal Revenue Code Section 512(a).
Distributions by Kramont to a shareholder that is a tax-exempt entity should
not constitute unrelated business taxable income, as long as the securities
are not otherwise used in an unrelated trade or business of the tax-exempt
entity, and the tax-exempt entity has not financed the acquisition of its
securities with "acquisition indebtedness," as defined in the Internal
Revenue Code. In addition, certain pension trusts that own more than 10% of a
"pension-held REIT" must report a portion of the distribution that they
receive from such a REIT as unrelated business taxable income. Neither CV nor
Kranzco has been and Kramont does not expect to be treated as a pension-held
REIT for purposes of this rule.
Taxation of Foreign Shareholders
A "Non-U.S. Holder" is any person who holds securities and is not (a) a
citizen or resident of the United States; (b) a corporation or partnership
created or organized in the United States or under the laws of the United
States or of any state thereof, except to the extent otherwise provided in
Treasury Regulations with respect to an
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entity treated as a partnership for Federal tax purposes; (c) an estate or
trust whose income is includable in gross income for U.S. Federal income tax
purposes regardless of its source; or (d) a trust if (A) a court in the
United States is able to exercise primary jurisdiction over its
administration and (B) one or more United States persons have the authority
to control all substantial decisions of the trust. The discussion is based on
current law and is for general information only. Non-U.S. Holders are urged
to consult with their own legal and tax advisors regarding the United States
Federal income tax consequences of continuing to hold their Kramont shares.
1. Ordinary Dividends. The portion of dividends received by Non-U.S.
Holders payable out of Kramont's earnings and profits which are not
attributable to capital gains of Kramont and which are not effectively
connected with a U.S. trade or business of the Non-U.S. Holder will be
subject to U.S. withholding tax at the rate of 30%, unless reduced by an
applicable treaty. In general, Non-U.S. Holders will not be considered
engaged in a U.S. trade or business solely as a result of their ownership of
securities. Where the dividend income from a Non-U.S. Holder's investment in
securities is considered effectively connected with the Non-U.S. Holder's
conduct of a U.S. trade or business, the Non-U.S. Holder generally will be
subject to U.S. tax at graduated rates, similar to the manner in which U.S.
shareholders are taxed with respect to such dividends. Additionally, a Non-
U.S. Holder that is a foreign corporation may also be subject to the 30%
branch profits tax.
Non-U.S. Holders are encouraged to consult their tax advisors
particularly in light of recent changes in the United States' position
regarding the treatment of dividends paid to REIT investors under the U.S.
Model Treaty and under certain recently negotiated treaties.
2. Non-Dividend Distributions. Distributions by Kramont, no portion of
which is a dividend out of the earnings and profits of Kramont, will not be
subject to U.S. income or withholding tax. If it cannot be determined at the
time a distribution is made whether or not such distribution will be in
excess of Kramont's current and accumulated earnings and profits, the entire
distribution will be subject to withholding at the rate applicable to
dividends. However, the Non-U.S. Holder may seek a refund of such amounts
from the IRS if it is subsequently determined that such distribution was, in
fact, in excess of current and accumulated earnings and profits of Kramont.
3. Capital Gain Dividends. Under the Foreign Investment in Real
Property Tax Act of 1980, a distribution made by Kramont to a Non-U.S.
Holder, to the extent attributable to gains from dispositions of United
States real property interests, such as the properties beneficially owned by
Kramont, will be considered effectively connected with a U.S. trade or
business of the Non-U.S. Holder. As such, these amounts will be subject to
U.S. income tax at the rate applicable to U.S. individuals or corporations,
without regard to whether such distribution is designated as a capital gain
dividend. In addition, Kramont will be required to withhold tax equal to 35%
of the amount of dividends to the extent such dividends constitute gain from
any U.S. real property interest. Distributions subject to the Foreign
Investment in Real Property Tax Act which are made to a foreign corporate
shareholder may also be subject to a 30% branch profits tax, unless the rate
is reduced or eliminated pursuant to a tax treaty.
4. Dispositions of Securities. Unless securities constitute a U.S.
real property interest, a sale of securities by a Non-U.S. Holder generally
will not be subject to U.S. taxation. The securities will not constitute a
U.S. real property interest if Kramont is a "domestically controlled REIT." A
domestically controlled REIT is a REIT in which, at all times during a
specified testing period, less than 50% in value of its securities is held
directly or indirectly by Non-U.S. Holders. Based on available information
regarding the share ownership of CV and Kranzco, Kramont anticipates that it
will be a domestically controlled REIT and that the sale of securities of
Kramont thus will not be subject to taxation. Because the securities will be
publicly traded and because available information may not accurately identify
the status of all holders as foreign or domestic, however, no assurance can
be given that Kramont will be a domestically controlled REIT. If Kramont does
not constitute a domestically controlled REIT, a Non-U.S. Holder's sale of
securities of Kramont generally will still not be subject to tax if (a) the
securities are "regularly
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traded" (as defined by applicable Treasury Regulations) on an established
securities market and (b) the selling Non-U.S. Holder held 5% or less of
Kramont's outstanding securities at all times during a specified testing
period of up to 5 years.
If gain on the sale of securities were subject to U.S. taxation, the
Non-U.S. Holder would generally be subject to the same treatment as a U.S.
shareholder with respect to such gain (subject to applicable alternative
minimum tax and a special alternative minimum tax in the case of nonresident
alien individuals). The purchaser of such securities might be required to
withhold 10% of the purchase price and remit such amount to the IRS. Capital
gains may also be taxable in the United States to a Non-U.S. Holder in two
additional cases: (1) if the Non-U.S. Holder's investment in securities were
effectively connected with a U.S. trade or business conducted by such
Non-U.S. Holder, and (2) if the Non-U.S. Holder were a nonresident alien
individual who was present in the United States for 183 days or more during
the taxable year and certain other conditions were satisfied.
Taxation of Non-U.S. Holders in the Mergers
Each of CV and Kranzco believes it has been, and will be through the
date of the mergers, a domestically controlled REIT. Thus, a Non-U.S. Holder
who is (i) a shareholder of CV and participates in the merger of CV into
Kramont, or (ii) a shareholder of Kranzco and participates in the merger of
KRT Trust into Kramont, will not be subject to U.S. taxation on the exchange
of their shares for Kramont shares, provided CV and Kranzco, as the case may
be, are domestically controlled REITs or if the 5% exception described in the
second preceding paragraph applies. If CV or Kranzco, as the case may be, is
not a domestically controlled REIT and the 5% exception does not apply, then
the exchange of shares by a CV shareholder or a Kranzco shareholder in the
mergers will be taxable in the manner described in the preceding paragraph.
Recent Legislation
On December 17, 1999, the President signed into law H.R. 1180, the
Ticket to Work and Work Incentives Improvement Act of 1999, which contains
the REIT Modernization Act. This act includes a number of provisions
affecting REITs generally effective for taxable years beginning after
December 31, 2000. One provision would amend the tests relating to the
composition of a REIT's assets. Under current law, a REIT is precluded from
owning more than 10% of the outstanding voting securities of any one issuer,
other than a "qualified REIT subsidiary" or another REIT. Pursuant to the
REIT Modernization Act, a REIT would remain subject to the current
restriction and would be additionally precluded from owning more than 10% of
the value of all classes of stock of any issuer. Certain interests held on
or before July 12, 1999 are grandfathered. Also, under the REIT
Modernization Act, the minimum distribution requirement to maintain REIT
status will decrease from 95% to 90% of REIT taxable income. In addition, a
REIT will be permitted to own up to 100% of the stock of one or more "taxable
REIT subsidiaries," as defined, subject to various limitations.
State and Local Tax Considerations
Kramont and its shareholders may be subject to state or local taxation
in various jurisdictions, including those in which it or they transact
business or reside. The state and local tax treatment of Kramont and its
shareholders may not conform to the Federal income tax consequences discussed
above. Consequently, prospective shareholders should consult their own tax
advisors regarding the effect of state and local tax laws on an investment in
the shares of beneficial interest of Kramont.
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Accounting Treatment
The mergers will be treated as a purchase by CV of Kranzco in accordance
with Accounting Principals Board Opinion No. 16. Although the Kranzco
shareholders will receive in the aggregate a majority of the Kramont common
shares to be issued in connection with the merger, CV is the accounting
acquirer of Kranzco because, among other things, for a period of at least two
years a majority of the Board of Trustees of Kramont will consist of current
members of the CV Board of Directors as a result of provisions in the Kramont
Declaration of Trust and Bylaws requiring the maintenance of a three-class
staggered board, and CV's Chief Executive Officer, Louis P. Meshon, Sr., will
become the Chief Executive Officer of Kramont. The fair value of the
consideration given by the accounting acquirer in the merger will be used as
the valuation basis of the acquiree. The assets and liabilities of CV will
be recorded at their historical carrying amount. The assets and liabilities
of Kranzco will be recorded at their fair values as of the completion of the
mergers. The financial statements of Kramont will reflect the combined
operations of CV and Kranzco from the closing date.
Appraisal Rights
Holders of Kranzco Series A-1 preferred shares are entitled to appraisal
rights under Title 8 of the Corporations and Associations Article of the
Annotated Code of Maryland (the "Maryland REIT Law") and the Maryland General
Corporation Law (the "MGCL") in connection with the merger of Kranzco into
KRT Trust II LLC. The preservation and exercise of appraisal rights are
conditioned on strict adherence to the applicable provisions of the Maryland
REIT Law and the MGCL. Each holder of Kranzco Series A-1 preferred shares
desiring to exercise appraisal rights should refer to Section 8-501.1(i) of
the Maryland REIT Law and Title 3, Subtitle 2, of the MGCL, for a complete
statement of their rights and the steps which must be followed in connection
with the exercise of those rights.
Under the Maryland REIT Law and the MGCL, a holder of Kranzco Series A-1
preferred shares will be entitled to demand and receive payment of the fair
value of its shares from KRT Trust II LLC instead of receiving KRT Trust
Series A-1 preferred shares. A Kranzco shareholder who wants to receive fair
value for his shares must follow specific procedures. He must:
(a) before or at the special meeting of Kranzco shareholders, file with
Kranzco a written objection to the merger of Kranzco into KRT Trust II LLC,
and
(b) make written demand on KRT Trust II LLC (or its successor, Kramont
Operating Partnership, L.P.), within 20 days after the Articles of Merger
have been accepted for record by the State Department of Assessments and
Taxation of Maryland ("SDAT"). Because it is expected, as discussed above
(see p. 37), that KRT Trust II LLC will be merged into Kramont Operating
Partnership, L.P. immediately after the merger of Kranzco into KRT Trust II
LLC, any references in this section to KRT Trust II LLC shall be deemed to
include Kramont Operating Partnership, L.P.
Any shareholder who fails to comply with the requirements described
above will be bound by the terms of the merger.
KRT Trust II LLC is required to promptly notify each objecting
shareholder in writing of the date of acceptance of the Articles of Merger
for record by the SDAT, and may send a written offer to each objecting
shareholder to pay for his shares at what KRT Trust II LLC considers to be
the fair value of the shares. Within 50 days after the SDAT accepts the
Articles of Merger for record, KRT Trust II LLC or any objecting shareholder
who
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has not received payment for his shares may petition a court of equity in the
appropriate county in Maryland for an appraisal to determine the fair value
of the shares.
KRT Trust II LLC does not presently intend to file an appraisal petition
and shareholders seeking to exercise appraisal rights should not assume that
KRT Trust II LLC will either file such a petition or initiate any
negotiations with respect to the fair value of any shares. Accordingly,
shareholders who desire to have their shares appraised should initiate any
petitions necessary for the perfection of their appraisal rights within the
time periods and in the manner prescribed in the MGCL.
If the court finds that an objecting shareholder is entitled to an
appraisal of its shares, the court is required to appoint three disinterested
appraisers to determine the fair value of the shares on terms and conditions
the court determines proper. The appraisers must, within 60 days after
appointment (or such longer period as the court may direct), file with the
court and mail to each party to the proceeding their report stating their
conclusion as to the fair value of such shares.
"Fair value" may not include any appreciation or depreciation which
directly or indirectly results from the merger or from its proposal.
Within 15 days after the filing of the report, any party may object to
such report and request a hearing on it. The court must, upon motion of any
party, enter an order either confirming, modifying or rejecting such report
and, if confirmed or modified, enter judgment for the appraised value of the
shares. If the appraisers' report is rejected, the court may determine the
fair value of the shares of the objecting shareholders or may remit the
proceeding to the same or other appraisers. Any judgment entered pursuant to
a court proceeding shall include interest from the date of the special
meeting of Kranzco shareholders. Costs of the proceeding shall be determined
by the court and may be assessed against KRT Trust II LLC or, under certain
circumstances, the objecting shareholder, or both.
At any time after the filing of a petition for appraisal, the court may
require objecting shareholders to submit their certificates evidencing the
shares to the clerk of the court for notation of the pendency of the
appraisal proceeding.
A shareholder demanding payment for shares has no right to receive any
dividends or distributions payable to shareholders of record after the close
of business on the date of the shareholders' vote on the merger, and shall
cease to have any right as a shareholder of Kranzco with respect to such
shares except the right to receive payment of the fair value thereof.
MERGER AGREEMENT
We encourage you to read the entire merger agreement, which is attached
as Appendix A to this joint proxy statement/prospectus.
General
The mergers provide for the merger of CV and KRT Trust into a newly
formed entity, Kramont Realty Trust. As we described under "Pre-Merger
Transactions," immediately prior to the completion of the mergers and in
order to facilitate the completion of the mergers, Kranzco will reorganize
into an UPREIT structure and CV Trust will be merged into CV. In connection
with the Kranzco Reorganization, each Kranzco common share will convert into
one common share of KRT Trust, and each preferred share of Kranzco will
convert into a preferred share in KRT Trust
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of the same series and having the same rights. See "Pre-Merger Transactions
- -Kranzco Reorganization Transactions".
In the mergers, the CV common shareholders will receive one common share
of Kramont for each common share of CV, and the KRT Trust common shareholders
(who will be former Kranzco common shareholders) will receive one common
share of Kramont for each common share of KRT Trust. Each KRT Trust
preferred share (which will be held by former holders of Kranzco preferred
shares) will convert into one preferred share of Kramont of the same series
and having the same rights.
Effective Time of the Mergers
Subject to the satisfaction, or waiver, of the conditions to the
obligations of Kranzco and CV to complete the mergers, the mergers of CV and
KRT Trust into Kramont will be completed as soon as practicable following the
approval by the shareholders of CV and Kranzco of the mergers and the merger
agreement at their respective meetings. It is currently expected that the
mergers will become effective during the second quarter of 2000.
Exchange of Certificates for CV and KRT Trust Shares
As of the effective time, Kramont will deposit or cause to be deposited
with an exchange agent selected by Kramont certificates evidencing the
Kramont common shares and the Kramont preferred shares to be issued in the
mergers to former CV and Kranzco shareholders.
Promptly after the effective time of the mergers, the exchange agent
will mail to each CV and KRT Trust shareholder of record a letter of
transmittal which contains instructions regarding surrendering certificates
representing CV common shares and Kranzco common and preferred shares for
certificates evidencing Kramont common shares or Kramont preferred shares.
You should not return your certificates with the enclosed proxy and
should not forward them to the exchange agent until you receive a letter of
transmittal following the effective time of the mergers.
Upon surrender of a share certificate for cancellation to the exchange
agent, together with the executed letter of transmittal and any other
documents reasonably required by the exchange agent, the person specified in
the letter of transmittal will be entitled to receive in exchange a
certificate evidencing that number of Kramont common or preferred shares
which the holder has the right to receive pursuant to the merger agreement
and a check for any unpaid CV or Kranzco distributions with a record date
before the time that the mergers become effective that the holder may have
the right to receive, in all instances giving effect to any required
withholding tax. The surrendered share certificates will be canceled. The
letter of transmittal will provide instructions for shareholders who have
lost or misplaced their certificates and wish to tender their shares.
Former CV and Kranzco shareholders who do not surrender their share
certificates to the exchange agent will continue to receive dividends and
distributions, if any, on the Kramont common or preferred shares into which
their shares converted until December 31, 2001. Distributions on the Kramont
common shares and Kramont preferred shares payable after December 31, 2001
will not be paid by Kramont to the former CV and Kranzco shareholders who do
not surrender their certificates to the exchange agent prior to December 31,
2001, but shall be paid by Kramont without interest to the non-tendering
holders at the time the non-tendering holders surrender their certificates
for cancellation.
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None of the parties to the merger agreement nor the exchange agent will
be liable to any former CV or Kranzco shareholder for any amount properly
delivered to a public official pursuant to applicable abandoned property,
escheat or similar laws.
At and after the effective time of the merger agreement there will not
be transfers on the stock transfer books of CV, Kranzco, or KRT Trust. After
the effective time, if any Kranzco common share certificates, Kranzco
preferred share certificates or CV common share certificates are presented to
Kramont, they will be canceled and exchanged for certificates of Kramont
common shares or Kramont preferred shares. Kranzco common share
certificates, Kranzco preferred share certificates or CV common share
certificates surrendered by any affiliate of Kranzco or CV will not be
exchanged until Kramont has received from the affiliate a written affiliate
letter in the form set forth in the merger agreement.
Options
At the effective time of the mergers, all outstanding KRT Trust share
options (which were Kranzco share options prior to the Kranzco reorganization
transactions described under "Pre-Merger Transactions") and CV stock options
will be assumed by Kramont. Each assumed option will have the same option
price per Kramont common share as the option price per CV share or KRT Trust
share, subject to the option in effect immediately prior to the effective
time.
Representations and Warranties
The merger agreement contains representations and warranties by CV,
Kranzco and KRT Trust, relating to among other things, the following matters:
o their due organization, power, authority and good standing and that
of their subsidiaries and similar corporate matters;
o their due authorization and power to execute the merger agreement,
and the enforceability of the merger agreement;
o their capital structure;
o ownership and capitalization of their subsidiaries;
o interests and investments in third parties;
o compliance of the merger agreement with their articles and bylaws
and material agreements;
o governmental and third party approvals;
o the absence of material legal proceedings and injunctions;
o filings with the Securities and Exchange Commission and reliability
of their financial statements;
o the absence of changes in their business, not in the ordinary
course of business, since December 31, 1998;
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o filing and accuracy of tax returns and qualification as a REIT;
o accuracy and completeness of their books and records and their
maintenance in accordance with generally accepted business
practices;
o the identity, status and condition of their respective properties,
including ownership, title and existence of necessary consents;
o compliance with environmental laws;
o employee benefit plans and compliance with the related laws and
regulations;
o labor matters;
o brokers' and finders' fees;
o opinions of their financial advisors;
o no ownership of common equity of CV or Kranzco, as the case may be;
o existence of convertible securities;
o related party transactions;
o material contracts, indebtedness and other obligations;
o payments resulting from consummation of the merger agreement
transactions;
o material leases;
o lack of any requirement to be registered under the Investment
Company Act of 1940, as amended;
o notes and related mortgages held by the party;
o the inapplicability to the mergers of state anti-takeover laws; and
o identification of compensation agreements or arrangements with any
officers, trustees or employees based on funds from operations.
Kramont made representations and warranties in the merger agreement
relating to the following matters:
o its due organization, power, authority and standing of and similar
corporate matters;
o its due authorization and power to execute the merger agreement and
the enforceability of the merger agreement;
o its capital structure; and
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o absence of Kramont conducting any business or incurring any
liabilities prior to the effective time of the mergers.
Certain Covenants
Conduct Of Business Pending Mergers. Except as contemplated by the
merger agreement, previously disclosed in writing or consented to by the
other parties, each of CV and Kranzco agreed that they will, and cause their
respective subsidiaries to:
o preserve intact their present business organizations and goodwill
and keep available the services of their respective officers and
employees;
o confer on a regular basis to report material operational matters
and proposals to engage in material transactions;
o coordinate the record dates for any dividends payable to holders of
CV and Kranzco common shares and Kranzco preferred shares; and
o promptly deliver to each other copies of any documents filed with
the Securities and Exchange Commission.
In addition, except as previously disclosed in writing or unless the
other party has agreed in writing, each party also agreed, for itself and its
subsidiaries:
o to conduct its operations according to its usual, regular and
ordinary course in substantially the manner conducted previously;
o not to amend its organizational documents;
o not to acquire, enter into an option to acquire or execute an
option or contract to acquire additional real property, encumber
assets or commence construction of (except regular tenant
improvements, reimbursements and allowances) or commit to develop
or construct retail shopping center properties and other real
estate projects;
o except pursuant to existing arrangements, not to issue any of its
shares, effect any share split, reverse share split, share
dividend, recapitalization or other similar transaction; grant or
award any option or other right to acquire any of its shares;
increase any compensation or enter into or amend any employment
agreement with any of its present or future trustees, officers or
directors; or adopt any new employee benefit plan or amend any
existing employee benefit plan in any material respect, except for
changes which are required by law or are less favorable to
participants in these plans;
o not to (i) declare or pay any dividend or other payment on its
shares, except for regular quarterly dividends and required
payments on preferred shares, if any, and (ii) redeem, purchase or
acquire any shares of capital stock of any of its subsidiaries or
commit to take such action, except in connection with (x) share-
based employee benefit plans, or (y) pay the exercise price or tax
withholding in connection with share-based employee benefit plans;
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o not to sell, lease or dispose of (i) any properties owned or leased
by them or any capital stock or interests in its subsidiaries or
(ii) any of its other material assets;
o not to make any loans, advances or capital contributions to, or
investments in, any other person other than loans, advances or
capital contributions to its subsidiaries and advances to tenants;
o not to pay, discharge or satisfy any claims, liabilities or
obligations, other than the payment, discharge or satisfaction, in
the ordinary course of business consistent with past practice or in
accordance with their terms, of liabilities reflected or reserved
against in, or contemplated by, its most recent consolidated
financial statements included in filings with the Securities and
Exchange Commission or incurred in the ordinary course of business
consistent with past practice;
o not to enter into any commitment which may result in total payments
or liability in excess of $100,000 except for (i) tenant
reimbursements and allowances and leases entered into in the
ordinary course of business consistent with past practice; (ii)
capital expenditures incurred in the ordinary course of business
consistent with past practice; (iii) pending listed commitments and
(iv) payment of fees and expenses in connection with obtaining
necessary consents;
o not to enter into any commitment with any officer, director,
trustee, consultant or affiliate;
o not to make any changes in its accounting methods or policies
except as required by law, the Securities and Exchange Commission
or generally accepted accounting principles;
o to maintain insurance in the amounts and against the risks as are
customary for these companies; or
o not to cause Montgomery CV Realty L.P. or Kramont Operating
Partnership, L.P. to own more than 10% of the voting interests in
any corporation at the effective time of the mergers.
Other Agreements
Prior to the effective time of the mergers, CV and Kranzco have also
agreed to:
o convene a meeting of their respective shareholders for the purpose
of obtaining approval of the merger agreement and the transactions
contemplated in the merger agreement;
o prepare and mail this joint proxy statement/prospectus to the
shareholders of CV and Kranzco;
o make all necessary filings, declarations, registrations and
notifications, and obtain all necessary consents and approvals and
otherwise use all reasonable efforts to do all things necessary to
consummate the mergers;
o notify the other party of all non-routine actions that each intends
to take in connection with any environmental laws and any
communication from any third party alleging that consent of the
party is required in connection with the merger agreement;
o afford the other party access to all files, correspondence, audits
and properties of the party, and permit each other to conduct
environmental inspections to the extent no inspection was
previously conducted for the particular property at issue;
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o consult with each other before issuing public statements regarding
the transactions contemplated by the merger agreement;
o not knowingly take any action or fail to take any action that would
jeopardize qualification of the mergers as tax-free reorganizations
for federal income tax purposes;
o make it the policy of the board of trustees of Kramont, subject to
the exercise of its duties under applicable law to pay quarterly
cash dividends of $0.325 per Kramont common share will be paid for
the first year following the effective time of the mergers (which,
if annualized, would equal $1.30 per Kramont common share); and
o have CV promptly obtain a $10,000,000 life insurance policy on
Louis P. Meshon, Sr. which it will keep in effect until the
effective time of the mergers and of which CV and Kranzco will each
be a beneficiary as to $5,000,000.
Listing of Shares
Kramont shall prepare and submit to the New York Stock Exchange a
listing application covering the Kramont common shares, Kramont Series B-1
preferred shares and Kramont Series D preferred shares issuable in the
mergers and the Kramont common shares issuable upon the exercise of options
issued by Kramont in connection with the mergers and any other shares of
Kramont issued in the mergers as may be required by the New York Stock
Exchange.
Employees
As of the effective time of the mergers, all employees of CV and
Kranzco, except those persons agreed upon by CV and Kranzco, will be
terminated by their employer and then offered a substantially similar
position with Kramont Operating Partnership, L.P., provided that these
employees waive any severance plans, arrangements or agreements that they
have with their employer. Any waiver by a Kranzco employee listed on the
schedules to the merger agreement will be void retroactive to the date of the
waiver if that employee's employment is terminated, other than for cause, by
Kramont Operating Partnership, L.P. within one year of the closing of the
mergers. If any employee does not waive his or her severance plans,
arrangements or agreements, then Kramont Operating Partnership, L.P. will not
offer that person employment. Except for persons who will have employment
agreements with Kramont or Kramont Operating Partnership, all offers of
employment will be on an at-will basis.
No Solicitation of Transactions
In the merger agreement, each of CV and Kranzco agree:
o that neither they nor any of their subsidiaries will directly or
indirectly initiate, solicit or encourage any inquires or the
making or implementation of any proposal or offer with respect to a
merger, acquisition, tender offer, exchange offer, consolidation or
similar transaction involving or any purchase of 10% or more of the
assets, or any equity securities of, the party or its subsidiaries
or engage in any negotiations concerning, or provide any
confidential information or data to, or have any discussions with,
any person relating to a proposal;
o to immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties previously
conducted with respect to any proposal; and
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o to notify the other party immediately if any inquiries or proposals
are received by, any information is requested from, or any
negotiations or discussions are sought to be initiated or continued
with the party;
The merger agreement does not prohibit either party from furnishing
information to, or entering into discussions or negotiations with, any
person or entity that makes an unsolicited proposal, if a majority of the
disinterested members of the board of directors of CV or board of trustees of
Kranzco determines in good faith after consultation with outside counsel that
the action is required for them to comply with their respective duties
imposed by law or their duties under its organizational documents and that
the person or entity making the proposal has the ability and financial
wherewithal to consummate a more favorable proposal than the transactions
contemplated by the merger agreement.
Notwithstanding the foregoing, each of CV and Kranzco may approve and
recommend a superior acquisition proposal and withdraw or modify its approval
or recommendation of the merger agreement and the mergers only (i) after
providing written notice to the other party advising them that the board has
received a proposal, specifying the material terms and conditions of the
proposal, and (ii) if the party so advised does not within five business days
after receipt of the notice make an offer which the board of the notifying
party determines in its good faith judgment (after consultation with its
independent financial advisor) to be as favorable to the party's common
shareholders as the superior acquisition proposal. As used in the merger
agreement, "superior acquisition proposal" means a bona fide acquisition
proposal made by a third party which a majority of the disinterested members
of the CV board of directors or Kranzco board of trustees determines in good
faith (after consultation with independent financial advisors) to be more
favorable to the shareholders of its company than the merger agreement and
which the board of trustees or board of directors intends to accept and
determines is reasonably capable of being completed.
Conditions to the Mergers
The respective obligations of CV, Kranzco and KRT Trust to effect the
mergers and the other transactions contemplated by the merger agreement are
subject to the satisfaction or waiver of each of the following conditions at
or prior to the closing date of the mergers:
o Each party will have performed in all material respects its
obligations required to be performed by it on or prior to the
closing of the mergers;
o The representations and warranties of each party that are qualified
as to material adverse effect to the business of CV or Kranzco,
shall be true and correct, and any of the representations and
warranties that are not so qualified shall be true and correct
except where the failure to be so true and correct would not have a
material adverse effect on the business of CV or Kranzco, as the
case may be, except to the extent that a representation or warranty
is expressly limited by its terms to another date;
o Holders of a majority of the outstanding common shares of CV and
holders of two-thirds of the outstanding common shares of Kranzco
will have approved the mergers and the transactions contemplated by
the merger agreement;
o No injunctions or restraints shall have been issued by any court of
competent jurisdiction preventing the consummation of the mergers
or any of the other transactions or agreements contemplated by the
merger agreement;
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o The registration statement of which this joint proxy
statement/prospectus forms a part shall have become effective, all
necessary state securities law permits or approvals will have been
obtained and no stop order will have been issued and no proceeding
for that purpose shall have been initiated or threatened by the
Securities and Exchange Commission;
o The New York Stock Exchange will have approved for listing the
Kramont common shares to be issued in the mergers, the Kramont
Series B-1 preferred shares and the Kramont Series D preferred
shares to be issued in the merger of KRT Trust into Kramont, and
the Kramont common shares issuable upon the exercise of any Kramont
stock options;
o All necessary consents and waivers shall have been received from
third parties in connection with the consummation of the mergers,
except where failure to receive such consents or waivers would not
have a material adverse effect on the business of Kranzco and CV;
o Nothing will have caused Kramont not to qualify as a real estate
investment trust;
o Receipt of a favorable opinion of Ballard Spahr Andrews &
Ingersoll, LLP to the effect that, among other things, the merger
agreement is enforceable under Maryland law;
o Receipt of a favorable opinion of Richards, Layton & Finger, P.A.
to the effect that, among other things, the merger agreement is
enforceable under Delaware law; and
o Some agreed upon consents of third parties will have been obtained.
The following additional conditions must be satisfied or waived before
the parties to the merger agreement are obligated to complete the merger:
o CV will have received a favorable opinion of its counsel to the
effect that the merger of CV into Kramont will qualify as a
reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended;
o Each of Kranzco and KRT Trust will have received a favorable
opinion of its counsel to the effect that the merger of KRT Trust
into Kramont will qualify as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended;
o CV will have received an opinion from counsel to Kranzco stating
that, commencing with its tax year ended December 31, 1992 Kranzco
qualified as a REIT under Section 856 of the Internal Revenue Code
of 1986, as amended;
o Kranzco will have received an opinion from counsel to CV stating
that, commencing with its tax year ended December 31, 1991, CV
qualified as a REIT under Section 856 of the Internal Revenue Code
of 1986, as amended;
o Each of CV and Kranzco will have received a "comfort letter" from
the other party's accountants with respect to the financial
statements of the other party in this joint proxy
statement/prospectus;
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o Since the date of the merger agreement, there will have been no
material adverse change in the business, financial condition or
results of operations of CV and its subsidiaries or Kranzco and its
subsidiaries;
o Louis P. Meshon. Sr. and Norman M. Kranzdorf will have executed
employment agreements with Kramont; and
o The board of trustees of Kramont will consist of Louis P. Meshon,
Sr., Norman M. Kranzdorf, H. Irwin Levy, Donald Shapiro, Bernard J.
Korman, Alan L. Shulman and Milton S. Schneider and if any of these
trustees are unable to serve, the CV board of directors or Kranzco
board of trustees (whichever designated the trustee) will designate
the successor to that trustee.
The following are additional conditions that must be satisfied before
Kranzco is obligated to complete the merger:
o Holders of at least 75% of the limited partner interests in
Montgomery CV Realty L.P. will have executed the unit contribution
agreement described in "Private Placement Offering of Kramont
Operating Partnership Units", given notice requiring redemption of
their partnership interest in Montgomery CV Realty L.P. or
exchanged their partnership interests in Montgomery CV Realty L.P.
or CV Partner Holdings, L.P. for an equal number of partnership
interests in Kramont Operating Partnership, L.P.;
o Louis P. Meshon, Sr., H. Irwin Levy and any entities controlled by
either of them will have executed the unit contribution agreement
described in "Private Placement Offering of KRT Operating
Partnership Units";
o All agreements by which people receive payments or benefits based
on funds from operations generated by CV, all management agreements
with respect to any properties owned or leased by CV or any of its
subsidiaries, and all employment agreements to which CV is a party
will be terminated; and
o Options to acquire CV shares do not result in the triggering of any
payment or acceleration of vesting under any CV options, except
those listed on the schedules to the merger agreement.
The following are conditions that must be satisfied or waived by CV
before CV is obligated to complete the merger:
o the Kranzco Reorganization is completed;
o the lease amendment with respect to Kranzco's executive offices is
executed; and
o Options to acquire Kranzco shares do not result in the triggering
of any payment or acceleration of vesting under any Kranzco
options, except those listed on the schedules to the merger
agreement.
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Termination
The merger agreement may be terminated at any time prior to the
effective time by the board of directors of CV or the board of trustees of
Kranzco under the following circumstances:
o by the mutual written consent of CV and Kranzco;
o the mergers shall not have been consummated by July 31, 2000,
provided that the terminating party shall not have materially
breached its obligations under the merger agreement in a manner
that proximately caused the mergers not to be consummated by that
date;
o the approval of the shareholders of CV or Kranzco will not have
been obtained at the meetings of the shareholders or at any
adjournment thereof;
o any governmental entity shall have issued a final and
non-appealable order, decree or injunction or taken any other final
action permanently restraining, enjoining or otherwise prohibiting
the transactions contemplated by the merger agreement;
o Louis P. Meshon, Sr. shall have died prior to the effective time of
the mergers; or
o the Kranzco Reorganization cannot be consummated by reason of any
change in laws, rules or regulations.
The merger agreement may be terminated at any time prior to the
effective time of the mergers whether before or after approval of the
shareholders under the following circumstances:
1. by CV, if the board of trustees of Kranzco withdraws, modifies or
changes in a manner adverse to CV its recommendation to Kranzco shareholders
of the merger agreement or the mergers, other than as a result of the
occurrence of an event that, in the good faith judgment of the board of
trustees of Kranzco has or is reasonably likely to have a material adverse
effect on CV's business, or if the board of trustees of Kranzco approves, or
recommends a superior acquisition proposal (which term is described under "-
No Solicitation of Transactions");
2. by CV, if in the exercise of its good faith judgment as to its
duties to its shareholders imposed by law the board of directors of CV
determines that the termination is required by reason of a superior
acquisition proposal, provided CV made all necessary termination payments
described under "- Termination Fees and Expenses";
3. by CV, if Kranzco shall have breached its obligations with respect
to proposals from third parties described under "-No Solicitation of
Transactions" or Kranzco or Norman M. Kranzdorf or Robert H. Dennis shall
have breached their obligations under any voting agreement described under
"The Mergers-Voting Agreements";
4. by CV, if there has been a breach by Kranzco of any representation
or warranty contained in the merger agreement which would have or would be
reasonably likely to have a material adverse effect on Kranzco's business,
which breach is not curable by July 31, 2000;
5. by CV, if Kranzco shall have materially breached any of its
covenants or agreements set forth in the merger agreement, which breach is
not curable or, if curable, is not cured within 30 days after written notice
of the breach is given by CV to Kranzco;
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6. by Kranzco, if the board of directors of CV withdraws, modifies or
changes in a manner adverse to Kranzco its recommendation to CV shareholders
of the merger agreement or the mergers, other than as a result of the
occurrence of an event that, in the good faith judgment of the board of
directors of CV has or is reasonably likely to have a material adverse effect
on Kranzco's business, or if the board of directors of CV approves, or
recommends a superior acquisition proposal (which term is described under "-
No Solicitation of Transactions");
7. by Kranzco, if in the exercise of its good faith judgment as to its
duties imposed by law, the board of trustees of Kranzco determines that the
termination is required by reason of a superior acquisition proposal,
provided Kranzco has made all necessary termination payments described under
"- Termination Fees and Expenses";
8 by Kranzco, if CV shall have breached its obligations with respect
to proposals from third parties described under "-No Solicitation of
Transactions" or CV or H. Irwin Levy, Louis P. Meshon, Sr., Alan L. Shulman
or the Claudia Morse Evans Family Trust shall have breached their obligations
under any voting agreements described under "The Mergers -Voting Agreements;"
9. by Kranzco, if there has been a breach by CV of any representation
or warranty contained in the merger agreement which would have or would be
reasonably likely to have a material adverse effect on CV's business, which
breach is not curable by July 31, 2000; or
10. by Kranzco, if CV shall have materially breached any of its
covenants or agreements set forth in the merger agreement, which breach is
not curable or, if curable, is not cured within 30 days after written notice
of the breach is given by Kranzco to CV.
Termination Fees and Expenses
In the event the merger agreement is terminated under the circumstances
described in paragraphs 1, 3 or 7 above, then Kranzco will be obligated to
pay CV (provided Kranzco was not entitled to terminate the merger agreement
pursuant to paragraphs 9 or 10 above) a break-up fee of up to $6 million plus
transaction expenses of CV of up to $1.5 million.
In the event the merger agreement is terminated under the circumstances
described in paragraphs 4 or 5 above, then Kranzco will be obligated to pay
CV (provided Kranzco was not entitled to terminate the merger agreement
pursuant to paragraphs 9 or 10 above) the transaction expenses of CV of up to
$1.5 million.
In the event the merger agreement is terminated under the circumstances
described in paragraphs 2, 6 or 8 above, then CV will be obligated to pay
Kranzco (provided CV was not entitled to terminate the merger agreement
pursuant to paragraphs 4 or 5 above) a break-up fee of up to $5 million plus
transaction expenses of Kranzco of up to $1.5 million.
In the event the merger agreement is terminated under the circumstances
described in paragraphs 9 or 10 above, then CV will be obligated to pay
Kranzco (provided CV was not entitled to terminate the merger agreement
pursuant to paragraphs 4 or 5 above) the transaction expenses of Kranzco of
up to $1.5 million.
In the event the merger agreement is terminated by either CV or Kranzco
because Louis P. Meshon, Sr. shall have died prior to the effective time of
the mergers, CV and Kranzco will each be entitled to receive $5 million under
the life insurance policy described under "-Other Agreements," and neither
party will be entitled to break-up fees or transaction expenses.
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Indemnification
From and after the effective time of the mergers, Kramont shall
exculpate and indemnify to the fullest extent permitted by the Maryland
General Corporation Law or Title 8 each person who is now or has been at any
time prior to the date of the merger agreement or who becomes prior to the
effective time of the mergers, an officer, trustee or director of CV, Kranzco
or any of their subsidiaries. The exculpation and indemnification shall
cover actions on or prior to the effective time of the mergers, including all
transactions contemplated by the merger agreement.
Amendment and Waiver
The merger agreement may be amended by the board of directors of CV and
the board of trustees of Kranzco at any time before or after approval of the
mergers by the shareholders of CV and Kranzco. After any shareholder
approval, no amendment may be made which by law requires the further approval
of shareholders without obtaining such further approval.
At any time prior to the effective time of the mergers, any party may,
to the extent legally allowed,
o extend the time for the performance of any of the obligations or
other acts of the other parties;
o waive any inaccuracies in the representations and warranties made
to the party contained in the merger agreement or in any related
document; and
o waive compliance with any of the agreements or conditions for the
benefit of the party contained in the merger agreement.
THE COMPANIES
CV Reit, Inc.
CV is a self-administered and self-managed equity REIT primarily in the
business of owning, managing, operating, leasing, acquiring, redeveloping and
upgrading neighborhood and community shopping centers. CV owns 22
properties, including two office buildings, aggregating approximately 2
million square feet of gross leasable area, which are principally
neighborhood and community shopping centers located in the Mid-Atlantic
region and Florida with a diverse base of approximately 400 tenants. CV is
organized as an UPREIT, or umbrella partnership REIT. In an UPREIT structure,
the REIT owns its properties through a limited partnership called the
operating partnership, in which the REIT is usually the general partner and
owns a substantial amount of the limited partner interests. The name of CV's
operating partnership is Montgomery CV Realty L.P. CV owns the general
partner interest and approximately 84.5% of the limited partner interests in
Montgomery CV Realty L.P. through CV's wholly owned subsidiary, Montgomery CV
Realty Trust.
The following table sets forth certain information regarding CV's real
properties, as of March 1, 2000. CV's operating partnership owns each of the
properties listed below. Except for Century Plaza and the Century Village
Administration Building, which CV originally built, each of the properties
was acquired by CV operating partnership on December 31, 1997, or during 1998
or 1999.
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<PAGE>
<TABLE>
<CAPTION>
Gross
Year of Leasable
Latest Square Occu- Principal Tenants
Year Renovation Ownership Area pancy (Lease Expiration/
Property Location Acquired or ExpansionInterest (Sq. Ft.) Rate Option Expiration)
- ---------------- -------- -------- --------------------- --------- ------ --------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Shopping Centers
- ----------------
Florida
Century Plaza Deerfield Beach 1982 1991 Fee 85,151 95.0% Broward County Library (2001/2004)
Pennsylvania
Chesterbrook
Village Center Wayne 1997 1995 Fee 122,316 96.9% Genuardi Markets (2010/2030)
Collegeville
Shopping Center Collegeville 1998 1994 Fee 110,518 100% Acme (2003/2038)
Chalfont Village
Shopping Center New Britain 1999 N/A Fee 46,051 85.3% Better Bodies (2005/2010)
Cherry Square
Shopping Center Northampton 1999 N/A Fee 75,005 100% Redners Supermarket (2016/2021)
County Line Plaza Souderton 1997 1998 Fee 175,023 100.0% Ames (2002/2017)
Clemens Markets (2007/2027)
Danville Plaza Danville 1997 1987 Fee 24,052 96.4% CVS Pharmacy (2007/2027)
Gilbertsville
Shopping Center Gilbertsville 1998 N/A Fee 85,748 97.7% Weis Markets (2004/2019)
New Holland Plaza New Holland 1998 N/A Fee 65,730 85.7% Weis Markets (2000/2015)
Mount Carmel Glenside 1997 N/A Fee 14,504 90.3% CVS Pharmacy (2002)
Plaza
North Penn
Marketplace Upper Gwynedd 1998 N/A Fee 57,898 100.0% Eckerd Drugs (2003/2018)
Dickson City
Center Dickson City 1997 1990 Fee 47,224 100.0% Office Max (2006/2016)
Village at
Newtown Newtown 1998 N/A Fee 177,032 96.2% Genuardi Markets (2008/2018)
Whitemarsh
Shopping Center Conshohocken 1997 1996 Fee 67,546 100.0% Clemens Markets (2017/2027)
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Woodbourne
Square Langhorne 1997 N/A Fee 29,976 93.6% Rehab Place at Oxford Valley (2000)
555 Scott
Street Center Wilkes-Barre 1997 N/A Fee 8,400 100.0% Pet Supplies Plus (2000/2005)
New Jersey
Marlton Shopping
Center-Phase II Evesham 1998 N/A Fee 155,587 93.0% Burlington Coat Factory (2006/2030)
T.J. Maxx (2001/2011)
Lakewood Plaza
Shopping Center Lakewood 1999 N/A Fee 202,499 99.7% Shop Rite Supermarkets (2010/2030)
Marlton Shopping
Center-Phase I Evesham 1998 N/A Fee 146,542 97.2% Super Fresh Markets (2007/2047)
Rio Grande Plaza Rio Grande 1997 1997 Fee 138,747 100.0% JC Penney (2012/2042)
Peebles (2012/2022)
Sears (2006/2026)
Office Buildings
- ----------------
Florida
Century Village
Administration
Building W. Palm Beach N/A 1995 Fee 25,100 100.0% First Choice Health Care
Services (2000/2025)
Pennsylvania
Plymouth Plaza Plymouth
Meeting 1997 1994 Fee 30,026 97.5% Drexel Realty, Inc. (2004)
--------- -----
Totals 1,890,675 97.2%
========= =====
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</TABLE>
<PAGE>
<TABLE>
<CAPTION>
The following table sets forth certain information regarding the expiration of leases at CV's properties as of
December 31, 1999.
Percent of
Annualized Base Annualized Base
Leased GLA Percent of GLA Rent Revenue Under Rent Revenue
No. of Leases Expiring Represented by Expiring Leases as of Represented by
Year Expirations Expiring (in Sq. Ft) Expiring Leases 12/31/99 Expiring Leases
- ---------------- ------------- ----------- --------------- --------------------- ----------------
<S> <C> <C> <C> <C> <C>
2000 61 196,032 10.37% $2,096,877 10.48%
2001 70 195,711 10.35% $2,622,668 13.11%
2002 55 230,529 12.19% $1,992,120 9.95%
2003 51 182,960 9.68% $2,011,570 10.05%
2004 51 187,385 9.91% $2,256,248 11.28%
2005 26 109,691 5.80% $2,014,474 10.07%
2006 24 163,246 8.63% $1,742,258 8.71%
2007 13 180,903 9.57% $1,661,273 8.30%
2008 6 58,426 3.09% $824,064 4.12%
2009 4 24,325 1.29% $240,631 1.20%
Thereafter 16 311,752 16.49% $2,546,193 12.73%
Vacant 0 49,715 2.63% $0 0.00%
--- --------- ------- ----------- -------
TOTALS 377 1,890,675 100.00% $20,008,376 100.00%
=== ========= ======= =========== =======
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<PAGE>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Kranzco Realty Trust
Kranzco Realty Trust is a self-administered and self-managed equity real estate investment trust (a "REIT") engaged in the
business of owning, managing, operating, leasing, acquiring and expanding neighborhood and community shopping centers and, to a
lesser extent, free-standing retail properties. Kranzco owns and operates 62 neighborhood and community shopping centers and free-
standing properties, aggregating approximately 9 million square feet of gross leasable area located primarily in the Northeast, Mid-
Atlantic and Southern regions of the United States with a diverse base of approximately 825 tenants.
The following table sets forth certain information regarding Kranzco's shopping center properties, as of March 1, 2000.
Year Gross
of Latest Ownership Leasable Occupancy Principal Tenants
Year Renovation or Interest/ Area Rate (Lease Expiration/
Property Location Acquired Expansion (expiration) (Sq. Ft.) (1) Option Expiration)
- -------- -------- -------- --------- ------------ --------- ------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Connecticut
Groton Square Groton 1992 1999 Fee 194,015 100.00% Stop & Shop (2007/2027),
Stop & Shop (2007/2025)(1)
Manchester Kmart Manchester 1994 1998 Fee 183,376 100.00% Kmart (2002/2022),
Plaza Stop & Shop (2018/2058),
Pep Boys (2016/2036)
Milford Milford 1992 N/A Leasehold (2020) 25,200 100.00% Xpect Discount Drug (2004/2009)
Orange Orange 1992 N/A Leasehold (2006) 27,000 0%
Parkway Plaza I Hamden 1992 N/A Fee 72,530 93.55% Pathmark (2007/2037) (1)
Parkway Plaza II Hamden 1992 N/A Fee 131,100 53.72% Kids R Us (2006/2026),
Pathmark (2005/2035) (1)
Stratford Square Stratford 1992 N/A Fee 160,176 86.45% Pathmark (2009/2039) (1),
Marshalls (2005/2010)
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<PAGE>
Florida
Village Oaks Pensacola 1998 N/A Fee 171,653 100.00% Wal Mart (2008/2038),(2003/2018)
Haverty Furniture Company
Georgia
Bainbridge Town Bainbridge 1997 N/A Fee 143,729 98.89% Kmart (2015/2065),
Center Food Lion (2010/2030)
Douglasville Douglasville 1998 N/A Fee 267,800 97.11% Wal Mart (2010/2040) (1),
Crossing Cub Foods Inc. (2010/2035),
Rhodes Furniture (2000/2010)
Holcomb Bridge Roswell 1997 N/A Fee 105,420 97.56% Cub Foods Inc. (2008/2033),
Georgetown Interiors (2003/2008)
Northpark Macon 1997 1998 Fee 195,355 97.93% Kroger (2008/2028),
Kmart (2013/2063)
Park Plaza Douglasville 1998 N/A Fee 46,495 86.34% Kroger (not owned by the Company)
Snellville Oaks Snellville 1998 N/A Fee 220,885 94.86% Wal Mart (2011/2041),
Georgia State Theatres (2015/2025),
Food Lion Inc. (2011/2031)
Summerville Summerville 1998 N/A Fee 67,809 100.00% Wal Mart (2004/2034)
Tifton Corners Tifton 1998 N/A Fee 186,629 97.86% Wal Mart (2011/2041),
Bruno's (2010/2025)
Tower Plaza Carrollton 1997 N/A Fee 87,990 92.69% Bruno's (2007/2027)
Vidalia Vidalia 1998 N/A Fee 93,696 100.00% Wal Mart (2005/2035)
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<PAGE>
Village at
Mableton Mableton 1997 1998 Fee 239,474 95.18% Kmart (2014/2064),
Cub Foods (2009/2029),
CVS (2004/2019)(1)
Kentucky
Harrodsburg Harrodsburg 1997 N/A Fee 60,048 94.00% Kroger (2007/2027)
Marketplace
Maryland
Anneslie Baltimore 1993 N/A Fee 135,744 96.34%
Campus Village College Park 1995 N/A Fee 25,529 93.48%
Coral Hills Coral Hills 1995 N/A Fee 86,050 90.27% Shoppers Food Warehouse (2004/2029)
Fox Run Prince 1994 1997 Fee 293,492 98.32% Kmart (2016/2066),
Frederick Giant Foods (2021/2051),
Peebles (2012/2032)
Hillcrest Plaza Frederick 1995 N/A Fee 109,526 53.90%
Michigan
Builder's Square Flint 1997 N/A Fee 80,000 100.00% Kmart (2006/2026) (1)
Musicland Livonia 1997 N/A Fee 80,000 100.00% Media Play (2007/2027)
Mississippi
Brookway Brookhaven 1997 N/A Fee 47,587 29.84%
Village
Towne Square Columbus 1997 N/A Fee 116,358 45.10% Jitney Jungle (2003/2003)
New Jersey
Collegetown Glassboro 1992 1995 Fee 250,234 96.41% Kmart (2001/2021),
Acme (2004/2044)
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<PAGE>
Hillcrest Mall Phillipsburg 1992 1985 Fee 220,985 63.73% Staples (2010/2025),
Warren Hospital (2008/2018),
Consolidated Stores Inc. (2004/2019)
Suburban Plaza Hamilton 1994 1999 Fee 244,718 98.61% Bradlees Stores, Inc. (2013/2033),
Shop Rite (2002/2017)
New York
A & P Mamaroneck 1992 N/A Fee 24,978 100.00% A & P (2006/2016)
Mamaroneck
The Mall at Yonkers 1992 1997 Fee 262,256 98.12% National Wholesale Liquidators
Cross County (2012/2032), T.J. Maxx (2004/2014), The
Sports Authority (2010/2025), Circuit
City (2018/2038)
Highridge Yonkers 1992 N/A Fee 88,501 100.00% Pathmark (2003/2027)
North Ridge New Rochelle 1992 N/A Fee 42,198 97.47% Harmon Cosmetics (2007/2017),
NRHMC (2011/2016)
Port Washington Port 1992 N/A Leasehold (2067) 19,600 100.00% North Shore Farms (2003/2033)
Washington
Village Square Larchmont 1992 1998 Fee 17,028 94.71% Trader Joe's (2009/2024)
North Carolina
Cary Plaza Cary 1997 N/A Fee 60,702 95.39% Food Lion (2010/2030)
Magnolia Plaza Morganton 1997 1997 Fee 104,539 72.85% Ingles Supermarket (2007/2062)
Ohio
Pickaway Circleville 1998 1999 Fee 127,130 100.00% Wal Mart (2009/2039)
Crossing
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<PAGE>
Pennsylvania
69th Street
Plaza Upper Darby 1994 1994 Fee 42,500 100.00% Drug Emporium (2003/2006)
Barn Plaza Doylestown 1992 1998 Fee 210,782 95.68% Acme (2007/2037),
Marshalls (2004/2019),
Regal Cinemas, Inc. (2018/2026)
Bensalem Square Bensalem 1992 1983 Fee 72,558 100.00% Pathmark (2009/2039)
Bethlehem Square Bethlehem 1992 1994 Fee 386,820 100.00% Bradlees (2007/2025),
TJ Maxx (2006/2021),
Home Depot (2010/2040),
Shop Rite (2010/2030)
Bradford Mall Bradford 1992 N/A Fee (2) 287,975 98.96% Kmart (2004/2049),
Consolidated Stores Inc. (2002/2012),
Ames (2008/2026)
Bristol Commerce Bristol 1992 1993 Fee 273,119 97.92% Superfresh (2008/2038),
Ames (2020/2029)
Franklin Center Chambersburg 1997 N/A Fee 174,892 94.11% Food Lion (2010/2030),
Big Lots (2001/2011),
Lowe's (2010/2018) (1)
MacArthur Road Whitehall 1993 N/A Fee 50,856 100.00% Oak Works (2007/2017),
Frank's Nursery (2002/2032)
Park Hills Plaza Altoona 1992 1996 Fee 279,858 97.15% Weis Market (2022/2037),
Dunham's Sporting Goods (2005/2015),
Toys R Us (2015/2035),
Staples (2010/2019),
Superpetz (2005/2015)
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<PAGE>
Pilgrim Gardens Drexel Hill 1992 N/A Fee 83,358 100.00% Loehmann's (2003/2013),
QVC Network, Inc. (2000/2000)
Street Road Bensalem 1993 1995 Fee 68,031 100.00% Drug Emporium (2002/2008),
Frank's Nursery (2007/2022)
Valley Fair Tredyffrin 1993 1999 Fee 112,336 40.36%
Valley Forge Phoenixville 1992 N/A Fee 177,379 87.11% Eckerd Drug (2000/2010),
Mall Ames (2017/2025)
French Creek Outfitters, Inc.
(2005/2020)
Whitehall Whitehall 1992 N/A Fee 298,023 93.25% Stop & Shop (2006/2024)(1),
Square Phar Mor (2001/2016),
Today's Man (2002/2007),
The Sports Authority (2006/2036),
Kids R Us (2007/2027)
Rhode Island
Wampanoag East 1992 N/A Fee 242,162 82.49% Rx Drug (2001/2016),
Plaza Providence Cherry&Webb (2005/2005),
Marshalls (2006/2006),
Savers/TVI, Inc.(2010/2025)
South Carolina
East Main Centre Spartanburg 1997 N/A Fee 171,595 100.00% Wal Mart (2009/2039),
Goody's (2001/2007)
Park Centre Columbia 1997 N/A Fee 190,705 100.00% Wal Mart (2009/2039),
Harris Teeter (2012/2027)
Tennessee
Meeting Square Jefferson
City 1998 N/A Fee 92,968 100.00% Wal Mart (2009/2039) (1),
Food Lion (2009/2039)
Virginia
Culpeper Town Culpeper 1995 1999 Fee 132,881 89.51% Central Tractor (2005/2010),
Mall Schewel Furniture (2001/2006),
Food Lion (2017/2039)
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<PAGE>
Marumsco- Woodbridge 1995 N/A Fee 329,305 68.51% Giant Food Store (2004/2024),
Jefferson Plz. Peebles (2004/2010),
Consolidated Stores Inc.
(2002/2012)
Statler Crossing Staunton 1998 N/A Fee 166,944 97.12% Wal Mart (2009/2039) (1),
Rack 'N Sack (2013/2028)
---------- -------
Total 8,962,582 91.27%
========= =======
_________________
Footnotes:
(1) Includes space for which rent is being paid but which is not presently occupied, which represents approximately 816,000 square
feet.
(2) 84,692 square feet gross leasable area is subject to a ground lease which expires in 2004.
</TABLE>
<TABLE>
<CAPTION>
The following table sets forth certain information regarding the expiration of leases at Kranzco's properties
as of December 31, 1999.
Percent of
Annualized Base Annualized Base
Leased GLA Percent of GLA Rent Revenue Under Rent Revenue
No. of Leases Expiring Represented by Expiring Leases as of Represented by
Year of Expiration Expiring (in Sq. Ft.) Expiring Leases 12/31/99 Expiring Leases
- ------------------ ------------- ------------ --------------- --------------------- ---------------
<S> <C> <C> <C> <C> <C>
2000 190 557,708 6.22% $5,324,182 8.65%
2001 127 590,096 6.58% $5,188,765 8.43%
2002 134 604,473 6.74% $5,235,699 8.50%
2003 101 455,671 5.09% $4,307,297 7.00%
2004 92 816,863 9.12% $5,831,061 9.47%
2005 31 414,234 4.62% $2,593,930 4.21%
Thereafter 164 4,775,162 53.28% $33,085,961 53.74%
Vacant 0 748,375 8.35% $0 0.00%
--- --------- ------- ----------- -------
TOTALS 839 8,962,582 100.00% $61,566,895 100.00%
=== ========= ======= ----------- -------
</TABLE>
KRT Trust
KRT Trust is a Maryland real estate investment trust and a wholly-owned
subsidiary of Kranzco and was recently created solely to effect the Kranzco
Reorganization and the combination of the businesses of CV and Kranzco. KRT
Trust will not conduct any business operations.
Kramont Realty Trust
CV and Kranzco caused Kramont to be formed solely for the purpose of
effecting the mergers of CV and KRT Trust into Kramont. Kramont has had no
other business operations as of the date of this joint proxy
statement/prospectus. After the mergers of CV and KRT Trust into Kramont,
the current shareholders of CV
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<PAGE>
and Kranzco will become shareholders of Kramont, and Kramont will, through an
operating partnership, directly or indirectly own real estate assets
currently owned by CV and Kranzco. If the mergers were completed as of the
date of this joint proxy statement/prospectus, Kramont would have 84
properties totaling approximately 11 million square feet of gross leasable
area in 16 states. Kramont intends to qualify as a real estate investment
trust.
MANAGEMENT OF KRAMONT FOLLOWING THE MERGERS
Trustees and Executive Officers
The executive officers and trustees of Kramont and their ages and
positions held by them will be as set forth in the following table:
Trustee
Name Age Position Term Expires
---- --- -------- -----------
Louis P. Meshon, Sr. 59 President, Chief Executive 2002
Officer and Trustee
Norman M. Kranzdorf 69 Chairman of the Board 2001
of Trustees
George S. Demuth 43 Executive Vice President
and Chief Operating Officer
Etta Strehle 44 Treasurer
Bernard J. Korman 68 Trustee 2001
H. Irwin Levy 73 Trustee 2003
Milton S. Schneider 50 Trustee 2002
E. Donald Shapiro 68 Trustee 2003
Alan L. Shulman 67 Trustee 2002
Louis P. Meshon, Sr., 59, has been a director and the Chief Executive
Officer of CV since December 1997. Mr. Meshon was the President of Drexel
Realty, Inc. and of Montgomery Development Company, a shopping center
developer and manager, from 1974, when he co-founded the company, until 1997.
In December 1997, companies directly or indirectly owned or controlled by Mr.
Meshon and engaged in the development, management and ownership of community
based shopping centers and an office building in the aggregate totaling
approximately 590,000 square feet consummated a transaction in which CV
acquired ownership of those properties through its subsidiary, Montgomery CV
Realty L.P. and Mr. Meshon assumed the positions of director, President and
Chief Executive Officer of CV. Mr. Meshon is a member of NAREIT, the
International Council of Shopping Centers, and the Real Estate Advisory Board
of the Wharton School of the University of Pennsylvania.
Norman M. Kranzdorf, 69, a co-founder of Kranzco, has been a trustee and
the President and Chief Executive Officer of Kranzco since its organization
in June 1992. Mr. Kranzdorf was the President of Kranzco Realty, Inc., a
general commercial real estate management and brokerage company, from 1979,
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<PAGE>
when he founded Kranzco Realty, Inc., to 1992. He served as President of
Amterre Development Inc. from 1972 to 1981. Amterre, the successor to Food
Fair Properties, Inc., owned and operated over 50 shopping centers, as well
as other single-tenant retail properties, on the Eastern seaboard. Mr.
Kranzdorf was also an officer and director of Kranzco Management Inc., a
general commercial real estate manager and brokerage company and a wholly-
owned subsidiary of Kranzco Realty, from 1980, when it was founded, to 1992.
He is a former member of the Board of Governors of NAREIT and a former
trustee of the ICSC.
George S. Demuth, 43, has been Director of Leasing at Kranzco since
1997. From 1995 to 1997, Mr. Demuth was the Director of Real Estate at Kimco
Realty Corporation. From 1994 to 1995, Mr. Demuth was managing director of
LRA Realty Advisors, Inc. Mr. Demuth has been engaged in the shopping center
industry since 1981, holding both executive and officer positions in leasing,
acquisition, management and redevelopment capacities. Mr. Demuth has been
associated with Dusco Property Management, Cadillac Fairview Corporation and
the Kravco Companies. From 1978 to 1981, Mr. Demuth was engaged in the
appraisal, development, acquisition and disposition of commercial real estate
for the Penn Central Corporation, the Southland Corporation and the Beal
Companies. Mr. Demuth has been active in the International Council of
Shopping Centers and the Urban Land Institute.
Etta Strehle, 44, has been Chief Financial Officer of Montgomery CV
Realty Trust, a subsidiary of CV, since February 1999, and was previously the
Controller of Drexel Realty, Inc., in which CV owns a 95% economic interest
from December 1997 until February 1999. Prior to joining CV in 1997, Ms.
Strehle was employed by Drexel Realty, Inc., then doing business as
Montgomery Development Company, for 5 years, principally as Controller.
Previously thereto, she was employed by Kravco Company for 16 years, holding
various supervisory positions including property controller.
Bernard J. Korman, 68, has been a trustee of Kranzco since May 1997.
Mr. Korman is Chairman of Philadelphia Health Care Trust, a non-profit
organization, and NutraMax Products, Inc. (NASDAQ), a consumer healthcare
products company. Mr. Korman served as President and Chief Executive Officer
of MEDIQ Incorporated (healthcare services) (AMEX) from 1981 to 1995 and as
Chairman of PCI Services, Inc. from 1992 to 1996. Mr. Korman currently is a
director of The Pep Boys, Inc. (auto supplies) (NYSE), The New America High
Income Fund, Inc. (financial services) (NYSE), Omega Healthcare Investors,
Inc. (a healthcare REIT) (NYSE) and Omega Worldwide, Inc. (real estate
company) (NASDAQ).
H. Irwin Levy, 73, became a director and Chairman of the Board of CV in
December 1997. Mr. Levy is Chairman of the Board, Chief Executive Officer
and a majority stockholder of Hilcoast Development Corp., which is
principally engaged in the ownership and management of recreation facilities
at active adult condominium communities in southern Florida. Since 1995, he
has also served as a director of nStor Technologies, Inc. (a manufacturer of
information storage and storage area network solutions) (AMEX). Mr. Levy was
Chairman of the Board and Chief Executive Officer of CV from 1985 to July
1992. He is of counsel to the West Palm Beach law firm of Levy Kneen Mariani
Curtin Kornfeld and del Russo, which provides legal services to CV.
Milton S. Schneider, 50, became a director of CV in December 1997.
Since January 1995 Mr. Schneider has been Chief Executive Officer of The
Glenville Group, Inc., headquartered in Plymouth Meeting, Pennsylvania, which
is involved in the development, ownership and management of commercial and
residential properties. Since June 1995 Mr. Schneider also has been Chairman
of Togar Property Company, an apartment development company located in
Malvern, Pennsylvania. In addition, since June 1994 Mr. Schneider has been
Vice Chairman of Parkland Management Company, a financial services company,
and since October 1994 Vice Chairman of Horvitz Newspapers, Inc.
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<PAGE>
E. Donald Shapiro, 68, has been a trustee of Kranzco since June 1994.
Mr. Shapiro is The Joseph Solomon Distinguished Professor of Law at New York
Law School since 1983. Mr. Shapiro also serves as a director of each of the
following entities: Loral Space and Communications (formerly Loral
Corporation) (satellite communications) (NYSE) since 1973; GHI (health care
provider) (not for profit) since 1974; Vasomedical, Inc. (medical products)
(NASDAQ) since 1992; United Industrial Corporation (defense industry) (NYSE)
since 1996; and Frequency Electronics (space and communication components)
(AMEX) since 1998.
Alan L. Shulman, 67, has been a director of CV since 1985 and served as
Chairman of the Board from August 1992 until May 1996. Mr. Shulman is a
private investor and was previously a general partner of Unitel Associates,
Ltd., a Florida limited partnership engaged in the ownership and operation of
Holiday Inn motel properties, for more than twenty years until its
dissolution in 1987. From December 1997 Mr. Shulman has served as a director
of Engle Homes (real estate development) (NASDAQ). A company controlled by
Mr. Shulman leased, operated and managed a Days Inn Motel in West Palm Beach,
Florida, which was owned by the Company until sold in May 1998.
Kramont intends to hire or designate a chief financial officer.
Trustee Compensation
It is expected that Kramont will pay to each non-employee trustee (i) an
annual fee of $18,000, payable in cash, (ii) a fee of $1,000, payable in
cash, for each board meeting at which the trustee is present and (iii) a fee
of $500, payable in cash, for each board committee meeting at which the
trustee is present. In addition, Kramont will issue annually to each non-
employee trustee options to purchase 5,000 Kramont common shares.
Board Committees
Following the mergers, Kramont's board of trustees will establish an
audit committee in accordance with applicable New York Stock Exchange
requirements. The Kramont board of trustees will select the members of any
committees following completion of the mergers. No determination is expected
to be made by Kramont's board of trustees regarding the formation of any
other committees until after the completion of the mergers.
Executive Compensation
The following table sets forth some information with respect to the
compensation that will be paid by Kramont to the Chief Executive Officer and
each of the other executive officers of Kramont whose salary and bonus are
expected to exceed $100,000 on an annualized basis for the fiscal year ended
December 31, 2000 and all executive officers as a group.
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<PAGE>
Summary Compensation Table
Annual
Name Principal Position Compensation
- ---- ------------------ -------------
($)
Louis P. Meshon, Sr. President and CEO 325,000
George S. Demuth Executive Vice President and COO 150,000
Etta Strehle Treasurer 137,500
All executive officers as a group 612,500
(consisting of the three persons named above)
Employment Agreements
Kramont will enter into employment agreements with Messrs. Louis P.
Meshon, Sr. and Norman M. Kranzdorf, pursuant to which Mr. Meshon will serve
as the President and Chief Executive Officer of Kramont and Mr. Kranzdorf
will serve as Chairman of the board of trustees. It is expected that Kramont
will also enter into one year employment agreements with George S. Demuth,
Etta Strehle and nine other employees see "- Other Employment Agreements."
Kramont may enter into employment agreements with other employees from time
to time.
Louis P. Meshon, Sr. Employment Agreement
Kramont's employment agreement with Louis P. Meshon, Sr. has a term of
five years and shall continue for successive one year periods unless
otherwise terminated as provided in the employment agreement or unless
Kramont or Mr. Meshon gives notice to the other at least 90 days prior to the
end of the term of his employment. The employment agreement provides for
annual compensation of $325,000. The board of trustees of Kramont may, in
their sole discretion, increase Mr. Meshon's base salary or other
compensation. All officers, executives and employees of Kramont will report
to Mr. Meshon and Mr. Meshon will have to power to hire and/or terminate
officers, executives and employees of Kramont. Mr. Meshon's employment
agreement requires that he devote substantially all of his time to his duties
on behalf of Kramont.
Mr. Meshon will receive a performance bonus determined by Kramont and
Kramont's independent auditor to be paid within 100 days after the end of
each calendar year. The performance bonus is calculated as follows:
Funds from Operations Per Share(1) Bonus ($)
- ---------------------------------- ---------
< $1.30 0
$1.30 to $1.49 $200,000 - $10,000 for each cent < $1.50
$1.50 to $1.60 $200,000
$1.61 to $1.80 $200,000 + $10,000 for each cent > $1.60
> $1.80 $400,000 + $5,000 for each cent > $1.80
(1) Funds from operations has been redefined as of January 1, 2000.
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<PAGE>
The employment agreement further provides that Kramont will sell to Mr.
Meshon 75,000 restricted shares for a price equal to their fair market value
evidenced by a full recourse promissory note that matures after 5 years. The
note, any security interest created by the note and Mr. Meshon's obligations
under the note, will terminate on the earlier to occur of: (i) its full
satisfaction, (ii) its fifth anniversary (if Mr. Meshon is still employed by
Kramont) or (iii) the termination of Mr. Meshon's employment following a
change of control, termination of the employment of Mr. Meshon without cause
or by Mr. Meshon for good reason or because of Mr. Meshon's death or
disability. Kramont will pay to Mr. Meshon an amount equal to any taxes
payable by him, on a full gross-up basis, at the time his obligations under
the note terminates.
One-fifth of the restricted shares will vest on each anniversary of the
effective time of the mergers so long as Mr. Meshon is still employed by
Kramont. The restricted shares will fully vest: (i) on a termination of Mr.
Meshon's employment following a change of control, (ii) upon Mr. Meshon's
death or disability, (iii) if Mr. Meshon terminates his employment for good
reason or (iv) if Mr. Meshon's employment is terminated without cause. If
Mr. Meshon's employment is terminated for cause or if he terminates his
employment without good reason, Kramont is obligated to buy from Mr. Meshon,
and Mr. Meshon will be obligated to sell, any unvested restricted shares for
the lesser of: (i) the fair market value of the common shares on the date Mr.
Meshon's employment terminates and (ii) the price evidenced by Mr. Meshon's
promissory note.
In the event that Mr. Meshon is fired for "cause," Kramont shall pay Mr.
Meshon's salary through the date that he is fired.
In the event Mr. Meshon dies or is unable to perform his customary
duties for a period of ninety consecutive days or one hundred twenty days in
the aggregate in any twelve month period due to a disability, Mr. Meshon or
his estate shall receive his salary for twelve months after his death or
disability. Upon disability, during the same twelve month period, Mr. Meshon
shall continue to receive benefits, perquisites and health coverage.
The employment agreement provides that if Mr. Meshon terminates his
employment for "good reason," (including a change of control) Kramont shall
pay him a severance benefit in four equal quarterly payments beginning at the
end of the calendar quarter when the termination occurs, in an amount equal
to the greater of (A) the sum of all compensation due to Mr. Meshon during
the balance of his term of employment, assuming that annual bonuses payable
to him during this period equal the average of the annual bonuses paid to him
under the employment agreement prior to the end of his employment, or (B)
199% of his annual salary and bonuses for the year prior to his termination
for "good reason." Kramont will also continue all medical, dental and life
insurance coverages that were in effect when Mr. Meshon terminated his
employment for "good reason" for a period ending the sooner of three years or
the date upon which Mr. Meshon obtains new employment which provides him with
this coverage. In no event, however, shall any of the foregoing payments be
made by Kramont upon Mr. Meshon terminating his employment for "good reason"
to the extent such payments will constitute an "excess parachute payment"
within the meaning of Section 280G of the Internal Revenue Code of 1986, as
amended (without regard to Section 280G(b)(4) of the Code).
The employment agreement will supersede Mr. Meshon's current employment
agreement with CV on the completion of the mergers, and also contains
provisions relating to non-competition and indemnification.
Norman M. Kranzdorf Employment Agreement
Kramont's employment agreement with Norman M. Kranzdorf has a term of
five years. The employment agreement provides for annual compensation of
$350,000 for the first three years and $175,000 for the last two years of the
term of his employment. The board of trustees of Kramont may, in their sole
discretion, increase Mr.
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<PAGE>
Kranzdorf's salary or other forms of compensation. Mr. Kranzdorf will have
duties that are not inconsistent with his status as Chairman of the board,
as are assigned to him by the Kramont board of trustees. He is not required
to devote all of his time to his duties as Chairman, but only such time as is
necessary to carry out his responsibilities under his employment agreement.
In the event that Mr. Kranzdorf is fired for "proper cause," Kramont
shall pay Mr. Kranzdorf's salary through the date that he is fired. In the
event Mr. Kranzdorf dies during the term of his employment, Kramont shall pay
Mr. Kranzdorf's estate his annual salary for the remainder of his five year
term of employment and to the extent not inconsistent with any plan under
which shares are granted, all options and restricted stock awards granted to
Mr. Kranzdorf shall vest and be immediately exercisable. In the event Mr.
Kranzdorf is unable to perform his customary duties for a period of ninety
consecutive days or one hundred twenty days in the aggregate in any twelve
month period due to a disability, Mr. Kranzdorf shall receive his salary and
will continue to receive health, dental and life insurance for the remaining
term of his employment.
The employment agreement provides that if Mr. Kranzdorf terminates his
employment for "good reason," (except as a result of a change of control)
Kramont shall pay him a lump sum severance payment equal to his salary during
the remainder of his employment term and any accrued and unpaid bonuses
within 15 days of termination. If the termination for "good reason" is
because of a change of control of Kramont, Mr. Kranzdorf will receive a
severance payment of $1,040,000 if the termination is prior to the end of the
third year of his employment or $520,000 if it is after the third year of his
employment and Kramont will also pay taxes payable by Mr. Kranzdorf under
section 4999 of the Internal Revenue Code of 1986, as amended with respect to
any "excess parachute payment" within the meaning of the Internal Revenue
Code, plus all federal, state and local income taxes payable by him under
section 4999 of the Internal Revenue Code. Upon any termination by Mr.
Kranzdorf for "good reason," Mr. Kranzdorf will receive any accrued but
unpaid bonuses or awards and to the extent not inconsistent with any plan
under which shares are granted, all options and restricted stock awards shall
vest and be immediately exercisable.
The employment agreement also contains provisions relating to non-
competition and indemnification. Currently Mr. Kranzdorf is party to a
severance agreement with Kranzco, but is not a party to an employment
agreement with Kranzco.
Other Employment Agreements
Kramont will enter into one-year employment agreements with George S.
Demuth and Etta Strehle and nine other employees. The base annual
compensation of George S. Demuth will be $150,000 and of Etta Strehle will be
$137,500. The nine employment agreements will also provide for severance
payments in the event of a change in control.
The employment agreements will supersede any existing agreements.
CERTAIN TRANSACTIONS
Norman M. Kranzdorf
Kranzco currently leases, and after the mergers Kramont will lease from
Norman Kranzdorf a three-story building containing approximately 20,000 gross
square feet located at 128 Fayette Street, Conshohocken, Pennsylvania. The
lease expires on January 15, 2004 and provides that Kranzco (Kramont after
the mergers) will pay rent of $153,720 per annum. The lease also provides
that Kranzco (Kramont after the mergers) will pay all
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real estate taxes, utilities, repairs and other costs and expenses in
connection with the use and occupancy of the building. The lease will be
amended at the effective time of the mergers to provide for termination
rights for both parties to the lease in the event Mr. Kranzdorf enters into
an agreement to sell the building and to provide for rights of assignment and
subleasing to Kramont upon the terms described in the amendment.
H. Irwin Levy/Hilcoast
During December 1981 and January 1982, CV sold each of its recreation
facilities at the Century Villages in West Palm Beach, Deerfield Beach and
Boca Raton in separate transactions to different purchasers, including
Mr. Levy, for sales prices based upon independent appraisals. CV sold the
recreation facilities at Boca Raton to Mr. Levy for $18 million, subject to a
lease to a corporation currently owned by Mr. Levy. (The annual net rental
to Mr. Levy on that lease is $2,162,000.) At closing, Mr. Levy issued a 30-
year non-recourse promissory note to CV in the principal amount of
$12,535,000 which bears interest at 13.25% per annum and is not prepayable.
At December 31, 1999, the outstanding balance on this note was approximately
$10.3 million. During 1999, CV recognized approximately $1.7 million in
interest income on this note.
Since 1990, companies owned by Mr. Levy and/or members of his family
have leased, managed and operated the recreation facilities at the Century
Villages in West Palm Beach, Deerfield Beach and Boca Raton, Florida which
are collateral for certain notes held by CV with an outstanding balance of
approximately $38.6 million (including the $10.3 million discussed above) at
December 31, 1999. During 1999, Montgomery CV Realty L.P. leased
approximately 2,500 square feet of office space to those companies on a
month-to-month basis for approximately $4,766 per month, plus an allocation
of expenses.
Mr. Levy is Chairman of the Board, chief executive officer and a
majority stockholder of Hilcoast Development Corp. which, as of December 31,
1999, owed approximately $24.7 million to CV, consisting of an 11% mortgage
note collateralized by first mortgages on the recreation facilities at the
Century Village at Pembroke Pines, Florida active adult condominium project.
That note requires equal monthly payments of principal and interest
aggregating approximately $2.9 million per annum through 2023 and may not be
prepaid by Hilcoast without a prepayment penalty. During 1999, CV recognized
$2.7 million in interest income from Hilcoast on that note.
Effective July 31, 1992, CV and Hilcoast entered into a consulting and
advisory agreement under which Hilcoast provides certain investment advisory,
consulting and administrative services to CV, excluding matters related to
Hilcoast's loans from CV. The agreement provides for the payment of $10,000
per month to Hilcoast, plus reimbursement for reasonable out-of-pocket
expenses. The agreement may be terminated by Hilcoast upon 180 days notice
and by CV upon 30 days notice. During 1999, CV paid $104,000 under this
agreement, plus expense reimbursement. Following the mergers, this agreement
will be continued for 6 months at a reduced fee of $5,000 per month.
Louis P. Meshon, Sr.
Louis P. Meshon, Sr. and Patricia Meshon, in the aggregate, own 99% of
the voting stock (a 5% equity interest) in Drexel Realty, Inc., the
management company in which Montgomery CV Realty L.P. owns 1% of the voting
stock and 100% of the non-voting stock (a 95% equity interest). In 1999,
Drexel Realty did not make any payments to Mr. Meshon. Montgomery CV Realty
L.P. leases space to Drexel Realty, Inc. in the Plymouth Plaza office
building pursuant to a lease expiring in 2004. In 1999, Drexel Realty, Inc.
paid Montgomery CV Realty L.P. $236,257 for rent and additional charges in
connection with that lease.
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In addition, Drexel Realty, Inc. manages the following third-party owned
properties in which Louis P. Meshon, Sr. has the following partnership
interests:
Percentage of Meshon
Properties Partnership Interest
---------- --------------------
Renaissance Plaza 20.75%
Montgomery A.C., Inc. (owns 1% general partner
interest in Renaissance Plaza) 50.00%
Laurel Mall (indirect ownership through MTGY
Associates) (Louis P. Meshon, Sr. owns 100%
of the corporate general partner of Laurel Mall) 29.00%
Lane Plaza Associates (holds a cash-flow mortgage
on Weis Plaza, which is a third-party managed
property) (Louis P. Meshon, Sr. is general
partner of Lane Plaza Associates) 25.00%
In 1999, the owners of these properties paid Drexel Realty, Inc. $302,596 for
these management services and leasing commissions.
OPERATING, ACQUISITION, FINANCING AND
GENERAL INVESTMENT STRATEGIES OF KRAMONT
Operating Strategies
Kramont's primary business objective will be to achieve growth in its
funds from operations by enhancing the operating performance of its
properties and, in appropriate cases, through the selective acquisitions of
properties. Kramont's operating strategies will be to:
o principally focus on the neighborhood and community shopping center
business;
o actively manage its properties for long-term growth in funds from
operations and, in appropriate cases, capital appreciation;
o increase portfolio occupancy by capitalizing on its management's
reputation and relationships with national and regional tenants;
o maintain, renovate, expand and redevelop its properties;
o refine and balance the tenant mix; and
o benefit from economies of scale by spreading overhead expenses over
a larger number of assets.
Acquisition Strategies
Kramont intends to make acquisitions in appropriate cases in a manner
consistent with the federal tax requirements applicable to REITs and related
regulations. Kramont will seek to utilize its UPREIT structure to
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acquire interests in properties in exchange for units of limited partner
interest in Kramont Operating Partnership, L.P.
Financing Strategies
Kramont expects to finance any future acquisitions with the most
appropriate sources of capital, as determined by its board of trustees, which
may include limited partner units in Kramont Operating Partnership, L.P.,
available cash from operations, the issuance of other equity securities, and
the issuance of debt securities. Future borrowings by Kramont for
acquisitions may be either on a secured or unsecured basis.
Kramont will not have a policy limiting the number or amount of
mortgages that may be placed on any particular property, but mortgage
financing instruments will usually limit additional indebtedness on specific
properties. Following the mergers, there will be no restrictions on the
amount of debt that Kramont may incur.
General Investment Strategies
Kramont intends to make acquisitions in a manner consistent with the
requirements of the federal tax law applicable to REITs and related
regulations with respect to the composition of Kramont's portfolio and the
derivation of its income. Since Kramont will be an UPREIT, potential
transferors of property to Kramont may be able to transfer the property on a
tax-deferred basis. See "The Mergers-Material Federal Income Tax
Consequences." Kramont has the authority to offer its shares of beneficial
interest or other securities in exchange for property and to repurchase or
otherwise reacquire shares or any other securities.
Upon completion of the mergers, Kramont will have outstanding more than
one series of preferred shares and anticipates that its balance sheet will
reflect indebtedness for borrowed money. Kramont may acquire securities of
other REITs or other issuers or purchase or otherwise acquire its own shares.
However, Kramont does not anticipate investing in issuers of securities,
other than REITs, for the purpose of exercising control or underwriting
securities of other issuers or acquiring any investments primarily for sale
in the ordinary course of business or to hold any investments with a view to
making short-term profits from their sale. In any event, Kramont does not
intend that its investments in securities will require Kramont to register as
an "investment company" under the Investment Company Act of 1940, and Kramont
will divest securities before any such registration would be required.
Although Kramont may make loans to other entities or persons, it has no plans
to do so. In the future, the board of trustees will consider any transaction
involving loans to other entities or persons on a case by case basis.
The Declaration of Trust of Kramont permits the board of trustees,
without the approval of shareholders, to alter Kramont's operating,
acquisition, financing and investment strategies if they determine in the
future that such a change is in the best interests of Kramont and its
shareholders.
PRINCIPAL SHAREHOLDERS OF KRAMONT
The following table sets forth information regarding the beneficial
ownership of Kramont common shares by each person anticipated by Kramont to
be the beneficial owner of more than 5% of the Kramont common shares, by each
trustee of Kramont, by each executive officer of Kramont and by all trustees
and executive officers of Kramont as a group after giving effect to the
mergers. Each person named in the table has sole voting and investment power
with respect to all Kramont common shares shown as beneficially owned by such
person.
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Name and Address After Merger Percent
of Beneficial Owner Amount Beneficially Owned(1) Owned(2)
- ------------------- -------------------------- --------
Louis P. Meshon, Sr.(3) 835,539 (4) 4.3%
George S. Demuth(5) 12,786 (6) *
Etta M. Strehle(3) 8,100 (7) *
Norman M. Kranzdorf(5) 655,033 (8) 3.4%
Bernard J. Korman
Graduate Health System, Inc.
22nd and Chestnut Streets
Philadelphia, PA 19103 17,386 (9) *
E. Donald Shapiro
1 Princeton Terrace
Short Hills, NJ 07078 34,271 (10) *
H. Irwin Levy(11) 825,946 (12) 4.4%
Alan L. Shulman(11) 35,680 (13) *
Milton S. Schneider(3) 95,957 (14) *
Trustees and Executives
as a group 2,520,698 12.53%
* Indicates beneficial ownership of less than 1.0%.
(1) Several of the trustees and officers of Kramont will own units of
limited partnership interest in Kramont Operating Partnership, L.P.,
which units may at the holder's election be redeemed at any time at a
price payable in cash equal to the fair market value of an equal number
of Kramont common shares or, at Kramont's option, for Kramont common
shares on a one-to-one basis (as adjusted).
(2) Calculated based on approximately 18,753,165 Kramont common shares
beneficially owned and outstanding upon completion of the mergers.
(3) The address for this individual is 580 W. Germantown Pike, Suite 200,
Plymouth Meeting, PA 19462.
(4) Includes options to purchase 60,000 common shares originally granted
under the Montgomery CV Trust Executive Officer Stock Option Plan (with
an exercise price of $13.69 per share). Includes option to purchase
25,000 Kramont common shares to be issued pursuant to the 2000 Incentive
Plan of Kramont. Includes 674,249 partnership units expected to be held
in Kramont Operating Partnership, L.P. The partnership units include
89,909 partnership units jointly owned with Mr. Meshon's wife and 2,714
partnership units owned by companies controlled by Mr. Meshon. Also
includes 75,000 shares to be issued to Mr. Meshon upon completion of the
mergers.
(5) The address for this individual is 128 Fayette Street, Conshohocken, PA
19428.
(6) Includes options to purchase 7,500 common shares originally granted to
him under Kranzco's 1995 Incentive Plan (with exercise prices of $19.06
per share). Includes option to purchase 3,000 Kramont common shares to
be issued pursuant to the 2000 Incentive Plan of Kramont.
(7) Includes option to purchase 4,000 common shares originally granted under
the Drexel Realty, Inc. 1997 Stock Option Plan (with an exercise price
of $13.69 per share). Includes options to purchase 3,500 Kramont common
shares to be issued pursuant to the 2000 Incentive Plan of Kramont.
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(8) Includes (a) 14,956 shares to be owned directly by Mr. Kranzdorf's wife,
(b) 36,000 shares to be owned by Mrs. Kranzdorf as trustee for the
benefit of Michael Kranzdorf and Betty Kranzdorf, (c) options to
purchase 381,800 shares originally granted to him under Kranzco's 1992
Trustee Share Option Plan (with exercise prices ranging from $19.25 to
$20.00 per share), (d) options to purchase 21,250 shares originally
granted to Mrs. Kranzdorf under Kranzco's 1992 Employee Share Option
Plan (with exercise prices ranging from $16.25 to $20.00 per share) and
(e) options to purchase 25,000 Kramont common shares to be issued
pursuant to the 2000 Incentive Plan of Kramont. All options originally
granted under either Kranzco's 1992 Employee Share Option Plan or the
1992 Trustee Share Option Plan are exercisable immediately.
(9) Includes (a) options to purchase 9,000 common shares originally granted
to him under Kranzco's 1995 Incentive Plan (with exercise prices ranging
from $8.88 to $19.19 per share) and (b) 3,900 common shares to be owned
solely by his spouse.
(10) Includes (a) options to purchase 3,000 common shares originally granted
to him under Kranzco's 1992 Trustee Share Option Plan (with an exercise
price of $21.50) and (b) options to purchase 12,000 common shares
originally granted to him under Kranzco's 1995 Incentive Plan (with
exercise prices ranging from $8.88 to $19.19 per share), and (c) 10,000
shares to be owned directly by his spouse.
(11) The address for this individual is 100 Century Boulevard, West Palm
Beach, FL 33147.
(12) Includes 102,292 shares to be owned by a corporation controlled by Mr.
Levy. Includes 78,149 partnership units expected to be held in Kramont
Operating Partnership, L.P. Excludes 175,000 shares to be owned by Mr.
Levy's wife. Mr. Levy disclaims beneficial ownership of the excluded
shares.
(13) Includes options to purchase 15,000 common shares originally granted
under the CV Reit, Inc. Non-Employee Director 1998 Stock Option Plan
(with exercise prices ranging from $8.9375 to $14.50 per share).
(14) Includes options to purchase 15,000 common shares originally granted
under the CV Reit, Inc. Non-Employee Director 1998 Stock Option Plan
(with exercise prices ranging from $8.9375 to $14.50 per share).
Includes 20,957 partnership units expected to be held in Kramont
Operating Partnership, L.P. Excludes 34,013 partnership units to be
owned by Mr. Schneider's wife. Mr. Schneider disclaims beneficial
ownership of the excluded partnership units.
COMPARISON OF RIGHTS OF SHAREHOLDERS
Comparison of Rights of Holders of CV Common Shares and Holders of Kramont
Common Shares
General
CV is organized as a corporation under the laws of the State of
Delaware, and Kramont is organized as a real estate investment trust under
Title 8 (a Maryland REIT). As a Delaware corporation, CV is subject to the
General Corporation Law of the State of Delaware (the "DGCL"), which is a
general corporation statute dealing with a wide variety of matters, including
election, tenure, duties and liabilities of directors; dividends and other
distributions; meetings of stockholders; and extraordinary actions, such as
amendments to the certificate of incorporation, mergers, sales of all or
substantially all of the assets and dissolution. The rights of CV
shareholders are governed by the DGCL, the CV Certificate of Incorporation,
the CV Bylaws and Delaware law generally.
As a Maryland REIT, Kramont is governed by Title 8 and certain other
provisions of the Annotated Code of Maryland. Title 8 covers some of the
same matters covered by the DGCL, including liabilities of the trust,
shareholders, trustees and officers; amendments of the Declaration of Trust;
and mergers of a Maryland REIT with other entities. There are, however, many
matters that are addressed in the DGCL that are not addressed by Title 8, and
it is a general practice for a Maryland REIT such as Kramont to address a
number of these matters through
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provisions in its declaration of trust or bylaws. The rights of holders of
Kramont common and preferred shares are governed by Title 8, the Kramont
Declaration of Trust and the Kramont Bylaws and Maryland law generally. Both
the Kramont Declaration of Trust and the Kramont Bylaws will be amended and
restated in connection with the mergers. The Declaration of Trust to be
adopted by Kramont at the effective time of the mergers is annexed hereto as
Appendix D. All references to the Kramont Declaration of Trust and to the
Kramont Bylaws in the discussion of the comparative rights of holders of CV
common shares and Kramont common shares as set forth below are to the
Declaration of Trust and Bylaws as amended and restated in connection with
the mergers.
If the mergers are completed, Kramont common shares received by the CV
common shareholders will be subject to the rights of Kramont preferred
shareholders. See "Risk Factors."
The following is a summary of the comparative rights of holders of CV
common shares and holders of Kramont common shares and may not contain all
the information that is important to you. To better understand the
comparative rights summarized below, please refer to the DGCL and Title 8 and
also to the CV Certificate of Incorporation and the CV Bylaws and the Kramont
Declaration of Trust and the Kramont Bylaws.
Liability of Shareholders
Holders of CV common shares have no personal liability as shareholders,
except with respect to wrongfully paid dividends and wrongfully paid
distributions upon dissolution in some circumstances. Both Title 8 and
Kramont's Declaration of Trust provide that no shareholder of Kramont will be
personally liable for any obligation of Kramont solely by reason of being a
shareholder. Kramont's Bylaws further provide that Kramont shall indemnify
each shareholder against any claim or liability to which the shareholder may
become subject by reason of his being or having been a shareholder and that
Kramont will reimburse each shareholder for all legal and other expenses
reasonably incurred by him in connection with any such claim or liability.
In addition, it is Kramont's policy to include a clause in its contracts
which provides that shareholders assume no personal liability for obligations
entered into on behalf of Kramont. However, with respect to tort claims,
contractual claims where shareholder liability is not so negated, claims for
taxes and certain statutory and other liabilities, a shareholder may, in some
jurisdictions, be personally liable to the extent that such claims are not
satisfied by Kramont. In addition, Kramont expects to carry public liability
insurance which it considers adequate. The risk of any personal liability to
shareholders is thus limited to situations in which Kramont's assets plus its
available insurance coverage would be insufficient to satisfy the claims
against Kramont and its shareholders.
Voting Rights
Each CV common share entitles the holder thereof to one vote on all
matters submitted to a vote of CV common shareholders, including the election
of directors. The amendment, alteration, change or repeal of any of the
provisions of Article 6 of the CV Certificate of Incorporation (relating to
limitation for liability for directors and indemnification of officers and
directors) must be approved by the affirmative vote of the holders of at
least 80% of the outstanding CV common shares entitled to vote in elections
of directors, except such amendment that is submitted to the CV common
shareholders for adoption with the unanimous recommendation of the CV board.
No other action to be taken by CV requires approval by the affirmative vote
of the holders of greater than a majority of the outstanding CV common
shares, except for actions that require super-majority or unanimous
shareholder approval under the DGCL.
Each Kramont common share entitles the holder thereof to one vote on all
matters submitted to a vote of Kramont common shareholders, including the
election of trustees. The following actions must be approved by the
affirmative vote of the holders of at least two-thirds of the outstanding
Kramont common shares: certain amendments to the Kramont Declaration of
Trust or removal of trustees from the Kramont board. No other action
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to be taken by Kramont requires approval by the affirmative vote of the
holders of greater than a majority of the outstanding Kramont common shares.
All proposed amendments to the Kramont Declaration of Trust must first be
declared advisable by a majority vote of the Kramont Board of Trustees.
Dividends and Other Distributions
CV shareholders are entitled to distributions if, as and when authorized
by the CV board. CV currently pays a regular quarterly cash distribution of
$0.29 per CV common share (which, if annualized, would equal $1.16 per CV
common share). However, future distributions are at the discretion of the CV
board, provided, however, that until December 31, 2002, any reduction of the
regular quarterly cash distribution below $0.29 per CV common share must be
approved by the affirmative vote of at least three- quarters of the entire
board of directors, unless it resulted from a material default in certain
outstanding debt obligations payable to CV and, if such a reduction occurs in
any quarter that is not a result of a material default in such debt
obligations, the base salary, deferred compensation and bonus of CV's chief
executive officer and chief financial officer must be reduced by fifty
percent for that quarter and for each subsequent quarter until a dividend of
at least $0.29 per CV common share is declared and paid for four consecutive
quarters. Additionally, until December 31, 2002, for any proposed
acquisition of real property to be approved, CV's board of directors must
determine by a majority vote that it does not believe that the acquisition
would adversely affect or cause a decrease in CV's regular quarterly cash
distribution below $0.29 per CV common share. Dividends may only be paid out
of the surplus of CV or, if there is no surplus, out of net profits for the
year in which the dividend is declared and/or the preceding fiscal year.
Holders of Kramont common shares are entitled to distributions if, as
and when declared by the Kramont board. It is expected that Kramont will
initially pay a regular quarterly cash distribution of $0.325 per Kramont
common share (which, if annualized, would equal $1.30 per Kramont common
share). However, future distributions will be at the discretion of the
Kramont board. Under Title 8 and the Kramont Declaration of Trust, there are
no limits on the assets from which payment of dividends or other
distributions on the Kramont common shares may be paid similar to the limits
in the DGCL.
Restrictions on Transfer
The CV Certificate of Incorporation restricts the transferability of CV
common shares as provided in the CV Bylaws. The CV Bylaws authorize the CV
board to take such actions as are necessary and desirable to preserve its
qualification as a REIT.
The Kramont Declaration of Trust restricts the transferability of
Kramont common shares and Kramont preferred shares. To ensure that Kramont
will not fail to qualify as a REIT under various tests set forth under the
Code, the Kramont Declaration of Trust, subject to certain exceptions, limits
any person (other than (i) David Hillman with respect to the Kramont Series
A-1 preferred shares, (ii) Leonard Mandor, Robert Mandor and certain of their
affiliates with respect to the Kramont Series B-1 preferred shares and
(iii) other persons approved by the Kramont board, in its discretion, with
respect to Kramont common shares and Kramont preferred shares, provided that
such approval will not result in the termination of Kramont's status as a
REIT) to direct or indirect ownership of 9.8% of the lesser of the number or
value of the outstanding Kramont common shares or Kramont Series B-1
preferred shares, 75% of the lesser of the number or value of the outstanding
Series A-1 preferred shares or 10% of the lesser of the number or value of
the outstanding Kramont Series D preferred shares. The Declaration of
Trust also authorizes the Kramont board to take such actions as are necessary
and desirable to preserve its qualification as a REIT. The ownership limits
may delay, defer or prevent a transaction or a change in control of Kramont
that might involve a premium price for the Kramont common shares or the
Kramont preferred shares or otherwise be in the best interest of the
shareholders of Kramont. See "Description of Kramont Shares -- Restrictions
on Transfer."
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Amendment of Bylaws
The CV Bylaws may be amended by the CV board or by the CV common
shareholders. The Kramont Bylaws may be amended only by the Kramont board
and not by the Kramont common shareholders or Kramont preferred shareholders.
Appraisal Rights
Under the DGCL, CV shareholders are entitled to appraisal rights in
connection with certain mergers involving CV. Under Title 8, holders of
Kramont Series A-1 preferred shares are entitled to appraisal rights in
connection with certain mergers of Kramont into another entity and certain
other transactions. Because the Kramont common shares, the Kramont Series
B-1 preferred shares and the Kramont Series D preferred shares will be listed
on a national securities exchange, holders of these shares will have no
appraisal rights. See "The Mergers- Appraisal Rights."
CV Board and Kramont Board
The business and affairs of CV are managed under the direction of a
seven-member board of directors. The business and affairs of Kramont will be
managed under the direction of a seven-member board of trustees.
The CV Certificate of Incorporation and the CV Bylaws provide that the
number of directors of CV will be fixed by the CV board, from time to time
(but in no case shall the number be less than seven or more than twelve).
Vacancies and newly created directorships resulting from any increase in the
authorized number of directors may be filled by a majority of the directors
then in office (although such majority is less than a quorum) or by the
shareholders. The CV board is divided into three classes, as nearly equal in
number as possible, with the term of one class expiring at each annual
meeting of shareholders. At each annual meeting, the class of directors
whose term expires at that meeting will be elected for a term of three years
and the directors in the other two classes will continue in office.
The Kramont Declaration of Trust provides that the number of trustees of
Kramont shall be seven, which number may be increased or decreased pursuant
to the Kramont Bylaws. The Kramont Bylaws provide that the number of
trustees shall be seven, which number may be increased or decreased by the
affirmative vote of at least two-thirds of the whole board of trustees. Any
vacancy for any cause other than an increase in the number of trustees will
be filled, at any regular meeting or at any special meeting of the trustees
called for that purpose, by a majority of the remaining trustees, although
such majority is less than a quorum. Any vacancy created by an increase in
the number of trustees will be filled by a majority vote of the entire
Kramont board. The Kramont board is divided into three classes, as nearly
equal in number as possible, with the term of one class expiring at each
annual meeting of shareholders. At each annual meeting, the class of
trustees whose term expires at that meeting will be elected for a term of
three years and the trustees in the other two classes will continue in
office.
Kramont believes the classification of the Kramont board will help to
assure the continuity and stability of Kramont's business strategies and
policies as determined by the Kramont board.
The classified board provision could, however, have the effect of making
the replacement of incumbent trustees more time-consuming and difficult. At
least two annual meetings of shareholders, instead of one, will generally be
required to effect a change in a majority of the trustees on the Kramont
board. Thus, the classified board could increase the likelihood that
incumbent trustees will retain their positions. The staggered terms of
trustees might have the effect of delaying, deferring or preventing a change
in control of Kramont or other
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transaction which might involve a premium price for Kramont common shares or
the Kramont preferred shares or otherwise be in the best interest of its
shareholders.
Special Meetings
Under the DGCL, a special meeting of the CV shareholders may only be
called by the CV board or anyone authorized in the CV Certificate of
Incorporation or the CV Bylaws. Under the CV Bylaws, a special meeting of CV
common shareholders may be called by the CV board, the chairman or the
president and must be called by the CV board, the chairman, the president or
the secretary at the written request of holders of at least 40% of the
outstanding common shares of CV. Under the Kramont Bylaws, a special meeting
of holders of Kramont common shares may be called by the president or the
Kramont board and must be called upon the written request of the holders of
Kramont common shares entitled to cast not less than a majority of all the
votes entitled to be cast at a meeting.
Advance Notice for Shareholder Nominations for Trustee and Proposals of
New Business
CV common shareholders are not required to provide advance notice to
nominate a director or to propose new business at CV's annual meeting of
shareholders.
In order to nominate a trustee or to propose new business at an annual
meeting of shareholders, a Kramont shareholder entitled to vote at the
meeting must give written notice not less than 90 days nor more than 120 days
prior to the first anniversary of the date of mailing of notice for the
preceding year's annual meeting. In the case of a special meeting, similar
notice must be given not less than 90 days nor more than 120 days prior to
the date of the special meeting.
Action by Written Consent
Any action required or permitted to be taken at an annual meeting or
special meeting of CV shareholders may be taken without a meeting if a
written consent to the action is signed by holders of outstanding shares of
stock having not less than the minimum number of votes required to authorize
or take the action at a meeting at which all shares entitled to vote thereon
were present and voted.
Any action required or permitted to be taken at an annual or special
meeting of Kramont shareholders may be taken without a meeting only if a
written consent to the action is signed by holders of all of the outstanding
shares entitled to vote on the action and any other shareholder entitled to
notice of a meeting of shareholders (but not to vote thereat) has waived in
writing any right to dissent from such action.
Amendment of CV Certificate of Incorporation and Kramont Declaration of
Trust
An amendment to the CV Certificate of Incorporation must be approved by
holders of a majority of the outstanding shares entitled to vote on the
amendment; provided, however, that the amendment, alteration, change or
repeal of any of the provisions of Article 6 of the CV Certificate of
Incorporation dealing with the limitation of liability of directors and the
indemnification of directors and officers must be approved by the affirmative
vote of the holders of at least 80% of the outstanding CV common shares
entitled to vote on the matter, except an amendment that is submitted to the
CV common shareholders for adoption with the unanimous recommendation of the
CV board. The trustees of the Kramont board, by a two-thirds vote, may at
any time amend the Declaration of Trust of Kramont to enable Kramont to
maintain its qualification as a REIT, without the approval of the
shareholders. In addition, the trustees, without any action by the
shareholders, may amend the Declaration of Trust from time to time to
increase or decrease the aggregate number of shares or the number of shares
of any
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class or series that Kramont has authority to issue. Other amendments
require the affirmative vote of the holders of a majority of the outstanding
Kramont shares entitled to vote except that amendments to the provisions of
the Kramont Declaration of Trust relating to the classification of the board,
the removal of trustees, amendments by shareholders and mergers require the
affirmative vote of the holders of two-thirds of the outstanding Kramont
shares entitled to vote thereon.
Dissolution of CV and Termination of Kramont and REIT Status
CV may be dissolved if (i) the CV board, by resolution adopted by a
majority of the directors of the CV board at any meeting called for that
purpose, deems such dissolution advisable and (ii) the holders of a majority
of the outstanding CV common shares vote for the proposed dissolution at a
shareholders meeting called for the purpose of acting upon such resolution.
Dissolution of CV may also be authorized without action by the CV board if
all shareholders entitled to vote on the dissolution consent in writing.
Kramont may be dissolved by the affirmative vote of the holders of a
majority of the outstanding Kramont common shares at a meeting of
shareholders called for that purpose. The Kramont board may terminate the
status of Kramont as a REIT at any time.
Upon any liquidation, dissolution or winding-up of the affairs of
Kramont, before any distribution may be made to the holders of any junior
shares, including the Kramont common shares, and subject to the payment or
provision or reserve for payment of the debts and liabilities and the
preferences of senior shares, if any:
o the holders of Kramont Series A-1 preferred shares shall be
entitled to receive, out of the assets of Kramont legally available
for payment of distributions, liquidating distributions in cash in
the amount of $1,000 for each Series A-1 preferred share plus an
amount equal to all accrued and unpaid distributions to the date of
such liquidation, dissolution or winding-up;
o the holders of Kramont Series B-1 preferred shares shall be
entitled to receive, out of the assets of Kramont legally available
for payment of distributions, liquidating distributions in cash or
property (or a combination thereof) in the amount of the Series B-1
liquidation preference of $25.00 for each Kramont Series B-1
preferred share plus an amount equal to all accrued and unpaid
distributions to the date of such liquidation, dissolution or
winding-up; and
o the holders of Kramont Series D preferred shares shall be entitled
to receive, out of the assets of Kramont legally available for
payment of distributions, liquidating distributions in cash or
property (or a combination thereof) in the amount of the Series D
liquidation preference of $25.00 for each Kramont Series D
preferred share plus an amount equal to all accrued and unpaid
distributions to the date of such liquidation, dissolution or
winding-up.
After payment of the full amount of the liquidating distributions to
which they are entitled, the holders of Kramont preferred shares shall have
no right or claim to any of the remaining assets of Kramont and will not be
entitled to any other distribution.
Upon any liquidation, dissolution or winding-up of the affairs of
Kramont, holders of Kramont common shares will be entitled to share ratably
in the assets of Kramont remaining after provision for payment of liabilities
to creditors and any senior securities, including, without limitation, the
Kramont preferred shares.
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Limitation of Liability of Directors and Officers
As permitted by the DGCL, the liability of the directors of CV to CV or
to any CV shareholder for monetary damages for breach of fiduciary duty as a
director has been eliminated except for (a) any breach of the director's duty
of loyalty to CV or the CV shareholders, (b) acts or omissions not in good
faith or which involve intentional misconduct or knowing violation of law,
(c) unlawful dividends or redemptions or purchases of stock, or (d) any
transaction from which the director derived an improper personal benefit.
As permitted by Title 8, the liability of trustees and officers of
Kramont to Kramont or to any shareholder of Kramont for money damages has
been eliminated except for (a) actual receipt of an improper personal benefit
in money, property or services and (b) active and deliberate dishonesty
established by a final judgment and which is material to the cause of action.
Indemnification of Directors and Officers
CV is required to indemnify, to the fullest extent permitted by the
DGCL, any and all persons that it shall have the power to indemnify under the
DGCL. The DGCL currently permits CV to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement, actually and reasonably incurred by him in connection
with such action, suit or proceeding if the individual acted in good faith
and in a manner he reasonably believed to be in or not opposed to the
corporation's best interests and, with respect to a criminal proceeding, had
no reasonable cause to believe his conduct was unlawful. However, the DGCL
does not permit CV to indemnify any person for judgments, fines or amounts
paid in settlement in a suit by or in the right of CV. The CV Certificate of
Incorporation provides that the rights to indemnification provided thereby
are non-exclusive.
Kramont is required, to the maximum extent permitted by Maryland law in
effect from time to time, to indemnify (a) any trustee, officer or
shareholder, or former trustee, officer or shareholder, against reasonable
expenses incurred by him in the successful defense (on the merits or
otherwise) of any proceeding to which he is made a party by reason of service
in such capacity, (b) any trustee or officer or any former trustee or officer
against any claim or liability to which he may become subject by reason of
such status unless it is established that (i) the act or omission giving rise
to the claim was material to the matter giving rise to the proceeding and was
committed in bad faith or was the result of active and deliberate dishonesty,
(ii) he actually received an improper personal benefit in money, property or
services or (iii) in the case of a criminal proceeding, he had reasonable
cause to believe that his act or omission was unlawful and (c) each
shareholder or former shareholder against any claim or liability to which he
may become subject by reason of such status. Maryland law permits
indemnification for settlements (but not judgments in) suits by or in the
right of the trust. Kramont is also required by its Bylaws to pay or
reimburse, in advance of a final disposition, reasonable expenses of a
trustee, officer or shareholder or former trustee, officer or shareholder
made a party to a proceeding by reason of his status as such, provided that,
in the case of a trustee or officer, Kramont shall have received a written
affirmation by the trustee or officer of his good faith belief that he has
met the applicable standard for indemnification and a written undertaking to
repay such expenses if it is ultimately determined that the applicable
standard was not met.
The DGCL, Title 8, the CV Certificate of Incorporation, the CV Bylaws,
the Kramont Declaration of Trust and the Kramont Bylaws may permit
indemnification for liabilities arising under the Securities Act or the
Exchange Act. The CV board and the Kramont board have been advised that, in
the opinion of the Commission,
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indemnification for liabilities arising under the Securities Act or the
Exchange Act is contrary to public policy and is therefore unenforceable,
absent a decision to the contrary by a court of appropriate jurisdiction.
Business Combinations
Under the DGCL, certain business combinations (including certain
mergers, consolidations, asset transfers and certain issuances or
reclassifications of securities) between a Delaware corporation and any
person who owns 15% percent or more of the outstanding voting stock of the
corporation (an Interested Stockholder) or certain affiliates of the
Interested Stockholder are prohibited for three years after the time that the
Interested Stockholder became an Interested Stockholder. This provision of
the DGCL does not apply, however, to certain business combinations, including
without limitation, any business combination or transaction resulting in an
Interested Stockholder becoming an Interested Stockholder if the combination
or transaction was approved by the board of directors of the corporation
prior to the time the Interested Stockholder became an Interested
Stockholder.
Under the Maryland General Corporation Law, as applicable to Maryland
REITs, certain business combinations (including certain mergers,
consolidations, share exchanges, asset transfers and issuances or
reclassifications of equity securities) between a Maryland REIT and (a) any
person who beneficially owns 10% or more of the voting power of the trust's
shares or an affiliate or associate of the trust who, at any time within the
two-year period before the date in question, was the beneficial owner of 10%
or more of the voting power of the then outstanding voting shares of
beneficial interest of the trust (each, an Interested Shareholder) or (b) an
affiliate of the Interested Shareholder is prohibited for five years after
the most recent date on which the Interested Shareholder becomes an
Interested Shareholder. Thereafter, any such business combination must be
recommended by the board of trustees of such trust and approved by the
affirmative vote of at least (i) 80% of the votes entitled to be cast by
holders of outstanding voting shares of the trust and (ii) two-thirds of the
votes entitled to be cast by holders of outstanding voting shares other than
shares held by the Interested Shareholder with whom the business combination
is to be effected or its affiliate, unless, among other things, the trust's
common shareholders receive a minimum price (as defined in the statute) for
their shares and the consideration is received in cash or in the same form as
previously paid by the Interested Shareholder for his shares.
These provisions of Maryland law do not apply if, prior to the most
recent time at which a person would otherwise have become an Interested
Shareholder, the board of trustees approves the transaction which otherwise
would have resulted in the person becoming an Interested Shareholder. In
addition, these provisions do not apply to business combinations that have
been approved or otherwise exempted, specifically or generally, by resolution
of the board of trustees prior to the time that the Interested Shareholder
first became an Interested Shareholder.
The Kramont board has exempted from the Maryland statute any business
combination with (i) CV, (ii) Kranzco, (iii) KRT Trust and (iv) any affiliate
or associate of CV, Kranzco or KRT Trust (provided that such combinations are
entered into as a result of, or result from, the mergers).
The business combination statute could have the effect of delaying,
deferring or preventing offers to acquire Kramont and of increasing the
difficulty of consummating any such offer.
Removal of Directors and Trustees
A director of CV may be removed only for cause by the holders of a
majority of the CV common shares. A trustee of Kramont may be removed only
for cause by the affirmative vote of holders of not less than two-thirds of
the Kramont common shares outstanding and entitled to vote in the election of
trustees. Where a trustee has been elected by the holders of the Kramont
Series B-1 preferred shares, such trustee may not be removed except by the
vote of the holders of a majority of the outstanding Kramont Series B-1
preferred shares, voting together
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as a separate class, at a meeting called for such purpose. Where a trustee
has been elected by the holders of the Kramont Series D preferred shares,
such trustee may not be removed except by the vote of the holders of a
majority of the outstanding Kramont Series D preferred shares and all other
series of Kramont preferred shares ranking on a parity with the Series D
preferred shares with respect to distribution rights who would then be
entitled to vote in such trustee's election, voting together as a separate
class, at a meeting called for such purpose.
Inspection of Books and Records
Any CV shareholder, upon making a written demand stating the purpose
thereof, may inspect CV's corporate stock ledger, the shareholder list and
any other corporate books and records for any purpose reasonably related to
the shareholder's interest as a shareholder. Any shareholder of Kramont may
inspect and copy the Kramont Bylaws, minutes of proceedings of shareholders
and annual statements of affairs of Kramont. In addition, any shareholder
(or group of shareholders) of record of Kramont who owns (and for at least
six months has owned) at least five percent of the outstanding shares of any
class of beneficial interest for at least six months will be entitled to
inspect and copy Kramont's books of account and stock ledger and to require
Kramont to prepare and deliver a verified list of the name and address of,
and the number of shares owned by, each registered shareholder of Kramont.
Comparison of Rights of Holders of Kranzco Common and Preferred Shares and
Kramont Common and Preferred Shares
General
As real estate investment trusts under Title 8 of the Corporations and
Associations Article, Kranzco and Kramont are governed by Title 8 and certain
other provisions of the Annotated Code of Maryland. Title 8 covers such
matters as liabilities of the trust, shareholders, trustees and officers;
amendments of the declaration of trust; and mergers of a Maryland REIT with
other entities. There are, however, many matters that are not addressed by
Title 8, and it is a general practice for Maryland REITs such as Kranzco and
Kramont to address a number of these matters through provisions in their
declarations of trust or bylaws. The rights of holders of Kranzco shares are
governed by Title 8, the Kranzco Declaration of Trust, the Kranzco Bylaws and
Maryland law generally. The rights of holders of Kramont shares are governed
by Title 8, the Kramont Declaration of Trust and the Kramont Bylaws and
Maryland law generally. Both the Kramont Declaration of Trust and the
Kramont Bylaws will be amended and restated in connection with the mergers.
All references to the Kramont Declaration of Trust and to the Kramont Bylaws
in the discussion of the comparative rights of holders of Kranzco common
shares, Kranzco preferred shares, Kramont common shares and Kramont preferred
shares set forth below are to the Declaration of Trust and Bylaws as amended
and restated in connection with the mergers.
The following is a summary of the comparative rights of holders of
Kranzco common shares, holders of Kranzco preferred shares, holders of
Kramont common shares and holders of Kramont preferred shares and may not
contain all the information that is important to you. To better understand
the comparative rights summarized below, please refer to Title 8 and also to
the Kranzco Declaration of Trust and the Kranzco Bylaws and the Kramont
Declaration of Trust and the Kramont Bylaws.
Voting Rights
Each Kranzco common share entitles the holder thereof to one vote on all
matters submitted to a vote of holders of Kranzco common shares, including
the election of trustees. The following actions must be approved by the
affirmative vote of the holders of at least two-thirds of the outstanding
Kranzco common shares: certain amendments to the Kranzco Declaration of
Trust; removal of trustees from the Kranzco board; merging Kranzco
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into another entity; consolidating Kranzco with one or more other entities
into a new entity; or selling or otherwise disposing of all or substantially
all of the assets of Kranzco. No other action to be taken by Kranzco
requires approval by the affirmative vote of the holders of greater than a
majority of the outstanding Kranzco common shares.
Each Kramont common share entitles the holder thereof to one vote on all
matters submitted to a vote of holders of Kramont common shares, including
the election of trustees. The following actions must be approved by the
affirmative vote of the holders of at least two-thirds of the outstanding
Kramont common shares: certain amendments to the Kramont Declaration of
Trust or removal of trustees from the Kramont board. No other action to be
taken by Kramont requires approval by the affirmative vote of the holders of
greater than a majority of the outstanding Kramont common shares. All
proposed amendments to the Kramont Declaration of Trust must first be
declared advisable by a majority vote of the Kramont Board of Trustees.
Neither Kranzco Series A-1 preferred shares nor Kramont Series A-1
preferred shares entitles the holder thereof to any vote on matters submitted
to a vote of the holders of Kranzco common shares and Kramont common shares,
respectively, including the election of trustees. See "Description of
Kramont Shares - Preferred Shares - Series A-1 Preferred Shares - Voting."
Holders of Kranzco Series B-1 preferred shares are not entitled to any
vote on matters submitted to a vote of the holders of Kranzco common shares,
including the election of trustees except under certain limited
circumstances, including, without limitation, (i) the occurrence of a Special
Conversion Event and (ii) the failure of Kranzco to pay the distributions
accumulated on the Kranzco Series B-1 preferred shares for any two quarterly
distribution periods (whether or not consecutive). After the occurrence of a
Special Conversion Event, the holders of Kranzco Series B-1 preferred shares
will be entitled to vote together with the holders of the Kranzco common
shares, and will be entitled to cast one vote for every common share into
which their Series B-1 preferred shares are then convertible.
A "Special Conversion Event" means:
(i) Norman M. Kranzdorf ceasing to be Chief Executive
Officer, Chief Operating Officer or any other senior
executive officer of Kranzco having an active role in
such capacity in the management of the business of
Kranzco;
(ii) the merger or consolidation of Kranzco with or into
any person, unless the holders of Kranzco common shares
own more than 50% of the voting securities of the
surviving corporation and effective provisions are made
by the surviving corporation to protect the preferences
and other rights of the Series B-1 preferred shares;
(iii) the sale, lease, transfer, spin-off, or other
disposal or distribution of all or substantially all of
the assets of Kranzco;
(iv) a tender offer or similar offer for at least a
majority of the voting shares of beneficial interest of
Kranzco is commenced and successfully completed;
(v) certain defaults on indebtedness of Kranzco or any of
its subsidiaries for borrowed money in excess of
$10,000,000 or capital lease obligations of Kranzco or
any of its subsidiaries in excess of $25,000,000;
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(vi) the commencement by or against Kranzco of any
insolvency, bankruptcy, dissolution, liquidation or
receivership proceedings with respect to Kranzco;
(vii) the loss of Kranzco's status as a REIT; or
(viii) Kranzco's failing to pay a distribution on the
outstanding Series B-1 preferred shares for any quarterly
distribution period within five days of the payment date
therefor.
Holders of Kramont Series B-1 preferred shares will have the right to
vote together with the holders of Kramont common shares as a single class on
all actions to be taken by the holders of the Kramont common shares. Each
holder of Kramont Series B-1 preferred shares shall be entitled to cast a
number of votes equal to the number of Kramont common shares into which his
Kramont Series B-1 preferred shares are then convertible. Accordingly,
following completion of the mergers, holders of Kramont Series B-1 preferred
shares will be entitled to cast 1,670,116 votes, which will represent
approximately 8% of all shares entitled to vote at a meeting of Kramont
shareholders immediately after completion of the mergers. Holders of
Kranzco's Series B-1 preferred shares will not have a right to vote on the
mergers. See "Description of Kramont Shares-Preferred Shares-Series B-1
Preferred Shares-Voting."
Neither Kranzco Series D preferred shares nor Kramont Series D preferred
shares entitle the holder thereof to any vote on matters submitted to a vote
of the holders of Kranzco common shares and Kramont common shares,
respectively, including the election of trustees except under certain limited
circumstances, including, without limitation, the failure of the trust to pay
the distributions accumulated on the outstanding Series D preferred shares
for any six quarterly distribution periods. See "Description of Kramont
Shares - Kramont Preferred Shares - Series D Preferred Shares - Voting."
Dividends and Other Distributions
Holders of both Kranzco common shares and Kramont common shares are
entitled to distributions if, as and when authorized by the board of
trustees. Kranzco currently pays a regular quarterly cash distribution of
$0.325 per Kranzco common share (which, if annualized, would equal $1.30 per
Kranzco common share). However, future distributions are at the discretion
of the Kranzco board. It is expected that Kramont will initially pay a
regular quarterly cash distribution of $0.325 per Kramont common share
(which, if annualized, would equal $1.30 per Kramont common share). However,
future distributions will be at the discretion of the Kramont board.
Holders of both Kranzco Series A-1 preferred shares and Kramont Series
A-1 preferred shares are entitled to cumulative dividends at an annual rate
of $60.00 per Series A-1 preferred share through April 18, 2000; $62.50 per
Series A-1 preferred share from April 19, 2000 through April 18, 2001; and
$65.00 per Series A-1 preferred share thereafter. Holders of both Kranzco
Series B-1 preferred shares and Kramont Series B-1 preferred shares are
entitled to cumulative dividends at an annual rate of 9.75% of the Series B-1
liquidation preference of $25.00. Holders of both Kranzco Series D preferred
shares and Kramont Series D preferred shares are entitled to cumulative
dividends at an annual rate of 9.5% of the Series D liquidation preference of
$25.00.
Restrictions on Transfer
The Kranzco Declaration of Trust restricts the transferability of
Kranzco common shares and Kranzco preferred shares. To ensure that Kranzco
will not fail to qualify as a REIT under various tests set forth under the
Code, the Kranzco Declaration of Trust, subject to certain exceptions, limits
any person (other than (i) Norman M. Kranzdorf and Marvin Williams with
respect to the Kranzco common shares, (ii) David Hillman with respect
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to the Kranzco Series A-1 preferred shares, (iii) Leonard Mandor, Robert
Mandor and certain of their affiliates with respect to the Kranzco Series B-1
preferred shares and (iv) other persons approved by the Kranzco board, in its
discretion, with respect to Kranzco common shares and Kranzco preferred
shares, provided that such approval will not result in the termination of
Kranzco's status as a REIT) to direct or indirect ownership of 9.8% of the
lesser of the number or value of the outstanding Kranzco common shares or
Kranzco Series B-1 preferred shares, 75% of the lesser of the number or value
of the outstanding Kranzco Series A-1 preferred shares or 10% of the lesser
of the number or value of the outstanding Kranzco Series D preferred shares.
The Declaration of Trust also authorizes the Kranzco board to take such
actions as are necessary and desirable to preserve its qualification as a
REIT. The ownership limits may delay, defer or prevent a transaction or a
change in control of Kranzco that might involve a premium price for the
Kranzco common shares or the Kranzco preferred shares or otherwise be in the
best interest of the shareholders of Kranzco.
Likewise, the Kramont Declaration of Trust restricts the transferability
of Kramont common shares and Kramont preferred shares. To ensure that
Kramont will not fail to qualify as a REIT under various tests set forth
under the Code, the Kramont Declaration of Trust, subject to certain
exceptions, limits any person (other than (i) David Hillman with respect to
the Kramont Series A-1 preferred shares, (ii) Leonard Mandor, Robert Mandor
and certain of their affiliates with respect to the Kramont Series B-1
preferred shares and (iii) other persons approved by the Kramont board, in
its discretion, with respect to Kramont common shares and Kramont preferred
shares, provided that such approval will not result in the termination of
Kramont's status as a REIT) to direct or indirect ownership of 9.8% of the
lesser of the number or value of the outstanding Kramont common shares or
Kramont Series B-1 preferred shares, 75% of the lesser of the number or value
of the outstanding Kramont Series A-1 preferred shares or 10% of the lesser
of the number or value of the outstanding Kramont Series D preferred shares.
The Declaration of Trust also authorizes the Kramont board to take such
actions as are necessary and desirable to preserve its qualification as a
REIT. The ownership limits may delay, defer or prevent a transaction or a
change in control of Kramont that might involve a premium price for the
Kramont common shares or the Kramont preferred shares or otherwise be in the
best interest of the shareholders of Kramont. See "Description of Kramont
Shares-Restrictions on Transfer."
Amendment of Bylaws
The Kranzco Bylaws may be amended only by the Kranzco board and not by
the holders of Kranzco common shares or holders of Kranzco preferred shares.
Likewise, the Kramont Bylaws may be amended only by the Kramont board and not
by the holders of Kramont common shares or holders of Kramont preferred
shares.
Appraisal rights
Under Title 8, holders of Kranzco Series A-1 preferred shares and
Kramont Series A-1 preferred shares are entitled to appraisal rights in
connection with certain mergers of Kranzco or Kramont into another entity and
certain other transactions. Because the Kranzco common shares, the Kramont
common shares, the Kranzco Series B-1 preferred shares, the Kramont Series
B-1 preferred shares, the Kranzco Series D preferred shares and the Kramont
Series D preferred shares are, or, in the case of Kramont, will be listed on
a national securities exchange, holders of such shares will have no appraisal
rights. See "The Mergers-Appraisal Rights."
Shareholder Rights Plan
On November 10, 1998, Kranzco adopted a rights plan and authorized a
distribution of one preferred share purchase right for each outstanding
Kranzco common share of beneficial interest to each Kranzco shareholder of
record as of the close of business on November 24, 1998. Each such right
entitles the registered holder thereof to purchase from Kranzco one one-
hundredth of a Series E Junior Participating preferred share of beneficial
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interest, par value $.01 per share, at a purchase price of $55 per one one-
hundredth of a share, subject to adjustment. The description and terms of
the rights are set forth in a rights agreement dated as of November 10, 1998,
between Kranzco and First Union National Bank, as rights agent.
Kramont does not currently have a shareholder rights plan, but may in
the future elect to adopt a shareholder rights plan.
Kranzco Board and Kramont Board
The business and affairs of Kranzco are, and the business and affairs of
Kramont will be, managed under the direction of seven-member boards of
trustees.
The Kranzco Declaration of Trust provides that the number of trustees of
Kranzco may not be less than three or more than fifteen. Any vacancy
(including a vacancy created by an increase in the number of trustees) will
be filled, at any regular meeting called for that purpose, by a majority of
the trustees. The Kranzco board is divided into three classes, as nearly
equal in number as possible, with the term of one class expiring at each
annual meeting of shareholders. At each annual meeting, the class of
trustees whose term expires at that meeting will be elected for a term of
three years and the trustees in the other two classes will continue in
office.
The Kramont Declaration of Trust provides that the number of trustees of
Kramont shall be seven, which number may be increased or decreased pursuant
to the Kramont Bylaws. The Kramont Bylaws provide that the number of
trustees shall be seven, which number may be increased or decreased by the
affirmative vote of at least two-thirds of the whole board of trustees. Any
vacancy for any cause other than an increase in the number of trustees will
be filled, at any regular meeting or at any special meeting of the trustees
called for that purpose, by a majority of the remaining trustees, although
such majority is less than a quorum. Any vacancy created by an increase in
the number of trustees will be filled by a majority vote of the entire
Kramont board. The Kramont board is divided into three classes, as nearly
equal in number as possible, with the term of one class expiring at each
annual meeting of shareholders. At each annual meeting, the class of
trustees whose term expires at that meeting will be elected for a term of
three years and the trustees in the other two classes will continue in
office.
Kramont believes the classification of the Kramont board will help to
assure the continuity and stability of Kramont's business strategies and
policies as determined by the Kramont board.
The classified board provision could, however, have the effect of making
the replacement of incumbent trustees more time-consuming and difficult. At
least two annual meetings of shareholders, instead of one, will generally be
required to effect a change in a majority of the trustees on the Kramont
board. Thus, the classified board could increase the likelihood that
incumbent trustees will retain their positions. The staggered terms of
trustees might have the effect of delaying, deferring or preventing a change
in control of Kramont or other transaction which might involve a premium
price for Kramont common shares or the Kramont preferred shares or otherwise
be in the best interest of its shareholders.
Special Meetings
Under the Kranzco Bylaws, a special meeting of holders of Kranzco common
shares may be called by the president or one-third of the trustees and must
be called upon the written request of the holders of Kranzco common shares
entitled to cast not less than 40% of all the votes entitled to be cast at
such meeting. Under the Kramont Bylaws, a special meeting of holders of
Kramont common shares may be called by the president or the Kramont board and
must be called upon the written request of the holders of Kramont common
shares entitled to cast not less than a majority of all the votes entitled to
be cast at such meeting.
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Under the Kranzco Series B-1 articles supplementary, a special meeting
of holders of Kranzco Series B-1 preferred shares must be called by the
Kranzco board upon the request of holders of at least 25% of the Kranzco
Series B-1 preferred shares in certain limited situations in which the
holders of the Kranzco Series B-1 preferred shares are entitled to vote.
Under the Kranzco Series D articles supplementary, a special meeting of
holders of Kranzco Series D preferred shares must be called by the Kranzco
board upon the request of holders of at least 20% of the Kranzco Series D
preferred shares in certain limited situations in which the holders of the
Kranzco Series D preferred shares are entitled to vote.
Likewise, under the Kramont Declaration of Trust, a special meeting of
holders of Kramont Series B-1 preferred shares must be called by the Kramont
board upon the request of holders of at least 25% of the Kramont Series B-1
preferred shares in certain limited situations in which the holders of the
Kramont Series B-1 preferred shares are entitled to vote. Under the Kramont
Declaration of Trust, a special meeting of holders of Kramont Series D
preferred shares must be called by the Kramont board upon the request of
holders of at least 20% of the Kramont Series D preferred shares in certain
limited situations in which the holders of the Kramont Series D preferred
shares are entitled to vote.
Advance Notice for Shareholder Nominations for Trustee and Proposals of
New Business
In order to nominate a trustee or to propose new business at an annual
meeting of shareholders, a Kranzco shareholder entitled to vote at the
meeting must give written notice not less than 60 days nor more than 90 days
prior to the first anniversary of the preceding year's annual meeting. In
the case of a special meeting, similar notice must be given not less than 60
days nor more than 90 days prior to the date of the special meetings.
In order to nominate a trustee or to propose new business at a meeting
of shareholders, a Kramont shareholder entitled to vote at the meeting must
give written notice not less than 90 days nor more than 120 days prior to the
first anniversary of the date of mailing of notice for the preceding year's
annual meeting. In case of a special meeting, similar notice must be given
not less than 90 days nor more than 120 days prior to the date of the special
meeting.
Action by Written Consent
Any action required or permitted to be taken at an annual meeting or
special meeting of shareholders of Kranzco may be taken without a meeting if
a written consent to the action is signed by holders of all of the
outstanding shares entitled to vote on the action.
Any action required or permitted to be taken at an annual or special
meeting of shareholders of Kramont may be taken without a meeting if a
written consent to the action is signed by holders of all of the outstanding
shares entitled to vote on the action and any other shareholder entitled to
notice of a meeting of shareholders (but not to vote thereat) has waived in
writing any right to dissent from such action.
Amendment of Declaration of Trust
The trustees of the Kranzco board, by a two-thirds vote, may at any time
amend the Declaration of Trust of Kranzco to enable Kranzco to maintain its
qualification as a REIT without the approval of the shareholders. Other
amendments require the affirmative vote of the holders of a majority of the
outstanding Kranzco shares entitled to vote thereon except that amendments to
the provisions of the Kranzco Declaration of Trust relating to the
classification of the board, the removal of trustees, the restrictions on
transfer of Kranzco shares, reorganizations and mergers require the
affirmative vote of the holders of two-thirds of the outstanding Kranzco
shares entitled to vote thereon.
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The trustees of the Kramont board, by a two-thirds vote, may at any time
amend the Declaration of Trust of Kramont to enable Kramont to maintain its
qualification as a REIT without the approval of the shareholders. In
addition, the trustees, without any action by the shareholders, may amend the
declaration of trust from time to time to increase or decrease the aggregate
number of shares or the number of shares of any class or series that Kramont
has authority to issue. Other amendments require the affirmative vote of the
holders of a majority of the outstanding Kramont shares entitled to vote
thereon except that amendments to the provisions of the Kramont Declaration
of Trust relating to the classification of the board, the removal of
trustees, amendments by shareholders and mergers require the affirmative vote
of the holders of two-thirds of the outstanding Kramont shares entitled to
vote thereon.
Business Combinations
Under the Maryland General Corporation Law, as applicable to Maryland
REITs, certain business combinations (including certain mergers,
consolidations, share exchanges, asset transfers and issuances or
reclassifications of equity securities) between a Maryland REIT and (a) any
person who beneficially owns 10% or more of the voting power of the trust's
shares or an affiliate or associate of the trust who, at any time within the
two-year period before the date in question, was the beneficial owner of 10%
or more of the voting power of the then outstanding voting shares of
beneficial interest of the trust (each an Interested Shareholder) or (b) an
affiliate of the Interested Shareholder are prohibited for five years after
the most recent date on which the Interested Shareholder becomes an
Interested Shareholder. Thereafter, any such business combination must be
recommended by the board of trustees of such trust and approved by the
affirmative vote of at least (i) 80% of the votes entitled to be cast by
holders of outstanding voting shares of the trust and (ii) two-thirds of the
votes entitled to be cast by holders of outstanding voting shares other than
shares held by the Interested Shareholder with whom the business combination
is to be effected or its affiliate, unless, among other things, the trust's
common shareholders receive a minimum price (as defined in the statute) for
their shares and the consideration is received in cash or in the same form as
previously paid by the Interested Shareholder for his shares.
These provisions of Maryland law do not apply, if, prior to the most
recent time at which a person would otherwise have become an Interested
Shareholder, the board of trustees approves the transaction which otherwise
would have resulted in the person becoming an Interested Shareholder. In
addition, these provisions do not apply to business combinations that have
been approved or otherwise exempted, specifically or generally, by resolution
of the board of trustees prior to the time that the Interested Shareholder
first became an Interested Shareholder.
The Kranzco board has exempted from the Maryland statute any business
combination with Norman M. Kranzdorf or Marvin Williams or any other person
acting in concert or as a group with either of the foregoing persons. In
addition, the Kranzco board has exempted from the Maryland statute any
business combination with (i) CV, (ii) KRT Trust, (iii) Kramont and (iv) any
affiliate or associate of CV, KRT Trust or Kramont (provided that such
combinations are entered into as a result of or result from the mergers).
The Kramont board has exempted from the Maryland statute any business
combination with (i) CV, (ii) Kranzco, (iii) KRT Trust and (iv) any affiliate
or associate of CV, Kranzco or KRT Trust (provided that such combinations are
entered into as a result of, or result from, the mergers).
The business combination statute could have the effect of delaying,
deferring or preventing offers to acquire Kranzco or Kramont and of
increasing the difficulty of consummating any such offer.
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DESCRIPTION OF KRAMONT SHARES
The following summary of the terms of the shares of beneficial interest
of Kramont may not contain all the information that is important to you. To
more fully understand the legal terms of the Kramont shares and for a more
complete description of their legal terms, please read carefully the
Declaration of Trust and the Bylaws of Kramont, copies of which are exhibits
to the Registration Statement of which this joint proxy statement/prospectus
is a part. See "Where You Can Find Additional Information." Both the
Kramont Declaration of Trust and the Kramont Bylaws will be amended and
restated in connection with the mergers. All references to the declaration
of trust and to the bylaws in the following summary of the terms of the
shares of beneficial interest of Kramont are to the Declaration of Trust and
Bylaws as amended and restated in connection with the mergers.
General
The declaration of trust provides that Kramont may issue up to
96,683,845 common shares of beneficial interest, $.01 par value per share and
3,316,155 preferred shares of beneficial interest, $.01 par value per share.
Upon completion of the mergers, approximately 18,753,165 Kramont common
shares will be issued and outstanding and approximately 2,994,432 Kramont
preferred shares will be issued and outstanding, in addition to approximately
1,317,607 units of partnership interest that are held by limited partners
other than Kramont in Kramont Operating Partnership, L.P. or Montgomery CV
Realty L.P. which may be redeemed at any time for cash or, at the option of
Kramont, for Kramont common shares on a one-to-one basis (subject to
adjustment).
Both Title 8 and Kramont's declaration of trust provide that no
shareholder of Kramont will be personally liable for any obligation of
Kramont solely by reason of being a shareholder. Kramont's Bylaws further
provide that Kramont shall indemnify each shareholder against any claim or
liability to which the shareholder may become subject by reason of his being
or having been a shareholder and that Kramont will reimburse each shareholder
for all legal and other expenses reasonably incurred by him in connection
with any such claim or liability. In addition, it is Kramont's policy to
include a clause in its contracts which provides that shareholders assume no
personal liability for obligations entered into on behalf of Kramont.
However, with respect to tort claims, contractual claims where shareholder
liability is not so negated, claims for taxes and certain statutory and other
liabilities, a shareholder may, in some jurisdictions, be personally liable
to the extent that such claims are not satisfied by Kramont. In addition,
Kramont expects to carry public liability insurance which it considers
adequate. The risk of any personal liability to shareholders is thus limited
to situations in which Kramont's assets plus its insurance coverage would be
insufficient to satisfy the claims against Kramont and its shareholders.
Common Shares
All common shares issued in connection with the mergers will be duly
authorized, fully paid and nonassessable. Subject to the preferential rights
of any other shares or series of beneficial interest and to the provisions of
the declaration of trust regarding the restriction of the transfer of shares
of beneficial interest, holders of common shares are entitled to receive
dividends on such shares if, as and when authorized and declared by the board
of trustees of Kramont out of assets legally available therefor and to share
ratably in the assets of Kramont legally available for distribution to its
shareholders in the event of its liquidation, dissolution or winding up after
payment of or adequate provision for all known debts and liabilities of
Kramont.
Subject to the provisions of the declaration of trust regarding the
restriction of the transfer of shares of beneficial interest, each
outstanding common share entitles its holder to one vote on all matters
submitted to a vote of shareholders, including the election of trustees, and,
except as provided with respect to any other class or series of shares, the
holders of such shares will possess the exclusive voting power. There is no
cumulative voting in
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the election of trustees, which means that the holders of a majority of the
outstanding common shares can elect all of the trustees then standing for
election and the holders of the remaining shares will not be able to elect
any trustees.
Holders of common shares have no preference, conversion, exchange,
sinking fund, redemption or appraisal rights and have no preemptive rights to
subscribe for any securities of Kramont. Subject to the provisions of the
Declaration of Trust regarding the restriction on transfer of shares of
beneficial interest, common shares will have equal dividend, liquidation and
other rights.
Under the Maryland REIT Law, a Maryland real estate investment trust
generally cannot amend its declaration of trust or merge, unless approved by
the affirmative vote of shareholders holding at least two-thirds of the
shares entitled to vote on the matter unless a lesser percentage (but not
less than a majority of all of the votes entitled to be cast on the matter)
is set forth in the declaration of trust. The declaration of trust provides
that, except for certain amendments to Kramont's declaration of trust
relating to the classification of the board, removal of trustees, mergers or
amending the declaration of trust, and except where approval of the
shareholders would not be required if Kramont were a corporation, the
foregoing actions must be approved only by the affirmative vote of
shareholders holding at least a majority of the shares entitled to vote on
the matter. Under the Maryland REIT Law, a declaration of trust may permit
the trustees by a two-thirds vote to amend the declaration of trust from time
to time to qualify as a REIT under the Code or the Maryland REIT Law without
the affirmative vote or written consent of the shareholders. Kramont's
declaration of trust permits such action by the board of trustees. In
addition, Kramont's declaration of trust permits the trustees, without any
action by the shareholders, to amend the declaration of trust from time to
time to increase or decrease the aggregate number of shares or the number of
shares of any class or series that Kramont has authority to issue.
The declaration of trust authorizes the board of trustees to reclassify
any unissued common shares into other classes or series of shares of
beneficial interest and to establish the number of shares in each class or
series and to set the preferences, conversion and other rights, voting
powers, restrictions, limitations as to dividends or other distributions,
qualifications and terms or conditions of redemption for each such class or
series.
Preferred Shares
General
The declaration of trust authorizes the board of trustees of Kramont to
classify any unissued preferred shares and to reclassify any previously
classified but unissued preferred shares of any series from time to time, in
one or more series. Prior to issuance of shares of each series, the board of
trustees is required by the Maryland REIT Law and the Declaration of Trust of
Kramont to set, subject to the provisions of the Declaration of Trust
regarding the restriction on transfer of shares of beneficial interest, the
terms, preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends or other distributions, qualifications and terms
or conditions of redemption for each such series. Thus, the board could
authorize the issuance of preferred shares with terms and conditions which
could have the effect of delaying, deferring or preventing a transaction or a
change in control of Kramont that might involve a premium price for holders
of common shares or otherwise be in their best interest. Upon consummation
of the mergers, Kramont will have outstanding preferred shares of beneficial
interest consisting of the Series A-1 preferred shares, the Series B-1
preferred shares and the Series D preferred shares.
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Series A-1 Preferred Shares
Ranking. The Series A-1 preferred shares, as to distributions and as to
the distribution of assets upon any liquidation, dissolution, or winding up
of the affairs of Kramont, will rank on a parity with the Series B-1
preferred shares and the Series D preferred shares and senior to the common
shares.
Distributions. The holders of the Series A-1 preferred shares are
entitled to receive, when, as and if authorized by the board of trustees of
Kramont out of assets of Kramont legally available therefor (and subject to
the limitation described in the last sentence of the immediately following
paragraph), cumulative cash distributions on the Series A-1 preferred shares
from April 1, 2000, notwithstanding that no Series A-1 preferred shares had
been issued on such date, at the per share annual rates set forth below:
Annual Rate per
Series A-1 Period Covered By
Preferred Share Annual Rate
--------------- ----------------
$60.00 April 19, 1999 through April 18, 2000
$62.50 April 19, 2000 through April 18, 2001
$65.00 Thereafter
Distributions are payable quarterly on January 1, April 1, July 1, and
October 1 of each year, commencing on July 1, 2000, with the first
distribution being computed from April 1, 2000, notwithstanding that no
Series A-1 preferred shares were then outstanding. If a holder converts
Series A-1 preferred shares into common shares, then, in addition to all
accrued and unpaid distributions with respect to prior quarters, the holder
is entitled to receive a pro rata portion of the distribution which would
have been payable on the Series A-1 preferred shares converted had they been
outstanding for the entire quarter. The amount of the distribution to which
a holder converting Series A-1 preferred shares is entitled will be
determined by multiplying the amount of the distribution which would have
been payable on the Series A-1 preferred shares so converted had they been
outstanding for the entire quarter by a fraction, the numerator of which is
the number of days in such quarter elapsed through the day immediately
preceding the date of conversion, and the denominator of which is the total
number of days in such quarter. If a distribution period for the common
shares overlaps with the current distribution period for the Series A-1
preferred shares, an offset against the amount to be distributed to the
holder with respect to the distribution period for the common shares may be
required.
No distribution or other payment with respect to redemption, purchase or
other acquisition of the common shares or of any other shares of beneficial
interest of Kramont ranking junior to the Series A-1 preferred shares as to
distribution rights and the liquidation preference (other than distributions
in shares of common shares or in any other shares of beneficial interest of
Kramont ranking junior to the Series A-1 preferred shares as to distribution
rights and the liquidation preference) shall be declared or paid or set apart
for payment or other distribution upon the common shares or upon any other
shares of beneficial interest of Kramont ranking junior to the Series A-1
preferred shares with respect to distributions or the liquidation preference,
unless full cumulative distributions on the Series A-1 preferred shares have
been paid or declared and a sum sufficient for such full payment on the next
distribution date set apart in trust for payment for all past distribution
periods.
Distributions payable on the Series A-1 preferred shares for any period
less than a full quarterly distribution period shall be computed on the basis
of a 360-day year and the actual number of days elapsed. Quarterly
distributions payable on the Series A-1 preferred shares shall be computed by
dividing the annual distribution rate by four.
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Distributions Upon Liquidation, Dissolution or Winding Up. In the event
of any liquidation, dissolution or winding up of the affairs of Kramont,
whether voluntary or otherwise, after payment or provision for payment of the
debts and other liabilities of Kramont, the holders of Series A-1 preferred
shares shall be entitled to receive, in cash, out of the remaining assets of
Kramont legally available therefor, the amount of $1,000 for each Series A-1
preferred share, plus an amount equal to all distributions accrued and unpaid
on each such share up to the date of such distribution of assets, before any
distribution shall be made to the holders of common shares or any other
shares of beneficial interest of Kramont ranking (as to any such distribution
of assets) junior to the Series A-1 preferred shares. If upon any
liquidation, dissolution or winding up of Kramont, the assets distributable
among the holders of Series A-1 preferred shares and all other classes and
series of preferred shares ranking (as to any such distribution of assets) on
a parity with the Series A-1 preferred shares are insufficient to permit the
payment in full to the holders of all such shares of all preferential amounts
payable to all such holders, then the entire assets of Kramont thus
distributable shall be distributed ratably among the holders of Series A-1
preferred shares and such other classes and series of preferred shares
ranking (as to any such distribution of assets) on a parity with the Series
A-1 preferred shares in proportion to the respective amounts that would be
payable per share if such assets were sufficient to permit payment in full.
Conversion. Holders of Series A-1 preferred shares shall have the
right, exercisable at any time and from time to time, subject, however, to
the next sentence of this paragraph, prior to 5:00 p.m. on April 18, 2009
(except in the case of the Series A-1 preferred shares called for redemption)
to convert all or any portion of their Series A-1 preferred shares into such
number of common shares as would then receive aggregate annual cash
distributions based on the last quarterly distribution paid to holders of
such common shares equal to the then aggregate annual cash distributions such
holders of the Series A-1 preferred shares are entitled to receive on the
number of Series A-1 preferred shares which such holders elect to convert
into common shares; provided, however, that the aggregate number of common
shares into which each share of Series A-1 preferred shares is convertible
may not exceed the greater of (A) the number of common shares equal to the
quotient of 500,000 divided by 11,155 or (B) the number of common shares
equal to the quotient of the number of common shares representing 5% of all
of the outstanding common shares at the time of conversion divided by 11,155
and not more than the following number of Series A-1 preferred shares may be
converted during the following periods (commencing at 9:30 a.m. on the first
day of each period and ending at 5:00 p.m. on the last day of each period):
Number of New Shares Maximum Number of Shares
Period Convertible Convertible During Period
April 19, 1999 to
April 18, 2000 1,860 1,860
April 19, 2000 to
April 18, 2001 1,860 3,720
April 19, 2001 to
April 18, 2002 1,860 5,578
April 19, 2002 to
April 18, 2003 1,860 5,578
April 19, 2003 to
April 18, 2004 1,860 5,578
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April 19, 2004 to
April 18, 2005 1,855 5,578
April 19, 2005 to
April 18, 2009 0 5,578
If Kramont were to be dissolved at the time of any distribution and,
after giving effect to amounts that would be needed to satisfy the
preferential rights upon dissolution of shareholders whose preferential
rights on dissolution are superior to those receiving the distribution,
Kramont would not have been permitted to make such distribution by dividend,
redemption or other acquisition of shares or otherwise under the Maryland
General Corporation Law (if such law were applicable to Kramont), then the
holders of the Series A-1 preferred shares shall have the right to
immediately convert all or any of the Series A-1 preferred shares into common
shares.
When any Series A-1 preferred shares are called for redemption (see
below), those shares immediately become convertible into common shares. The
right to convert shares called for redemption will expire at the close of
business on the last business day before the date set by the board of
trustees of Kramont for the redemption of the shares.
Voting. The holders of Series A-1 preferred shares have no right to
vote, except as required by law and except in certain other limited
situations described below.
In addition to any other rights provided by applicable law to the
holders of Series A-1 preferred shares, so long as any Series A-1 preferred
shares are outstanding, Kramont shall not, without the affirmative vote, or
the written consent, as provided by law, of the holders of at least a
majority of the total number of Series A-1 preferred shares outstanding,
voting as a class, (i) authorize, create or issue to any seller of real
property to Kramont in consideration of the purchase price for such real
property, any class or series of, or rights to subscribe to or acquire, any
security convertible into, any class or series of, shares of beneficial
interest ranking as to distribution rights or the liquidation preference,
senior to the Series A-1 preferred shares or (ii) amend any provisions of the
terms of the Series A-1 preferred shares so as to materially adversely affect
the preferences, rights or powers of the Series A-1 preferred shares, unless
at or prior to the time when such change is to take effect, Kramont has
mailed a notice of redemption to each holder of Series A-1 preferred shares
and sufficient funds have been deposited in trust for the redemption of all
of the then outstanding Series A-1 preferred shares on the date set forth in
such notice.
Notwithstanding any other provision in the Declaration of Trust or
Bylaws of Kramont, the provisions of the Declaration of Trust relating to:
(i) any transfer or issuance of Series A-1 preferred
shares that would create a direct or indirect owner of
Series A-1 preferred shares of more than 75% of the
lesser of the number or the value of the total
outstanding Series A-1 preferred shares (other than David
H. Hillman and certain persons previously approved by the
board of trustees of Kramont) or that would result in
Kramont being "closely held" within the meaning of
Section 856(h) of the Code being void ab initio
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(ii) any purported transfer, sale or acquisition of
Series A-1 preferred shares that would result in
termination of Kramont's status as a REIT under the Code
being null and void ab initio
(iii) the purchase by Kramont, by notice to the holder
thereof, of any or all Series A-1 preferred shares that
are proposed to be transferred or are the subject of an
attempted transfer which is void pursuant to the
foregoing provisions pursuant to which, in the Kramont
board's opinion, a transfer would result in any person
acquiring more than 75% of the lesser of the number or
the value of the total outstanding Series A-1 preferred
shares (other than David H. Hillman and certain persons
previously approved by the board of trustees of Kramont)
or would otherwise jeopardize Kramont's status as a REIT
under the Code
(iv) amendment or repeal of any of the foregoing
provisions
may not be amended or repealed without the affirmative vote of the holders of
not less than two-thirds of the Series A-1 preferred shares then outstanding
and entitled to vote.
Trustees' Right to Refuse to Transfer; Limitation on Holdings. Because
Kramont believes that it is essential for Kramont to continue to qualify as a
REIT, subject to certain exceptions, the Declaration of Trust provides that
in the event that any proposed transfer of Series A-1 preferred shares would
jeopardize the status of Kramont as a REIT under the REIT provisions of the
Code, the board of trustees of Kramont has the right to refuse to permit such
transfer and to take any action necessary to cause such transfer not to
occur. In addition, any transfer or issuance of Series A-1 preferred shares
that would (i) create a direct or indirect owner of more than 75% of the
lesser of the number or the value of all the Series A-1 preferred shares
outstanding, other than a person approved by the board of trustees of
Kramont, or (ii) result in Kramont being "closely held" within the meaning of
Section 856(h) of the Code, will be void ab initio and any shares purported
to be so transferred may be purchased by Kramont. For a more detailed
description of the transfer restrictions contained in the Declaration of
Trust, see below.
Redemption. The Series A-1 preferred shares may be redeemed at the
option of Kramont by resolution of the board of trustees of Kramont, in whole
or from time to time in part, subject to the limitations set forth in the
Declaration of Trust, at the redemption price per share of $1,000, plus, in
each case, all distributions accrued and unpaid, whether for current or past
distribution periods, on the Series A-1 preferred shares up to the date of
the redemption.
Series B-1 Preferred Shares
Ranking. The Series B-1 preferred shares, as to distributions and as to
the distribution of assets upon any liquidation, dissolution, or winding up
of the affairs of Kramont, will rank on a parity with the Series A-1
preferred shares and the Series D preferred shares and senior to the common
shares.
Distributions. The holders of Series B-1 preferred shares are entitled
to receive, when, as and if authorized by the board of trustees of Kramont
out of assets of Kramont legally available for payment of distributions,
cumulative cash distributions on the Series B-1 preferred shares from
April 20, 2000, notwithstanding that no Series B-1 preferred shares were then
outstanding, at the rate of 9.75% of the liquidation preference of $25.00 per
Series B-1 Preferred Share, computed on the basis of a 360-day year
consisting of twelve 30-day months. Distributions on the Series B-1
preferred shares shall accrue and be
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cumulative from April 20, 2000, notwithstanding that no Series B-1 preferred
shares were then outstanding. Distributions shall be payable quarterly in
arrears, when, as and if authorized by the board of trustees of Kramont on
January 20, April 20, July 20 and October 20 of each year, commencing on
July 20, 2000. The amount of distributions payable on Series B-1 preferred
shares for each calendar quarter will be computed by dividing the annual
distribution rate set forth above by four. Distributions payable for any
period which is less than a full quarterly period will be computed on the
basis of a 360-day year consisting of twelve 30-day months.
Except as provided in the next sentence, if any Series B-1 preferred
shares are outstanding, no distributions (other than distributions in common
shares or in any other shares of beneficial interest of Kramont ranking
junior to the Series B-1 preferred shares) shall be authorized, declared, set
apart for payment or paid on any class or series of shares of beneficial
interest of Kramont junior to or on a parity with the Series B-1 preferred
shares unless all accrued distributions on the Series B-1 preferred shares
for all prior periods and the then current period have been or
contemporaneously are authorized and declared and set apart for payment or
paid. When distributions are not paid in full, all distributions authorized
or declared upon the Series B-1 preferred shares will be authorized or
declared pro rata with all shares of beneficial interest of Kramont on a
parity with the Series B-1 preferred shares.
Unless all accrued distributions on the Series B-1 preferred shares have
been or contemporaneously are authorized and declared and set apart for
payment or paid for all distribution periods, no shares ranking junior to or
on a parity with the Series B-1 preferred shares shall be redeemed, purchased
or otherwise acquired for any consideration (or any moneys be paid to or made
available for a sinking fund for the redemption of any such shares) by
Kramont (except by conversion into or exchange for common shares or shares
ranking junior to the Series B-1 preferred shares). Holders of the Series
B-1 preferred shares shall not be entitled to any distributions, whether
payable in cash, property or shares of beneficial interest of Kramont, in
excess of accrued and cumulative distributions as herein provided. No
interest or sum of money in lieu of interest shall be payable in respect of
any distribution payment or payments on the Series B-1 preferred shares that
may be in arrears.
Distributions Upon Liquidation, Distribution or Winding Up. Upon any
voluntary or involuntary liquidation, dissolution or winding up of the
affairs of Kramont, before any distribution may be made to the holders of any
shares of beneficial interest of Kramont ranking junior to the Series B-1
preferred shares, and subject to the payment or provision or reserve for
payment of the debts and liabilities (whether absolute, accrued, asserted or
unasserted, contingent or otherwise) and the preferences of shares of
beneficial interest of Kramont, if any, ranking senior to the Series B-1
preferred shares, the holders of Series B-1 preferred shares shall be
entitled to receive, out of the assets of Kramont legally available for
payment of distributions, liquidating distributions in cash (or property at
its fair market value as determined in good faith by the board of trustees of
Kramont (or a combination thereof)) in the amount of $25.00 for each Series
B-1 Preferred Share plus an amount equal to all accrued and unpaid
distributions (whether or not authorized or declared, and whether or not
there would be assets legally available for the payment of such
distributions) to the date of the liquidation, dissolution or winding up.
After payment of the full amount of the liquidating distributions to which
they are entitled, the holders of Series B-1 preferred shares will have no
right or claim to any of the remaining assets of Kramont and will not be
entitled to any other distribution.
Notwithstanding the foregoing, in the event that, upon any such
voluntary or involuntary liquidation, dissolution or winding up of the
affairs of Kramont, the assets legally available for payment of distributions
are insufficient to pay (i) the full amount of the liquidating distributions
to which holders of Series
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B-1 preferred shares would otherwise be entitled and (ii) the corresponding
amounts of the liquidating distributions to which holders of shares of
beneficial interest of Kramont ranking on a parity with the Series B-1
preferred shares would be entitled upon liquidation, dissolution or winding
up of the affairs of Kramont, then the holders of the Series B-1 preferred
shares and the holders of any shares ranking on a parity therewith shall
share ratably in any such distribution of assets in proportion to the full
liquidating distributions to which they otherwise would be respectively
entitled.
Conversion Rate and Right to Convert. Holders of Series B-1 preferred
shares shall have the right, at any time and from time to time to convert all
or any Series B-1 preferred shares (except that upon any dissolution,
liquidation or winding up of the affairs of Kramont the right of conversion
shall terminate at the close of business on the business day fixed for
payment of the liquidating distributions to which holders of Series B-1
preferred shares are entitled) into such number of fully paid common shares
as is obtained by: (i) multiplying the number of Series B-1 preferred shares
to be converted by $25.00 and (ii) dividing the result by $17.7125.
Adjustment of Conversion Rate. The conversion rate for the Series B-1
preferred shares is subject to adjustment from time to time to protect
against certain dilutive events. However, no adjustment will be made until
cumulative adjustments require a change of at least one percent of the
conversion price. If common shares are issued to any person not an affiliate
of Kramont for a price per share less than 85% of the average closing price
of a common share for the 30 trading days preceding the tenth trading day
prior to the issuance, the conversion rate will be adjusted accordingly. The
conversion rate will be similarly adjusted for any issuance of any security
convertible into or exercisable for common shares if the sum of (i) the price
of the security and (ii) the price per common share for which the security is
convertible or exercisable do not total at least 85% of the average closing
price referred to in the preceding sentence.
If Kramont issues to any officer, trustee or affiliate more than 250,000
common shares in the aggregate (including common shares issuable upon the
exercise, exchange, or conversion of any other security of Kramont), at a
price per share less than the average closing price described above, then the
conversion rate shall be adjusted similarly for each common share or security
convertible into a common share issued below the average closing price
described above, determined on the date of the issuance.
The conversion rate will also be adjusted in the case of (i) a share
dividend, share split or any other distribution in common shares; (ii) a
reclassification of common shares into shares of another class or series; or
(iii) a subdivision or combination of common shares, so that, after any of
the foregoing events, each Series B-1 preferred share will be convertible
into the number of common shares into which the Series B-1 preferred share
would have been convertible had it been converted immediately prior to the
event. In addition, if Series A-1 preferred shares are converted into more
than 500,000 common shares, the conversion rate will be adjusted so that each
Series B-1 Preferred Share is convertible into the percentage of common
shares into which it would have been convertible had the Series A-1 preferred
shares been converted into exactly 500,000 common shares.
If Kramont issues a dividend or other distribution of securities (other
than common shares or securities convertible into or exercisable for common
shares) or other property (i) to the holders of shares ranking junior to the
Series B-1 preferred shares and (ii) not to the holders of Series B-1
preferred shares, then each holder of Series B-1 preferred shares will
receive at the time of the issuance of the dividend or other distribution,
without payment or consideration therefor, the securities or other property
which he would have received had he converted his Series B-1 preferred shares
immediately prior to the issuance, unless the holders of Series B-1 preferred
shares are entitled to receive the dividend or other distribution upon the
later conversion of their shares and the distribution has been set aside for
later distribution.
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Distributions Following Conversion. All accrued distributions with
respect to any Series B-1 preferred shares for any past distribution periods
that are in arrears at the time of the conversion shall be paid to the
registered holder of the Series B-1 preferred shares, notwithstanding their
surrender for conversion in the same manner as if the registered holder
continued to be the registered holder of the converted Series B-1 preferred
shares following the conversion. In addition, if any holder surrenders
Series B-1 preferred shares for conversion into common shares, he shall be
entitled to receive a distribution on all Series B-1 preferred shares
converted for the portion of the current distribution period during which he
owned the Series B-1 preferred shares surrendered for conversion,
notwithstanding that the record date for the distribution payable for the
current distribution period may not have occurred. If a distribution period
for the common shares overlaps with the current distribution period for the
Series B-1 preferred shares, an offset against the amount to be distributed
to the holder with respect to the distribution period for the common shares
may be required.
Reservation of Common Shares. Kramont will reserve and will at all
times keep reserved out of its authorized but unissued common shares a
sufficient number of common shares to permit the conversion of the then
outstanding Series B-1 preferred shares that may then be converted. All
common shares which may be issued upon conversion of Series B-1 preferred
shares will be validly issued and fully paid, and will not be subject to
preemptive or other similar rights. In order that Kramont may issue common
shares upon conversion of Series B-1 preferred shares, Kramont will endeavor
to comply with all applicable Federal and State securities laws and will
endeavor to list the common shares to be issued upon conversion on each
securities exchange on which the common shares are listed.
Voting. The holders of Series B-1 preferred shares shall be entitled
after completion of the mergers to vote together with the holders of common
shares as a single class on all actions to be taken by the holders of common
shares. Each holder of Series B-1 preferred shares shall be entitled to a
number of votes equal to the number of common shares into which his Series B-
1 preferred shares are then convertible. Accordingly, immediately following
completion of the mergers, holders of Kramont Series B-1 preferred shares
will be entitled to cast 1,670,116 votes, which will represent approximately
8% of all shares entitled to vote at a meeting of Kramont shareholders.
Holders of Kranzco's Series B-1 preferred shares will not have a right to
vote on the mergers.
In addition to any other rights provided to the holders of the Series B-
1 preferred shares by applicable law, Kramont may not, without the
affirmative vote of the holders of at least two-thirds of the total number of
the outstanding Series B-1 preferred shares, voting together as a separate
class:
(i) authorize, create or issue, or increase the par
value or authorized or issued amount of, any class or series
of shares ranking senior to the Series B-1 preferred shares,
or rights to subscribe to or acquire, any security convertible
into, any class or series of shares ranking senior to the
Series B-1 preferred shares, or reclassify any shares into any
shares ranking senior to the Series B-1 preferred shares or
reclassify any shares ranking junior thereto into shares
ranking on a parity therewith;
(ii) amend, alter or repeal, whether by merger,
consolidation or otherwise, any of the provisions of the
Declaration of Trust so as to adversely affect the
preferences, right to convert, conversion price adjustments,
notice rights, special conversion rights, distribution and
liquidation rights, preferences, restrictions or limitations,
redemption rights or privileges, or voting powers or rights of
the Series B-1 preferred shares; or
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(iii) modify an express contract right of the Series B-1
preferred shares.
Except as provided in the previous paragraph, Kramont may amend, alter
or repeal any of the provisions of the Declaration of Trust pertaining to
Series B-1 preferred shares with the written consent or affirmative vote of
the holders of a majority of the Series B-1 preferred shares.
If Kramont fails to authorize and pay or declare and set apart for
payment distributions accumulated on the outstanding Series B-1 preferred
shares for any four quarterly distribution periods, the number of trustees
constituting the board of trustees of Kramont will be increased by one and
the holders of the Series B-1 preferred shares, voting as a separate class,
will be entitled to elect one additional trustee to the board of trustees.
If Kramont fails to authorize and pay or declare and set apart for payment
distributions accumulated on the outstanding Series B-1 preferred shares for
any six quarterly distribution periods, the number of trustees constituting
the board of trustees of Kramont will be increased by one additional trustee
and the holders of the Series B-1 preferred shares will be entitled to elect
a second trustee. No trustee elected by the holders of the Series B-1
preferred shares may be removed except by the vote of the holders of a
majority of the Series B-1 preferred shares, voting as a separate class, in
person or by proxy, at a meeting called for that purpose.
Unless the holders of Series B-1 preferred shares have been divested of
their right to elect a trustee (as described below), if a trustee elected by
the holders of Series B-1 preferred shares no longer serves on the board by
reason of resignation, death or removal, the vacancy may be filled by holders
of a plurality of the Series B-1 preferred shares, voting as a separate
class.
If and when all distributions accumulated on the outstanding Series B-1
preferred shares have been authorized and paid or declared and set apart for
payment, the holders of the Series B-1 preferred shares will be divested of
their right to elect a trustee (subject to revesting upon each and every
future failure of Kramont to authorize and pay or declare and set apart for
payment distributions accumulated on the outstanding Series B-1 preferred
shares for the requisite number of distribution periods), the term of any
trustees so elected will immediately terminate and the number of trustees
constituting the board of trustees of Kramont will immediately be reduced
accordingly.
Trustees' Right to Refuse to Transfer; Limitation on Holdings. In the
event of any proposed transfer or issuance of Series B-1 preferred shares
that would jeopardize Kramont's status as a REIT, the board of trustees of
Kramont has the right to refuse to permit such transfer or issuance and to
take any action necessary to cause the transfer or issuance not to occur. In
addition, any transfer or issuance of Series B-1 preferred shares that would
(i) create a direct or indirect owner of more than 9.8% of the lesser of the
number or the value of the total outstanding shares of beneficial interest of
Kramont (other than certain persons previously approved by the board of
trustees of Kramont); or (ii) result in Kramont being "closely held" within
the meaning of Section 856(h) of the Code, will be void ab initio and Series
B-1 preferred shares purportedly so transferred may be purchased by Kramont.
For a more detailed description of the transfer restrictions contained in the
declaration of trust, see below.
Redemption. At any time after February 27, 2002, if the aggregate
liquidation preference of all outstanding Series B-1 preferred shares is less
than $3,000,000, the board of trustees of Kramont may, at its option and in
its sole discretion, redeem the Series B-1 preferred shares in whole, subject
to the limitations set forth below, for $25.00 per share plus (i) all accrued
and unpaid distributions for past quarterly distribution periods and (ii) the
pro rata portion of the distributions on the Series B-1 preferred shares for
the then current quarterly distribution period through the date of
redemption.
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From and after the date fixed by Kramont for the redemption of the
Series B-1 preferred shares (unless Kramont defaults in payment of any of the
amounts payable described above), (i) all distributions on the Series B-1
preferred shares shall cease to accrue, and all rights of the holders of
those shares as shareholders of Kramont will terminate, except the right to
convert their shares to common shares at any time or to receive payment for
their shares upon surrender of the certificates evidencing the shares and
(ii) the Series B-1 preferred shares shall no longer be deemed outstanding
for any purpose whatsoever.
Series D Preferred Shares
Ranking. The Series D preferred shares rank, with regard to rights to
receive distributions and amounts payable upon liquidation, dissolution or
winding up of Kramont, on a parity with the Series A-1 preferred shares and
the Series B-1 preferred shares and senior to the common shares.
Distributions. The holders of Series D preferred shares will be
entitled to receive cumulative cash distributions, when, as and if authorized
and declared by the board of trustees of Kramont, out of assets legally
available for payment of distributions. Distributions shall be payable
quarterly by Kramont in cash at a rate of $2.375 per Series D preferred share
per annum (equivalent to 9.5% of the liquidation preference per annum).
Distributions will accrue and be cumulative from April 20, 2000,
notwithstanding that no Series D preferred shares were then outstanding.
Distributions shall be payable quarterly in arrears when, as and if
authorized by the board of trustees of Kramont on the 20th day of January,
April, July, and October of each year, commencing on July 20, 2000. The
amount of distributions payable on Series D preferred shares for each full
quarterly distribution period will be computed by dividing the annual rate by
four. Distributions payable on Series D preferred shares for any period less
than a full quarterly dividend period will be computed on the basis of a 360-
day year consisting of twelve 30-day months.
If any Series D preferred shares are outstanding, no distributions shall
be paid or authorized or set apart for payment on any other class of
securities ranking junior to or on a parity with the Series D preferred
shares for any period unless full cumulative distributions have been or
contemporaneously are authorized and paid or authorized and a sum sufficient
for the payment thereof set apart for payment for all past quarterly
distribution periods and the then current quarterly distribution period.
When distributions are not paid in full (or a sum sufficient for their
full payment is not set apart) upon the Series D preferred shares and any
other class or series of preferred shares ranking on a parity as to
distributions with the Series D preferred shares, all distributions
authorized upon the Series D preferred shares and any other class or series
of shares ranking on a parity therewith shall be authorized pro rata so that
the amount of distributions authorized per share on the Series D preferred
shares and on any class or series of shares ranking on a parity therewith
shall in all cases bear to each other the same ratio that accrued and unpaid
distributions per share on the Series D preferred shares and on such class or
series of shares bear to each other.
Except as set forth above, unless full cumulative distributions on the
Series D preferred shares have been or contemporaneously are authorized and
paid or authorized and a sum sufficient for their payment set apart for all
past quarterly distribution periods and the then current distribution period,
no distributions (other than in shares ranking junior to the Series D
preferred shares) shall be authorized or paid or set apart for payment upon
any shares ranking junior to or on a parity with the Series D preferred
shares. Likewise, no shares ranking junior to or on a parity with the Series
D preferred shares shall be redeemed, purchased or otherwise acquired for any
consideration (or any moneys be paid to or made available for a sinking fund
for the redemption of any such shares) by Kramont (except by conversion into
or exchange for other such shares).
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No distributions on Series D preferred shares shall be authorized by the
board of trustees of Kramont or paid or set apart for payment by Kramont so
long as the terms and provisions of any agreement of Kramont, including any
agreement relating to its indebtedness, prohibit the authorization, payment
or setting apart for payment of distributions or provide that the
authorization, payment or setting apart for payment would constitute a breach
of, or a default under, any agreement of Kramont. Distributions will
likewise not be authorized, paid or set apart for payment to the extent that
their authorization, payment or setting apart for payment shall be restricted
or prohibited by applicable law.
Notwithstanding the foregoing, distributions on the Series D preferred
shares will accrue whether or not any agreement of Kramont prohibits their
payment, whether or not distributions are authorized, whether or not Kramont
has earnings and whether or not Kramont has assets legally available for
their payment.
Distributions Upon Liquidation, Dissolution or Winding Up
Upon any voluntary or involuntary liquidation, dissolution or winding up
of the affairs of Kramont, after payment or provision for payment of the
debts and other liabilities of Kramont, but before any distribution or
payment shall be made to holders of any shares ranking junior to the Series D
preferred shares as to the distribution of assets upon any liquidation,
dissolution or winding up of the affairs of Kramont, the holders of Series D
preferred shares shall be entitled to receive, out of the assets of Kramont
legally available for distribution to its shareholders, liquidating
distributions in cash (or property at its fair market value as determined by
the board of trustees of Kramont) in the amount of $25.00 per share plus an
amount equal to all distributions accrued and unpaid on each share (whether
or not declared) up to the date of the liquidation, dissolution or winding
up.
If the legally available assets of Kramont are insufficient to pay the
amount of $25.00 per share plus an amount equal to all distributions accrued
and unpaid on the Series D preferred shares and the corresponding amounts
payable on all shares ranking on a parity with the Series D preferred shares
as to the distribution of assets upon liquidation, dissolution or winding up,
then the holders of the Series D preferred shares and shares ranking on a
parity therewith shall share ratably in any such distribution of assets in
proportion to the full liquidating distributions to which they otherwise
would be respectively entitled.
Neither the consolidation or merger of Kramont with or into another
entity nor the dissolution, liquidation, winding up or reorganization of
Kramont immediately followed by incorporation of another corporation to which
Kramont's assets are distributed, nor the sale, lease, transfer or conveyance
of all or substantially all of Kramont's assets to another entity shall
bedeemed a liquidation, dissolution or winding up of the affairs of Kramont
if, in each case, effective provision is made in the charter of the resulting
or surviving entity or otherwise for the recognition, preservation and
protection of the rights of the holders of the Series D preferred shares.
After payment of the full amount of the liquidating distributions to
which they are entitled, the holders of Series D preferred shares will have
no right or claim to any of the remaining assets of Kramont and shall not be
entitled to any other distribution in the event of the liquidation or
dissolution of Kramont or the winding up of its affairs.
Conversion. The Series D preferred shares are not convertible into or
exchangeable for any other property or securities of Kramont.
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Voting Rights. Holders of the Series D preferred shares shall have no
voting rights, except as set forth below.
Whenever distributions on any Series D preferred shares are in arrears
for six or more quarterly distribution periods (whether or not consecutive),
the number of trustees of Kramont shall be increased by two and the holders
of the Series D preferred shares will be entitled to vote (separately as a
class with the holders of any other series of preferred shares upon which
like voting rights have been conferred and are exercisable) for the election
of two additional trustees at a special meeting called for that purpose
(except that no special meeting will be called if the request for the special
meeting is received less than 90 days before the date of the next annual
meeting of Kramont) at the request of at least 20% of the holders of the
Series D preferred shares and any other series of preferred shares upon which
like rights have been conferred and are exercisable. The holders of the
Series D preferred shares (together with the holders of any other series of
preferred shares upon which like voting rights have been conferred and are
exercisable) will be entitled to elect these two additional trustees until
the full distributions accumulated for all past quarterly distribution
periods and the then current quarterly distribution period on all outstanding
Series D preferred shares have been authorized and paid or set apart for
payment. No trustee elected by the holders of the Series D preferred shares
and the holders of any series of preferred shares upon which like voting
rights have been conferred and are exercisable may be removed except by the
vote of the holders of a majority of (i) the Series D preferred shares and
(ii) all other series of preferred shares which would then be entitled to
vote in the election of the trustee being removed, voting together as a
separate class, at a meeting called for that purpose.
Unless the holders of Series D preferred shares have been divested of
their right to elect trustees (as described below), if a trustee elected by
the holders of Series D preferred shares no longer serves on the board of
trustees by reason of resignation, death or removal, the vacancy may be
filled by holders of a majority of the Series D preferred shares and any
other series of shares upon which like voting rights have been conferred and
are exercisable.
If and when all distributions accumulated on the outstanding Series D
preferred shares have been authorized and paid or declared and set apart for
payment, the holders of the Series D preferred shares will be divested of
their right to elect trustees (subject to revesting upon each and every
future failure of Kramont to authorize and pay or declare and set apart for
payment distributions accumulated on the outstanding Series D preferred
shares for the requisite number of distribution periods), the term of any
trustees so elected will immediately terminate and the number of trustees
constituting the board of trustees of Kramont will immediately be reduced
accordingly.
Kramont may not, without the affirmative vote, or the written consent,
of the holders of at least two-thirds of the total number of outstanding
Series D preferred shares, voting as a class:
(i) authorize, create or issue, or increase the
authorized or issued amount of, or reclassify any
existing shares of beneficial interest into, any class or
series of, or rights to subscribe to or acquire, any
security convertible into, any class or series of shares
of beneficial interest ranking as to distribution rights
or liquidation preference, senior to the Series D
preferred shares; or
(ii) amend, alter or repeal, whether by merger,
consolidation or otherwise, any of the provisions of
Kramont's Declaration of Trust to
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change the preferences, rights or privileges of the Series D
preferred shares so as to materially and adversely affect the
Series D preferred shares;
provided, however, that no vote or consent will be required:
(i) in connection with any increase in the total
number of authorized common shares;
(ii) in connection with the authorization or
increase of any class or series of shares of beneficial
interest ranking, as to distribution rights and
liquidation preference, on a parity with or junior to the
Series D preferred shares;
(iii) in connection with any merger or consolidation
in which Kramont is the surviving entity if, immediately
after the merger or consolidation, there are outstanding
no shares of beneficial interest and no securities
convertible into shares of beneficial interest ranking as
to distribution rights or liquidation preference senior
to the Series D preferred shares other than securities of
Kramont outstanding prior to such merger or
consolidation;
(iv) in connection with any merger or consolidation
in which Kramont is not the surviving entity if, as a
result of the merger or consolidation, the holders of
Series D preferred shares receive shares of stock or
beneficial interest or other equity securities with
preferences, rights and privileges substantially
identical to the preferences, rights and privileges of
the Series D preferred shares and there are outstanding
no shares of stock or beneficial interest or other equity
securities of the surviving entity ranking as to
distribution rights or liquidation preference senior to
the Series D preferred shares other than securities of
Kramont outstanding prior to such merger or
consolidation; or
(v) if, at or prior to the time when the issuance
of any shares ranking senior to the Series D preferred
shares is to be made or any change is to take effect, the
Series D preferred shares have been called for
redemption.
Trustees Right to Refuse to Transfer; Limitation on Holdings. In the
event of any proposed transfer or issuance of Series D preferred shares that
would jeopardize Kramont's status as a REIT, the board of trustees of Kramont
has the right to refuse to permit such transfer or issuance and to take any
action necessary to cause the transfer or issuance not to occur. In
addition, any transfer or issuance of Series D preferred shares that would
(i) create a direct or indirect ownership of more than 9.8% of the lesser of
the number or the value of the total outstanding shares of beneficial
interest of Kramont (other than certain persons previously approved by the
board of trustees of Kramont); or (ii) result in Kramont being "closely held"
within the meaning of Section 856(h) of the Code, will be void ab initio and
Series D preferred shares purportedly so transferred may be purchased by
Kramont. For a more detailed description of the transfer restrictions
contained in the Declaration of Trust, see "-Restrictions on Transfer."
Redemption. Except in certain circumstances relating to Kramont's
maintenance of its status as a REIT (see below), the Series D preferred
shares are not redeemable before December 11, 2002. At any time and from
time to time on and after December 11, 2002, Kramont may, upon not less than
30 nor more than
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60 days' notice (given as described below), redeem the Series D preferred
shares in whole or in part (except as provided below), for the price of
$25.00 per share, plus all accrued and unpaid distributions up to the date
fixed by Kramont's board of trustees for the redemption, to the extent that
Kramont has funds legally available for the redemption. The redemption price
of $25.00 per share will be paid solely from the sale proceeds of any common,
preferred or depositary shares or interests; participation or other ownership
interests (however designated); and any rights (excluding convertible or
exchangeable debt securities), warrants or options to purchase any of the
foregoing. If Kramont elects to redeem fewer than all of the outstanding
Series D preferred shares, the shares to be redeemed shall be redeemed pro
rata from all holders of Series D preferred shares (with any adjustments
necessary to avoid the redemption of fractional shares) or by any other
equitable method determined by the board of trustees of Kramont.
If notice of redemption of any Series D preferred shares has been given
and the funds necessary for the redemption have been set aside by Kramont in
trust for the benefit of the holders of the shares called for redemption,
then from and after the date of the redemption, distributions will cease to
accrue on the shares called for redemption, the shares called for redemption
will no longer be deemed outstanding, and all rights of the holders of the
shares called for redemption with respect to those shares shall terminate,
except the right to receive the amount of $25.00 per share plus any accrued
and unpaid distributions on the shares called for redemption up to the date
of the redemption.
Notwithstanding the foregoing, unless full cumulative distributions on
all Series D preferred shares have been or contemporaneously are authorized
and paid or authorized and a sum sufficient for the payment thereof set apart
for payment for all past quarterly distribution periods and the then current
quarterly distribution period, no Series D preferred shares shall be redeemed
unless all outstanding Series D preferred shares are simultaneously redeemed;
provided, however, that the foregoing shall not prevent the purchase or
acquisition of Series D preferred shares pursuant to a purchase or exchange
offer made on the same terms to holders of all outstanding Series D preferred
shares, provided further, however, that the foregoing shall not prevent the
purchase or acquisition of Series D preferred shares from persons owning in
the aggregate 9.8% or more of the lesser of the number or value of the total
outstanding shares of beneficial interest of Kramont pursuant to provisions
of the declaration of trust, or 10% or more of the lesser of the number or
value of the total outstanding Series D preferred shares.
Unless full cumulative distributions on all outstanding Series D
preferred shares have been or contemporaneously are authorized and paid or
authorized and a sum sufficient for the payment thereof set apart for payment
for all past quarterly distribution periods and the then current quarterly
distribution period, Kramont shall not purchase or otherwise acquire any
Series D preferred shares, directly or indirectly (except by conversion into
or exchange for shares of Kramont ranking junior to the Series D preferred
shares as to distributions and upon liquidation, dissolution or winding up of
the affairs of Kramont).
Notice of any redemption will be given by publication, once a week for
two successive weeks beginning not less than 30 nor more than 60 days prior
to the date fixed by the board of trustees of Kramont for the redemption, in
a newspaper of general circulation in the city of New York. A similar notice
will be mailed by Kramont, postage prepaid, not less than 30 nor more than 60
days prior to the date fixed by the board of trustees of Kramont, addressed
to the holders of the Series D preferred shares to be redeemed at their
respective addressees as they appear on the share transfer records of
Kramont. No failure to give this notice or any defect in the notice or the
mailing thereof shall affect the validity of the proceedings for the
redemption of any Series D preferred shares except as to any holder to whom
Kramont failed to give notice or whose notice was defective.
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In addition to any information required by law or by the applicable
rules of any exchange upon which the Series D preferred shares may be listed
or admitted to trading, the notice will state:
(i) the date fixed by the board of trustees for the
redemption;
(ii) the price to be paid to redeem the shares
(including any accrued and unpaid distributions);
(iii) the number of shares to be redeemed and, if
less than all shares held by the particular holder are to
be redeemed, the number of shares to be redeemed from
that particular holder;
(iv) the place or places where certificates
representing the shares are to be surrendered for payment
of the amount set forth in clause (ii) above; and
(v) that distributions on the shares to be redeemed
will cease to accrue on the date set forth in clause (i)
above.
No Preemptive Rights
No holder of common or preferred shares will be entitled to any
preemptive rights to subscribe for or acquire any unissued shares of
beneficial interest of Kramont or securities of Kramont convertible into or
carrying a right to subscribe to or acquire shares of beneficial interest of
Kramont, whether such shares of beneficial interest or securities convertible
into shares of beneficial interest are now or hereafter authorized.
Power to Issue Additional Common Shares and Preferred Shares
Kramont believes that the power of the board of trustees to issue
additional authorized but unissued common shares or preferred shares and to
classify or reclassify unissued common or preferred shares and thereafter to
cause Kramont to issue such classified or reclassified shares of beneficial
interest will provide Kramont with increased flexibility in structuring
possible future financings and acquisitions and in meeting other needs which
might arise. The additional classes or series, as well as the common shares,
will be available for issuance without further action by Kramont's
shareholders, unless such action is required by applicable law or the rules
of any stock exchange or automated quotation system on which Kramont's
securities may be listed or traded.
Restrictions on Transfer
For Kramont to qualify as a REIT under the Code, its shares of
beneficial interest must be beneficially owned by 100 or more persons during
at least 335 days of a taxable year of twelve months (other than the first
year for which an election to be a REIT has been made) or during a
proportionate part of a shorter taxable year. Also, not more than 50% of the
value of the outstanding shares of beneficial interest may be owned, directly
or indirectly, by five or fewer individuals (as defined in the Code to
include certain entities) at any time during the last half of a taxable year
(other than the first year for which an election to be a REIT has been made).
Because the board of trustees believes it is at present essential for
Kramont to qualify as a REIT, the declaration of trust, subject to certain
exceptions, contains certain restrictions on the number of shares of
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beneficial interest of Kramont that a person may own. The declaration of
trust provides that no person may own, or be deemed to own by virtue of the
attribution provisions of the Code, more than 9.8% of the value of the
outstanding shares of beneficial interest of Kramont. In addition, the
declaration of trust prohibits any person from acquiring or holding, directly
or indirectly, common shares in excess of 9.8% (in value or in number of
shares, whichever is more restrictive) of the aggregate of the outstanding
common shares.
Kramont's board of trustees, in its sole discretion, may exempt a
proposed transferee from the ownership limitations discussed above. However,
the board may not grant an exemption to any person if doing so would result
in Kramont being "closely held" within the meaning of Section 856(h) of the
Code or otherwise would result in Kramont failing to qualify as a REIT. In
order to be considered by the board of trustees for an exemption, a person
also must not own, directly or indirectly, an interest in a tenant of Kramont
(or a tenant of any entity owned or controlled by Kramont) that would cause
Kramont to own, directly or indirectly, more than a 9.9% interest in such a
tenant. The person seeking an exemption must represent to the satisfaction
of the board of trustees that it will not violate the two aforementioned
restrictions. The person also must agree that any violation or attempted
violation of any of the foregoing restrictions will result in the automatic
transfer of the shares causing such violation to the trust discussed below.
The board of trustees may require a ruling from the Internal Revenue Service
or an opinion of counsel, in either case in form and substance satisfactory
to the board of trustees, in its sole discretion, in order to determine or
ensure Kramont's status as a REIT.
The declaration of trust further prohibits (a) any person from
beneficially or constructively owning shares of beneficial interest of
Kramont that would result in Kramont being "closely held" under Section
856(h) of the Code or otherwise cause Kramont to fail to qualify as a REIT
and (b) any person from transferring shares of beneficial interest of Kramont
if such transfer would result in the shares of beneficial interest of Kramont
being owned by fewer than 100 persons. Any person who acquires or attempts
or intends to acquire beneficial or constructive ownership of shares of
beneficial interest of Kramont that will or may violate any of the foregoing
restrictions on transferability and ownership, or any person who would have
owned shares of beneficial interest of Kramont that resulted in a transfer of
shares to the trust, is required to give notice immediately to Kramont and
provide Kramont with such other information as Kramont may request in order
to determine the effect of such transfer on Kramont's status as a REIT. The
foregoing restrictions on transferability and ownership will not apply if the
board of trustees determines that it is no longer in the best interests of
Kramont to attempt to qualify, or to continue to qualify, as a REIT.
If any transfer of shares of beneficial interest of Kramont occurs
which, if effective, would result in any person beneficially or
constructively owning shares of beneficial interest of Kramont in excess or
in violation of the above transfer or ownership limitations, then that number
of shares of beneficial interest of Kramont the beneficial or constructive
ownership of which otherwise would cause such person to violate such
limitations (rounded to the nearest whole share) shall be automatically
transferred to a trust for the exclusive benefit of one or more charitable
beneficiaries, and the intended transferee shall not acquire any rights in
the shares. The automatic transfer shall be deemed to be effective as of the
close of business on the business day (as defined in the declaration of
trust) prior to the date of such violative transfer. Shares of beneficial
interest held in the trust shall be issued and outstanding shares of
beneficial interest of Kramont. The intended transferee shall not benefit
economically from ownership of any shares of beneficial interest held in the
trust, shall have no rights to dividends and shall not possess any rights to
vote or other rights attributable to the shares of beneficial interest held
in the trust. The trustee of the trust shall have all voting rights and
rights to dividends or other distributions with respect to shares of
beneficial interest held in the trust, which rights shall be exercised for
the exclusive benefit of the charitable beneficiaries of the trust. Any
dividend or other distribution paid prior to the discovery by Kramont that
shares of beneficial interest have been transferred to the trustee shall be
paid by the recipient of such dividend or distribution to the trustee
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upon demand, and any dividend or other distribution authorized but unpaid
shall be paid when due to the trustee. Any dividend or distribution so paid
to the trustee shall be held in trust for the charitable beneficiaries of the
trust. The intended transferee shall have no voting rights with respect to
shares of beneficial interest held in the trust and, subject to Maryland law,
effective as of the date that such shares of beneficial interest have been
transferred to the trust, the trustee shall have the authority (at the
trustee's sole discretion) (i) to rescind as void any vote cast by an
intended transferee prior to the discovery by Kramont that such shares have
been transferred to the trust and (ii) to recast such vote in accordance with
the desires of the trustee acting for the benefit of the charitable
beneficiaries of the trust. However, if Kramont has already taken
irreversible trust action, then the trustee shall not have the authority to
rescind and recast such vote.
Within 20 days of receiving notice from Kramont that shares of
beneficial interest of Kramont have been transferred to the trust, the
trustee shall sell the shares of beneficial interest held in the trust to a
person, designated by the trustee, whose ownership of the shares will not
violate the ownership limitations set forth in the declaration of trust.
Upon such sale, the interest of the charitable beneficiaries in the shares
sold shall terminate and the trustee shall distribute the net proceeds of the
sale to the intended transferee and to the charitable beneficiaries of the
trust as follows. The intended transferee shall receive the lesser of (i)
the price paid by the intended transferee for the shares or, if the intended
transferee did not give value for the shares in connection with the event
causing the shares to be held in the trust (e.g., a gift, devise or other
such transaction), the Market Price (as defined in the Declaration of Trust)
of such shares on the day of the event causing the shares to be held in the
trust and (ii) the price per share received by the trustee from the sale or
other disposition of the shares held in the trust. Any net sale proceeds in
excess of the amount payable to the intended transferee shall be paid
immediately to the charitable beneficiaries of the trust. If, prior to the
discovery by Kramont that shares of beneficial interest have been transferred
to the trust, such shares are sold by a intended transferee, then (i) such
shares shall be deemed to have been sold on behalf of the Trust and (ii) to
the extent that the intended transferee received an amount for such shares
that exceeds the amount that such intended transferee was entitled to receive
pursuant to the aforementioned requirement, such excess shall be paid to the
trustee upon demand.
In addition, shares of beneficial interest of Kramont held in the trust
shall be deemed to have been offered for sale to Kramont, or its designee, at
a price per share equal to the lesser of (i) the price per share in the
transaction that resulted in such transfer to the trust (or, in the case of a
devise, gift or other such transaction, the Market Price at the time of such
devise gift or other such transaction) and (ii) the Market Price on the date
Kramont, or its designee, accepts such offer. Kramont shall have the right
to accept such offer until the trustee has sold the shares of beneficial
interest held in the trust. Upon such a sale to Kramont, the interest of the
charitable beneficiaries in the shares sold shall terminate and the trustee
shall distribute the net proceeds of the sale to the intended transferee.
All certificates evidencing common shares and preferred shares will bear
a legend referring to the restrictions described above.
Every owner of more than 5% (or such lower percentage as required by the
Code or the regulations promulgated thereunder) of all classes or series of
Kramont's shares of beneficial interest, including common shares, within 30
days after the end of each taxable year, is required to give written notice
to Kramont stating the name and address of such owner, the number of shares
of each class and series of shares of beneficial interest of Kramont which
the owner beneficially owns and a description of the manner in which such
shares are held. Each such owner shall provide to Kramont such additional
information as Kramont may request in order to determine the effect, if any,
of such beneficial ownership on Kramont's status as a REIT and to ensure
compliance with the ownership limitations described above. In addition, each
shareholder shall upon
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demand be required to provide to Kramont such information as Kramont may
request, in good faith, in order to determine Kramont's status as a REIT and
to comply with the requirements of any taxing authority or governmental
authority or to determine such compliance.
These ownership limitations could delay, defer or prevent a transaction
or a change in control of Kramont that might involve a premium price for the
common shares or otherwise be in the best interest of the shareholders.
Transfer Agent and Registrar
The transfer agent and registrar for the common shares and preferred
shares is First Union National Bank Shareholder Services Group.
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<PAGE>
DESCRIPTION OF THE PARTNERSHIP AGREEMENTS OF
KRAMONT OPERATING PARTNERSHIP, L.P.
AND MONTGOMERY CV REALTY L.P.
In anticipation of the signing of the merger agreement, KRT Trust and
its wholly owned subsidiary KRT Trust I LLC formed KRT Operating Partnership,
L.P. At the time of the Kranzco Reorganization and as of part of that
reorganization, KRT Operating Partnership, L.P. will change its name to
Kramont Operating Partnership, L.P. and will hold all of the equity interests
in the limited liability companies and limited partnerships formed by Kranzco
that will own Kranzco's existing properties. As a result of the mergers,
Kramont Realty Trust will become the sole general partner of, and also will
hold a substantial amount of the limited partner interests in, Kramont
Operating Partnership, L.P. The remaining limited partner interests in
Kramont Operating Partnership, L.P. will be held by the current limited
partners of Montgomery CV Realty L.P. who exchange their limited partner
interests in Montgomery CV Realty L.P. or in CV Partner Holdings, L.P. for
common units of limited partner interest in Kramont Operating Partnership,
L.P. See "PRE-MERGER TRANSACTIONS - Kranzco Reorganization Transactions,"
and "- Private Placement Offering of Kramont Operating Partnership, L.P.
Partnership Units."
Following the Kranzco Reorganization and upon the completion of the
mergers, Kramont Operating Partnership, L.P., through its subsidiary, CV GP
LP, is expected to become the general partner of, and will hold, together
with CV Partner Holdings, L.P., a subsidiary of CV GP LP, 99.88% of the
limited partner interests in Montgomery CV Realty L.P. as a result of the
private transaction in which the current limited partners of Montgomery CV
Realty L.P. were offered the opportunity to exchange their limited partner
interests in Montgomery CV Realty L.P. and in CV Partner Holdings, L.P. for
common units of limited partner interest in Kramont Operating Partnership,
L.P. or Kramont common shares.
At the time of the completion of the mergers, an amended and restated
agreement of limited partnership will be adopted for Kramont Operating
Partnership, L.P., which for purposes of this description is referred to as
the "Kramont OP Partnership Agreement." As a part of the private transaction
in which they agreed to exchange their limited partner interests in
Montgomery CV Realty L.P. for common units of limited partner interest in
Kramont Operating Partnership, L.P., or in CV Partner Holdings, L.P., or
Kramont common shares, the limited partners in Montgomery CV Realty L.P.
consented to the adoption of a second amended and restated agreement of
limited partnership of Montgomery CV Realty L.P. For purposes of this
description, that agreement is referred to as the "CV OP Partnership
Agreement."
Kramont Operating Partnership, L.P.
Generally, Kramont Realty Trust exclusively will possess all management
powers over the business and affairs of Kramont Operating Partnership, L.P.,
as its sole general partner and will have full power and authority to do all
things deemed necessary or desirable by it to conduct the business of Kramont
Operating Partnership, L.P., including the ability to cause it to enter into
certain major transactions, such as the acquisition, disposition, mortgage,
pledge, encumbrance, hypothecation, or exchange of any of its assets. For
purposes of this description only, Kramont is hereafter referred to as the
"General Partner." However, the Kramont OP Partnership Agreement provides
that neither Kramont Operating Partnership, L.P., CV GP LP nor Montgomery CV
Realty L.P. will sell or cause the sale of certain of the properties of
Montgomery CV Realty L.P. until various dates not later than July 31, 2002,
and also will not make certain prepayments or refinancings of certain of the
mortgages to which such properties are subject prior to various dates not
later than July 31, 2002, unless certain of the affected limited partners
consent to such sale, prepayment or refinancing.
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The holders of limited partner interests in Kramont Operating
Partnership, L.P., other than the General Partner, will not have any right to
participate in the management of Kramont Operating Partnership, L.P., except
that the General Partner (in its capacity as sole general partner) may be
required to seek the consent of some or all of the limited partners to effect
certain amendments to the Kramont OP Partnership Agreement.
Furthermore, the General Partner will be required to seek the consent of
a majority of the holders of the then outstanding limited partner interests
(including the limited partner interests held by the General Partner itself)
before engaging in any merger, consolidation, sale of substantially all of
its assets, or other "Termination Transaction," as such term is defined in
the Kramont OP Partnership Agreement.
As the sole general partner of Kramont Operating Partnership, L.P., the
General Partner will have the ability to cause Kramont Operating Partnership,
L.P., to issue additional common units of limited partner interest and under
certain circumstances preferred units of limited partner interest, in each
case subject to certain restrictions set forth in the Kramont OP Partnership
Agreement, and can cause Kramont Operating Partnership, L.P., to acquire
interests in additional properties including for common units of limited
partner interest without the consent of any other partners.
The Kramont OP Partnership Agreement provides that, if Kramont Operating
Partnership, L.P., requires additional funds to pursue its investment
objectives, the General Partner may fund such investments by (i) causing
Kramont Operating Partnership, L.P., to issue additional partnership
interests, (ii) making additional capital contributions to Kramont Operating
Partnership, L.P., (iii) causing Kramont Operating Partnership, L.P., to
borrow money, (iv) making a loan to Kramont Operating Partnership, L.P., or
(v) causing Kramont Operating Partnership, L.P., to sell any of its assets or
properties (subject to the limitations discussed above). However, limited
partners in Kramont Operating Partnership, L.P., cannot be required to make
additional capital contributions, loans or provide financial accommodations
to Kramont Operating Partnership, L.P.
The Kramont OP Partnership Agreement provides that if the General
Partner issues debt securities (other than to allow it to pay any dividend to
maintain its REIT qualification), preferred stock, common stock (except as is
needed to allow for the redemption of units of limited partner interest for
shares of beneficial interest in the General Partner) or rights, options,
warrants or convertible or exchangeable securities containing a right to
purchase debt securities, preferred or common stock of the General Partner,
then, (i) if debt securities are issued, the General Partner must lend to
Kramont Operating Partnership, L.P., an amount equal to the proceeds from
such debt securities on the same terms and conditions applicable to such debt
securities and (ii) if equity securities (including shares of beneficial
interest in the General Partner) are issued, then the General Partner must
contribute to Kramont Operating Partnership, L.P., an amount equal to the
proceeds from such securities including any subsequent conversion thereof (if
applicable). The Kramont OP Partnership Agreement contains provisions
designed to ensure that the number of common units of limited partner
interest and the general partner interest held by the General Partner,
directly or indirectly, will be equal to the number of outstanding Kramont
common shares, and that the number and financial terms of preferred units of
limited partner interest will be equal in number and will have substantially
similar terms as the outstanding Kramont preferred shares. Accordingly, to
maintain this equivalence, if the General Partner issues additional
securities, Kramont Operating Partnership, L.P. must issue additional units
of limited partner interest to the General Partner in the same amount and
having substantially the same terms.
The Kramont OP Partnership Agreement provides that the General Partner
may not voluntarily withdraw from or transfer or assign its general partner
interest in Kramont Operating Partnership, L.P., unless the General Partner
owns more than 95 percent of the common units of limited partner interest or
limited
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partners holding a majority of such common units (other than common units
originally issued to and still held by the General Partner) consent to such
transfer or withdrawal or such transfer is to an entity which is wholly-owned
by the General Partner. Except as provided in the preceding sentence, in the
event the General Partner withdraws as general partner, its general partner
interest will be converted into a limited partner interest.
The Kramont OP Partnership Agreement provides that the General Partner
shall cause Kramont Operating Partnership, L.P., to distribute from time to
time as the General Partner determines, but in any event not less frequently
than quarterly, all or a portion of the available cash generated by the
partnership during the quarter to the holders of common units of limited
partnership interest as the General Partner may, in its discretion,
determine. The partnership agreement also permits the General Partner to
cause Kramont Operating Partnership, L.P., to make sufficient distributions
to enable Kramont Realty Trust, in its capacity as the General Partner, to
satisfy the requirements for qualifying as REIT for purposes of federal tax
law.
Holders of limited partner interests in Kramont Operating Partnership,
L.P., generally may not transfer their limited partner interests without the
consent of the General Partner.
The Kramont OP Partnership Agreement grants holders of common units of
limited partner interest in Kramont Operating Partnership, L.P., other than
the General Partner, the right to require the partnership to redeem their
common units for cash at any time after the expiration of the twelve month
period following the effective time of the merger agreement (unless the
General Partner otherwise consents to a shorter holding period and except for
holders of common units who elected the right to do so immediately).
However, the General Partner will have the right to assume the obligation of
Kramont Operating Partnership, L.P., with respect to any such units tendered
for redemption and to acquire such units in exchange for cash or for Kramont
common shares at the option of the General Partner, provided that a
registration statement is in effect with respect to any Kramont common shares
the General Partner uses to satisfy its obligation to such holders of common
units (unless the Kramont common shares are otherwise freely tradeable, under
then applicable law, without a registration statement). The Kramont OP
Partnership Agreement also provides that if the General Partner elects to
exchange Kramont common shares for common units tendered for redemption, then
the number of Kramont common shares to be issued will generally be equal to
the number of units tendered for redemption.
Kramont Operating Partnership, L.P. will continue until December 31,
2096, or until sooner dissolved pursuant to terms of the Kramont OP
Partnership Agreement.
Montgomery CV Realty L.P.
The partners in Montgomery CV Realty L.P. have consented to the adoption
of the CV OP Partnership Agreement upon the completion of the mergers. The
following is a summary of certain amendments that will be made by the
adoption of the CV OP Partnership Agreement.
The general partner of Montgomery CV Realty L.P. currently is Montgomery
CV Realty Trust, a wholly owned subsidiary of CV. As a result of the merger
of Montgomery CV Realty Trust into CV prior to the effective time of the
mergers, Montgomery CV Realty Trust will cease to exist. Pursuant to the
transactions contemplated in the merger agreement, CV GP LP, a subsidiary of
Kramont Operating Partnership, L.P., will become the general partner of
Montgomery CV Realty L.P. Thereafter, CV GP LP will possess all of the
management powers over the business and affairs of Montgomery CV Realty L.P.
previously held by Montgomery CV Realty Trust. Additionally, upon the
completion of the mergers, the approximately 84.5% limited partner interest
in Montgomery CV Realty L.P. indirectly held by CV also shall
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be transferred to CV GP LP. See "Ownership Structure" and "Pre-Merger
Transactions-Private Placement Offering of Kramont Operating Partnership,
L.P. Partnership Units."
Following the exchange of limited partner interests in Montgomery CV
Realty L.P. and in CV Partners Holdings, L.P. for units of limited partner
interest in Kramont Operating Partnership, L.P. or Kramont common shares,
0.12% of the limited partner interests in Montgomery CV Realty L.P. will be
held by non-exchanging limited partners who will remain subject to the CV OP
Partnership Agreement.
In light of the merger of CV into Kramont Realty Trust, the CV OP
Partnership Agreement reflects an amendment of the provision that previously
permitted the general partner to substitute shares of CV common stock in lieu
of cash upon a limited partner's request to cause the redemption of its
limited partner interest. The CV OP Partnership Agreement provides that the
general partner may substitute common shares of beneficial interest in
Kramont Realty Trust instead of CV common stock.
The CV OP Partnership Agreement also reflects an amendment to the
provisions that previously required the general partner to use its best
efforts to cause the partnership to distribute sufficient amounts to CV,
through Montgomery CV Realty Trust, to enable it to maintain its REIT
qualification for federal tax purposes. The CV OP Partnership Agreement
provides that CV GP LP, in its capacity as general partner may cause the
partnership to make distributions in sufficient amounts to CV GP LP to enable
CV GP LP to make distributions to Kramont Operating Partnership, L.P., in
sufficient amounts to enable Kramont Operating Partnership, L.P. to make
distributions to Kramont Realty Trust sufficient to enable it to maintain its
REIT qualification for federal income tax purposes. However, the CV OP
Partnership Agreement no longer includes a provision that, until December 31,
2002, if sufficient distributions are not made to enable CV to pay a regular
quarterly dividend of at least 29 cents per share for any quarter, the
compensation payable to the person fulfilling the duties of chief executive
officer of Montgomery CV Realty L.P. shall be reduced by 50% in that quarter
and each subsequent quarter until a regular quarterly dividend of at least 29
cents per share has been paid for four consecutive quarters. The CV OP
Partnership Agreement does not include an analogous provision covering
distributions sufficient for Kramont Realty Trust to make a quarterly
dividend payment in a set amount or requiring the reduction in any person's
compensation if such distributions are not made.
The CV OP Partnership Agreement also clarifies the provisions that
previously limited the general partner from selling or causing the sale of
certain properties, or making certain pre-payments or refinancings of certain
of the mortgages encumbering such properties, until various dates not later
than July 31, 2002, so that, if the affected person is no longer a limited
partner, then the limitation does not apply with respect to the property
identified with such person.
The CV OP Partnership Agreement requires that cash or other
consideration received by Kramont or its subsidiaries as a result of the
issuance of shares or other securities by Kramont, or certain other events,
be contributed to Montgomery CV Realty L.P. CV GP LP has the power, as
general partner of Montgomery CV Realty L.P., but is not required, to cause
Montgomery CV Realty L.P. to lend any such cash received to Kramont Operating
Partnership, L.P. or any of its affiliates.
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KRAMONT PRO FORMA FINANCIAL STATEMENTS
UNAUDITED PRO FORMA OPERATING AND FINANCIAL INFORMATION
The following tables set forth summary consolidated pro forma financial
information of Kramont for the year ended December 31, 1999 as if the mergers
and CV's property acquisitions during its current fiscal year had occurred on
December 31, 1999 for balance sheet data and January 1, 1999 for income
statement data. The pro forma data included herein may not be indicative of
the actual results or financial position had the mergers and property
acquisitions occurred on the dates indicated nor does it purport to represent
the future financial position and results of operations of Kramont. The pro
forma information has been prepared on the basis that the merger will be
treated as a purchase by CV of Kranzco for accounting purposes because, among
other things, for a period of at least two years a majority of the Board of
Trustees of Kramont will consist of current members of the CV Board of
Directors as a result of provisions in the Kramont Declaration of Trust and
Bylaws requiring the maintenance of a three-class staggered board, and CV's
Chief Executive Officer, Louis P. Meshon, Sr., will become the Chief
Executive Officer of Kramont.
Kramont Realty Trust
Pro Forma Combined Condensed Balance Sheet
As of December 31, 1999
(Dollar amounts in thousands)
(Unaudited)
Pro Forma Kramont
CV Kranzco Merger Pro Forma
(Historical) (Historical) Adjustments Total
----------- ----------- ---------- --------
Assets
Real estate, at cost, net. $ 173,076 $ 510,321 $ 7,886(A) $691,283
Real estate mortgage notes
receivable. . . . . . . . 63,385 0 0 63,385
Cash and marketable
securities. . . . . . . . 3,495 5,020 0 8,515
Restricted cash. . . . . . 890 1,853 0 2,743
Rents and other
receivables, net. . . . . 2,164 7,584 (4,857)(B) 4,891
Prepaid expenses . . . . . 5,858 2,984 0 8,842
Deferred financing
costs, net. . . . . . . . 0 1,645 (1,645)(B) 0
Other deferred costs, net. 0 3,108 (3,108)(B) 0
Other assets . . . . . . . 0 3,110 (2,750)(B)(C) 360
Other real estate, net . . 5,503 0 0 5,503
Investments in unconsol-
idated affiliates . . . . 3,390 0 0 3,390
-------- ------- ------- -------
Total assets . . . . . . $ 257,761 $ 535,625 $(4,474) $788,912
========= ========= ======== =========
Liabilities
Mortgages and notes
payable . . . . . . . . . $ 156,329 $ 353,208 $11,761 (E) $521,298
Accounts payable and
accrued expenses. . . . . 7,024 10,713 (1,238)(D) 16,499
-------- ------- ------- -------
Total liabilities. . . . 163,353 363,921 10,523 537,797
Minority interests in
Operating Partnership. . 16,846 0 1,425(F) 18,271
Beneficiaries Equity
Paid in capital of Common and
Preferred shares . . . . 18,570 263,889 (107,857)(I) 174,602
Cumulative net income available
for common shares . . . . 58,992 41,977 (41,977)(G) 58,992
Cumulative distributions on
common shares . . . . . . 0 (133,897) 133,897 (G) 0
-------- ------- ------- -------
77,562 171,969 (15,937) 233,594
Unearned compensation on
restricted common shares. 0 (265) (485)(H) (750)
-------- ------- ------- -------
Total beneficiaries'
equity. . . . . . . . . 77,562 171,704 (16,422) 232,844
-------- ------- ------- -------
Total liabilities and
beneficiaries' equity . $ 257,761 $ 535,625 $(4,474) $788,912
========= ========= ======== =========
The accompanying notes and management's assumptions are an integral part of
this statement.
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<PAGE>
<TABLE>
<CAPTION>
Kramont Realty Trust
Pro Forma Combined Condensed
Statement of Operations for
the Year Ended December 31, 1999
(Unaudited)
CV
Pro Forma Pro forma
CV Adjustments CV Kranzco Merger Kramont
(Historical) Acquisitions (Pro Forma) (Historical) Adjustments (Pro Forma)
------------ ------------ ---------- ------------ ----------- ----------
(Audited) (A) (Audited)
<S> <C> <C> <C> <C> <C> <C>
Revenue
Minimum Rent . . . . . . . . . . $ 19,393 $ 1,050 $ 20,443 $ 62,087 $ 367(B) $ 82,897
Percentage rent. . . . . . . . . 304 23 327 1,335 0 1,662
Expense reimbursements . . . . . 5,700 318 6,018 13,820 0 19,838
Other income . . . . . . . . . . 158 5 163 520 0 683
Interest income primarily
from mortgage notes . . . . . . 8,008 0 8,008 340 0 8,348
--------- -------- --------- -------- ------- ---------
Total revenue . . . . . . . . . 33,563 1,396 34,959 78,102 367 113,428
--------- -------- --------- -------- ------- ---------
Expenses
Interest . . . . . . . . . . . . 11,743 640 12,383 27,236 422(C) 40,041
Depreciation and amortization. . 4,078 221 4,299 16,863 (4,819)(D) 16,343
Operations and maintenance . . . 7,621 388 8,009 18,503 0 26,512
General and administrative . . . 1,768 0 1,768 3,840 210(E) 5,818
--------- -------- --------- -------- ------- ---------
Total expenses. . . . . . . . . 25,210 1,249 26,459 66,442 (4,187) 88,714
--------- -------- --------- -------- ------- ---------
Subtotal . . . . . . . . . . . . $ 8,353 $ 147 $ 8,500 $ 11,660 $ 4,554 $ 24,714
Equity in income of
unconsolidated affiliates . . . 238 43 (F) 281 0 0 281
Gain on Sale of Real Estate. . . 0 0 0 535 0 535
Minority interests in income of
Operating Partnership . . . . . (1,344) 0 (1,344) 0 (516)(G) (1,860)
--------- -------- --------- -------- ------- ---------
Income before preferred share
distributions . . . . . . . . . 7,247 190 7,437 12,195 4,038 23,670
Preferred share distributions. . 0 0 0 7,903 0 7,903
--------- -------- --------- -------- ------- ---------
Net income attributable to
common shareholders . . . . . . $ 7,247 $ 190 $ 7,437 $ 4,292 $ 4,038 $ 15,767
--------- -------- --------- -------- ------- ---------
Basic Earnings Per Common
Share . . . . . . . . . . . . . $ 0.91 $ 0.93 $ 0.41 $ 0.85
======== ========= ======== =========
Diluted Earnings Per Common . .
Share. . . . . . . . . . . . . . $ 0.91 $ 0.93 $ 0.41 $ 0.85
======== ========= ======== =========
Weighted average number of
Common Shares of
Beneficial Interest . . . . . . 7,967 7,967 10,551 75 18,593
The accompanying notes and management's assumptions are an integral part of this statement.
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</TABLE>
<PAGE>
Notes and Management's Assumptions to Pro Forma Combined
Condensed Balance Sheet for Kramont Realty Trust as of December 31, 1999
(Dollar amounts in thousands, except per share data)
(A) Represents adjustments to record the Merger in accordance with the
purchase method of accounting with CV as the accounting acquirer. The
purchase price of the Kranzco shares was calculated assuming a market
value of CV shares of $10.00 per share (based on pre- and post-
announcement trading of CV shares) times the outstanding shares of
Kranzco Common Shares of Beneficial Interest of 10,566,746. In addition,
the Kranzco Series Preferred A-1 Shares of Beneficial Interest of 11,155
shares have been valued at $455.77 per share, based on the terms of the
conversion provisions into 508,410 Common Shares of Beneficial Interest.
The Kranzco Series Preferred B-1 Shares of Beneficial Interest of
1,183,277 shares have been valued at $16.88 per share and the Kranzco
Series Preferred D Shares of Beneficial Interest of 1,800,000 shares
have been valued at $14.44 per share based on pre- and post-
announcement trading of the respective shares. The total purchase price
is as follows:
Shares of Shares Value Per Total
Beneficial Interest Outstanding Share Consideration
------------------- ----------- --------- -------------
Common 10,566,746 $ 10.00 $ 105,667
Series Preferred A-1 11,155 $ 455.77 $ 5,084
Series Preferred B-1 1,183,277 $ 16.88 $ 19,968
Series Preferred D 1,800,000 $ 14.44 $ 25,988
---------
Total equity $ 156,707
Merger and the other transaction costs 12,168
---------
Total purchase price $ 168,875
=========
Estimated fees and expenses related to the mergers are as follows:
Advisory fees $ 4,500
Accounting and legal 3,500
Merger and other costs, including employment
and severance agreements and exit costs 4,168
---------
Total CV transaction costs $ 12,168
---------
Purchase Price (see above) $ 168,875
Less historical book value of Kranzco equity (171,704)
Adjustments to reflect certain assets and liabilities
of Kranzco at fair value:
Decrease in accounts receivable
and other assets (see (B)) $ 9,860
Increase mortgages and notes payable) 855
(see (E))
10,715
---------
Adjustment required to reflect increase in investment
in real estate, net $ 7,886
---------
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(B) Adjustments to other assets:
To eliminate Kranzco's asset related to the straight-
lining of rent related to leases $ (4,857)
To eliminate Kranzco's asset of deferred
financing costs (1,645)
To eliminate Kranzco's asset of deferred leasing costs (3,108)
To eliminate furniture and fixtures and other assets (250)
---------
$ (9,860)
(C) To eliminate transaction costs paid or accrued as
of December 31, 1999 $ (2,500)
(D) Adjustments to liabilities:
To reflect increase in other liabilities for future
rental obligation on Kranzco headquarters 512
To eliminate accrued transaction costs (1,750)
---------
$ (1,238)
=========
(E) Adjustments to mortgages and notes payable:
To record the premiums and (discounts) required to
adjust mortgages and notes payable to fair
value using estimated market rates on an
instrument by instrument basis.
Total premiums $ 3,535
Total discounts (2,680)
---------
855
To reflect the increase in debt to pay for estimated
Merger costs 10,906
---------
$ 11,761
=========
(F) To reflect the increase in minority interest resulting
from the contribution of assets to the new
Operating Partnership. $ 1,425
(G) To eliminate Kranzco's historical cumulative net
income and cumulative distributions.
(H) Adjustments to unearned compensation on
restricted common shares:
To record the vesting of unearned compensation
of Kranzco. $ 265
To record the unearned compensation related to
the 75,000 restricted shares issued to
Louis Meshon, Sr. (750)
---------
$ (485)
=========
(I) To adjust paid in capital for securities issued.
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Notes and Management's Assumptions to Pro Forma Combined
Condensed Statements of Operations
(Dollar Amounts in Thousands)
(A) To reflect the operations of the three properties acquired
by CVI during 1999, for the period from January 1, 1999
to the acquisition date.
Year
Ended
December 31,
1999
------------
(B) To eliminate effect of pre-acquisition
straight-line rental income for Kranzco leases $ (237)
To record reset straight-line rental income
for Kranzco leases 604
--------
Total straight-line rent adjustment, net $ 367
========
(C) To reflect the following adjustments to
interest expense:
To record interest expense on
merger debt $11,656 8.0% $ 932
To record amortization of the premium required
to adjust Kranzco's mortgages and other notes
payable to fair value, net (510)
--------
Total interest expense adjustment $ 422
========
(D) Adjustments to depreciation and amortization:
To adjust building depreciation expense for
Kranzco properties over a 40 year life $(3,358)
To eliminate amortization of deferred financing
costs for Kranzco (677)
To eliminate amortization of deferred leasing
costs for Kranzco (784)
--------
Total adjustment $(4,819)
========
(E) To record the compensation related to the
issuance of 75,000 shares of Kramont and the
estimated taxes thereon to Louis Meshon, Sr.,
President and CEO of Kramont $ 210
(F) To record management fee income of Drexel Realty,
subsidiary of CV, for acquisition properties $ 43
(G) To record the minority interest share of
operating results:
Operating results $25,530
Minority interest ownership percentage 7.29%
--------
Minority interest share as adjusted (1,860)
Minority interest share as previously stated (1,344)
--------
Adjustment to reflect minority interest
in pro-forma results $ (516)
========
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<PAGE>
PROPOSAL TO APPROVE KRAMONT'S 2000 INCENTIVE PLAN
General
The board of trustees of Kramont has approved the 2000 Incentive Plan,
subject to the approval by the shareholders of CV and Kranzco. The purpose
of the 2000 Incentive Plan is to align the interests of Kramont's trustees,
officers, consultants and employees with those of the Kramont shareholders.
This plan is intended also to enable Kramont to attract, compensate and
retain trustees, officers, consultants and employees and provide them with
appropriate incentives and rewards for their performance. The existence of
the 2000 Incentive Plan should enable Kramont to compete more effectively for
the services of these individuals. The following description of the 2000
Incentive Plan is a summary of the principal provisions of the 2000 Incentive
Plan and is qualified in its entirety by reference to the 2000 Incentive
Plan, a copy of which is attached as Appendix F hereto.
Awards to trustees, consultants, officers and other employees under the
2000 Incentive Plan may take the form of share options, including
corresponding share appreciation rights and reload options, restricted share
awards, share purchase awards and other share-based awards.
Share Authorization
The maximum number of Kramont common shares that may be the subject of
awards under the 2000 Incentive Plan is 1,000,000 shares. The number of
Kramont common shares that may be the subject of awards under the 2000
Incentive Plan may be adjusted to reflect any change in Kramont's capital
structure or business by reason of certain corporate transactions or events.
Kramont common shares will again be available for awards (other than
incentive options) under the 2000 Incentive Plan if those shares become
available because they were either (a) previously part of any unexercised
portions of terminated options, (b) forfeited by participants, or (c) subject
to any awards that are otherwise surrendered by a participant without
receiving any payment or other benefit. In the event the purchase price of
an option is paid in whole or in part through the delivery of Kramont common
shares, the number of Kramont common shares issuable in connection with the
exercise of the option shall not again be available for the grant of awards
under the 2000 Incentive Plan. Additionally, Kramont common shares subject
to options, or portions thereof, with respect to which share appreciation
rights are exercised are not again available for the grant of awards under
the 2000 Incentive Plan. Kramont common shares to be issued or delivered
under the 2000 Incentive Plan are shares which are either authorized and
unissued, or are already-issued Kramont common shares that have been
reacquired by Kramont, or both.
2000 Incentive Plan Administration
Unless otherwise determined by the trustees, the 2000 Incentive Plan
will be administered by a committee of two or more non-employee trustees,
each of whom is intended to be a non-employee director (trustee) as defined
in Rule 16b-3 under the Securities Exchange Act and an outside director
(trustee) as defined under Section 162(m) of the Internal Revenue Code. The
committee will determine the trustees, officers, consultants, advisors and
other employees who will be granted awards, and will determine the terms of
awards (including, without limitation, the extent to which awards under the
2000 Incentive Plan will become fully vested, loans may be forgiven or other
acceleration upon the occurrence of a change in control), and the amount and
type of awards. Additionally, the committee will establish rules and
regulations relating to the administration of the 2000 Incentive Plan.
Options
"Incentive options" meeting the requirements of Section 422 of the
Internal Revenue Code, and "nonqualified options" that do not meet such
requirements are both available for grant under the 2000 Incentive Plan. The
term of each option will be determined by the committee, but no option will
be
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exercisable more than ten years (or five years in the case of an incentive
option granted to a 10% shareholder) after the date of grant. Options may
also be subject to restrictions on exercise, as determined by the committee.
The exercise price for incentive options or nonqualified options which are
intended to be performance-based for purposes of Section 162(m) of the
Internal Revenue Code must be at least equal to 100% of the fair market value
of the Kramont common shares on the date of grant (or, in the case of an
incentive option granted to a 10% shareholder, 110% of the fair market
value). The exercise price for nonqualified options which are not intended
to be performance-based for purposes of Section 162(m) of the Internal
Revenue Code will be determined by the committee at the time of grant. The
exercise price can be paid in cash, or if approved by the committee: (i) by
actually or constructively tendering Kramont common shares owned by a
participant for at least 6 months or such other period to avoid accounting
charges against the Company's earnings, (ii) by delivery of a promissory
note, or (iii) if the Kramont common shares are publicly traded, through a
"cashless exercise" procedure whereby a participant delivers irrevocable
instructions to a broker to promptly deliver to Kramont an amount equal to
the exercise price, or a combination of any of the foregoing.
Incentive options are not transferable except by will or the laws of
descent and distribution and may be exercised only by the participant (or his
guardian or legal representative) during his or her lifetime, except as
provided below. Nonqualified options may be transferable to certain family
members and trusts, partnerships or other entities owned more than 50% by
such family members.
The maximum number of shares that may be granted to an individual in any
fiscal year with respect to grants of options and share appreciation rights
that are intended to qualify as "performance based" under the Section 162(m)
of the Internal Revenue Code is 100,000 shares per year.
In connection with the merger of CV into Kramont and the merger of KRT
Trust into Kramont, Kramont will cause options to be issued to current CV
officers or directors and current Kranzco executive officers. See "Interests
of CV Executive Officers and Directors in the Mergers-Assumption and Issuance
of Options" and "Interests of Kranzco Executive Officers and Trustees in the
Merge -Assumption and Issuance of Options."
Share Appreciation Rights
The 2000 Incentive Plan provides that share appreciation rights may be
granted in connection with a grant of options. Each share appreciation right
must be associated with a specific option and must be granted at the time
that the option is granted. A share appreciation right is exercisable only
to the extent that the related option is exercisable. Upon the exercise of a
share appreciation right, the recipient is entitled to receive from Kramont,
without the payment of any cash (except for any applicable withholding
taxes), up to, but no more than, an amount in cash or Kramont common shares
equal to the excess of (A) the fair market value of one common share on the
date of such exercise over (B) the exercise price of the related option,
times the number of Kramont common shares in respect of which such share
appreciation right shall have been exercised. Upon the exercise of a share
appreciation right, the related share option, or the portion thereof in
respect of which the share appreciation right is exercised, will terminate.
Upon the exercise of an option granted in tandem with a share appreciation
right, the tandem share appreciation right will terminate.
Reload Options
The committee may make available, concurrently with the award of any
option to the participants, the right to receive in the future one or more
reload options to purchase a number of Kramont common shares equal to the
number of Kramont common shares delivered (or deemed delivered) by the
participant to Kramont to exercise an underlying option and, to the extent
authorized by the committee, the number of shares used to satisfy any tax
withholding requirement incident to the exercise of the underlying option.
Although an underlying option may be an incentive option, a reload option is
not intended to qualify as an incentive option. A reload option may be
granted in connection with the exercise of an option that is itself a reload
option. Each reload option will have the same expiration date as the
underlying option and an
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exercise price equal to the fair market value of the Kramont common shares on
the date of grant of the reload option. A reload option is exercisable on or
after the six month anniversary of the date of grant of the reload option.
Restricted Shares
The committee may award restricted Kramont common shares to a
participant. Such a grant gives a participant the right to receive Kramont
common shares subject to a risk of forfeiture based upon certain conditions.
The forfeiture restrictions on the Kramont common shares may be based upon
performance standards, length of service or other criteria as the committee
may determine. Until all restrictions are satisfied, lapsed or waived,
Kramont will maintain custody over the restricted Kramont common shares.
However, during that time, the participant will be able to vote the Kramont
common shares and will be entitled to an amount equal to all distributions,
if any, paid with respect to the Kramont common shares, as provided by the
committee. During such restrictive period, the restricted Kramont common
shares may not be sold, assigned, transferred, pledged or otherwise
encumbered.
If the grant of restricted shares or the lapse of the relevant
restriction is based on the attainment of objective performance goals, the
committee shall establish the performance goals, formulae or standards and
the applicable vesting percentage for the award of restricted shares
applicable to each participant while the outcome of the performance goals is
substantially uncertain. Such performance goals may incorporate provisions
for disregarding (or adjusting for) changes in accounting methods, corporate
transactions (including, without limitation, dispositions and acquisitions)
and other similar events or circumstances.
These performance goals shall be based on one or more of the following
performance criteria (or, for awards not intended to satisfy Section 162(m)
of the Internal Revenue Code, such other factors as the committee may
determine in its sole discretion): (i) revenues, income before income taxes
and extraordinary income, net income, earnings before income tax, earnings
before interest, taxes, depreciation and amortization, funds from operation
of real estate investments or a combination of any or all of the foregoing;
(ii) after-tax or pre-tax profits; (iii) operational cash flow; (iv) level
of, reduction of, or other specified objectives with regard to Kramont's bank
debt or other long-term or short-term public or private debt or other similar
financial obligations; (v) earnings per share or earnings per share from
continuing operations; (vi) return on capital employed or return on invested
capital; (vii) after-tax or pre-tax return on stockholders' equity; (viii)
economic value added targets; (ix) fair market value of the common shares;
and (x) the growth in the value of an investment in the common shares
assuming the reinvestment of dividends. In addition, such performance goals
may be based upon the attainment of specified levels of Kramont (or
affiliate, division or other operational unit of Kramont) performance under
one or more of the measures described above relative to the performance of
other corporations. To the extent permitted under Section 162(m) of the
Internal Revenue Code, the committee may, for awards intended to satisfy
Section 162(m): (i) designate additional business criteria on which the
performance goals may be based or (ii) adjust, modify or amend the
aforementioned business criteria.
The maximum number of shares that may be granted to an individual in any
fiscal year with respect to grants of restricted shares or other share based
awards (described below) that are intended to qualify as "performance based"
under the Section 162(m) on the Internal Revenue Code is 50,000 shares per
year.
Share Purchase Awards
The 2000 Incentive Plan also permits the grant of share purchase awards
to participants. Participants who are granted a share purchase award are
provided with a share purchase loan to enable them to pay the purchase price
for the Kramont common shares acquired pursuant to the award. The terms of
each share purchase loan will be determined by the committee. The purchase
price of the Kramont common shares acquired with a share purchase loan is the
fair market value on the date of the award. The 2000 Incentive Plan provides
that some or all of a share purchase loan can be forgiven under terms
determined by the committee. At the end of the loan term, the remainder of
the share purchase loan will be due and payable.
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The interest rate, if any, on a share purchase loan will be determined by the
committee. Share purchase loans may be recourse or nonrecourse under terms
determined by the committee and, in the case of nonrecourse loans, shall be
secured by a pledge of the shares acquired pursuant to the loan.
Other Share-Based Awards
The committee may also grant other stock-based awards under the 2000
Incentive Plan to eligible participants that are payable in, valued in whole
or in part by reference to, or otherwise based on or related to Kramont
common shares, including, but not limited to, Kramont common shares in
payment of the amounts due under an incentive or performance plan sponsored
or maintained by Kramont or any of its subsidiaries. Subject to the
provisions of the 2000 Incentive Plan, the committee will have authority to
determine the recipients to whom and the time or times at which such awards
will be made, the number of shares of common stock to be awarded pursuant to
or referenced by such award and all other conditions of the awards. The
committee may also provide for the grant of such awards upon the completion
of a specified performance period and/or achievement of performance goals.
The performance criteria that may be selected by the committee are the same
as those described above for restricted shares. Other performance goals may
be used to the extent such goals satisfy the requirements of Section 162(m)
of the Internal Revenue Code or the award is not intended to satisfy the
requirements of Section 162(m) of the Internal Revenue Code.
Certain Federal Income Tax Consequences of the 2000 Incentive Plan
The following is a brief summary of the principal federal income tax
consequences of awards under the 2000 Incentive Plan. The summary is based
upon current federal income tax laws and interpretations thereof, all of
which are subject to change at any time, possibly with retroactive effect.
The summary is not intended to be exhaustive and, among other things, does
not describe state, local or foreign tax consequences. Each recipient of a
grant is urged to consult with his or her own tax advisor as to the specific
tax consequences to such grantee of the grant and exercise of options, share
appreciation rights and rights under other awards and of the disposition of
the common shares acquired through the exercise of options or other rights
awarded.
Options
In general, a participant is not subject to federal income tax either at
the time of grant or at the time of exercise of an incentive option.
However, upon exercise, the difference between the fair market value of the
Kramont common shares and the exercise price is a tax preference item subject
to the possible application of the alternative minimum tax. If (i) a
participant does not dispose of the Kramont common shares acquired through
the exercise of an incentive option in a "disqualifying disposition" (i.e.,
if no disposition occurs either within two years from the date of grant of
the share option or within one year of the transfer of the Kramont common
shares to the participant) and (ii) at all times during the period beginning
on the date of grant of the option and ending on the day three months before
the date of such exercise, the participant was an employee of Kramont or any
of its subsidiaries, then the participant will be taxed only upon the gain,
if any, from the sale of such Kramont common shares, and that gain will be
taxable as gain from the sale of a capital asset.
Kramont will not receive any tax deduction on the exercise of an
incentive option or, if the above holding period and employment requirements
are met, on the sale of the underlying Kramont common shares so acquired by a
participant. The aggregate fair market value of Kramont common shares
(determined at the time of grant) with respect to which incentive options can
be exercisable for the first time by a participant during any calendar year
cannot exceed $100,000. If there is a disqualifying disposition (i.e., if
one of the holding period requirements is not met) or the participant was not
employed by Kramont or one of its subsidiaries during the entire applicable
period, the participant will be treated as receiving compensation subject to
ordinary income tax and Kramont, subject to the application of Sections
162(m) and 280G of the Internal Revenue Code, will be entitled to a deduction
for compensation expense in an amount equal to the amount included in income
by the participant. The participant generally will be required to include in
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income an amount equal to the difference between the fair market value of the
Kramont common shares at the time of exercise and the exercise price. Any
appreciation in value after the time of exercise will be taxed as capital
gain and will not result in any deduction by Kramont.
If nonqualified options are granted to a participant, there generally
are no federal income tax consequences at the time of grant. Upon exercise
of the option and provided the common shares acquired upon exercise of the
option are not restricted shares, the participant must report as ordinary
income an amount equal to the difference between the exercise price and the
fair market value of the Kramont common shares on the date of exercise.
Kramont, subject to, inter alia, the application of Sections 162(m) and 280G
of the Internal Revenue Code, will receive a tax deduction of the same
amount. Any appreciation in value after the time of exercise will be taxed
as capital gain and will not result in any deduction by Kramont.
A participant who is an officer or trustee of Kramont or a beneficial
owner of more than 10% of any class of registered equity securities of
Kramont should consult with his or her tax advisor as to whether, as a result
of Section 16(b) of the Securities Exchange Act and the rules and regulations
thereunder that are related thereto, the timing of income recognition is
deferred for any period following the exercise of an option. If there is a
deferral period, absent a written election (pursuant to Section 83(b) of the
Internal Revenue Code) filed with the Internal Revenue Service within 30 days
after the date of transfer of the common shares pursuant to the exercise of
the option to include in income, as of the transfer date, the excess on such
date of the fair market value of such shares over their exercise price,
recognition of income by the participant could, in certain instances, be
deferred until the expiration of the deferral period.
Share Appreciation Rights
No income will be realized by a participant in connection with the grant
of any share appreciation right and there will be no U.S. federal tax
consequences to Kramont. Upon the exercise of any share appreciation right,
the participant must include in ordinary income the amount of cash and the
fair market value on the exercise date of any Kramont common shares that the
participant is entitled to receive. Kramont, subject to, inter alia, the
application of Sections 162(m) and 280G of the Internal Revenue Code, will be
entitled to a deduction equal to the amount included in such participant's
income by reason of the exercise of any share appreciation right.
Reload Options
The receipt of a reload option by a holder of an underlying incentive
option or an underlying nonqualified option (including a reload option) upon
exercise of such underlying option should not in itself affect the tax
treatment of the exercise of such underlying incentive or nonqualified
option. A participant will not be subject to tax at the time a reload option
is granted (except for any income recognized upon the exercise of the
underlying option at the time of grant of the reload option). A reload
option will constitute a nonqualified option for federal income tax purposes
and will be taxed as such in the manner set forth above.
Restricted Shares
A grant of restricted Kramont common shares does not constitute a
taxable event either for a participant or for Kramont. However, the
participant will be subject to tax, at ordinary income rates, when the
Kramont common shares are no longer subject to a substantial risk of
forfeiture or become freely transferable. Kramont, subject to, inter alia,
the application of Sections 162(m) and 280G of the Internal Revenue Code,
will be entitled to take a commensurate deduction at that time.
A participant may elect under section 83(b) of the Internal Revenue Code
to recognize taxable ordinary income at the time restricted Kramont common
shares are awarded. The amount which would be recognized would be the fair
market value of the Kramont common shares at the time of issuance over the
amount paid, if any, by the participant, determined without regard to any
forfeiture restrictions. If such an election is made, Kramont, subject to,
inter alia, the application of Sections 162(m) and 280G of the Internal
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Revenue Code, would be entitled to a deduction at that time in the same
amount. Future appreciation on the Kramont common shares would be taxed at
the capital gains rate when the Kramont common shares are sold. However, if,
after making such an election, the Kramont common shares were forfeited, the
participant would be unable to claim a deduction for the amount included in
the income of the participant by reason of such election.
Share Purchase Awards
In general, a participant who receives a share purchase award should
incur no tax liability if the participant pays fair market value for the
common shares. Additionally, Kramont would not receive any deduction at the
time Kramont common shares are acquired through such a share purchase award.
However, if the share purchase loan were forgiven, the participant would be
required to recognize ordinary income in an amount equal to the forgiven
portion of the loan. Kramont would, subject to, inter alia, the application
of Sections 162(m) and 280G of the Internal Revenue Code, be entitled to take
a commensurate deduction at such time.
Applicable withholding taxes may be withheld in connection with any
award under the 2000 Incentive Plan. In that regard, the committee has the
discretion to allow a participant to satisfy its required withholding tax
obligations with Kramont common shares.
Parachute Payments
In the event that the payment of any award under the 2000 Incentive Plan
is accelerated because of a change in ownership or control (as used in
Section 280G(b)(2) of the Internal Revenue Code) and such payment of an
award, either alone or together with any other payments made to the
participant by Kramont, constitute parachute payments under Section 280G of
the Internal Revenue Code, then, subject to certain exceptions, a portion of
such payments would be nondeductible to Kramont and the participant would be
subject to a 20% excise tax on such portion of the payment.
Section 162(m) of the Internal Revenue Code
Section 162(m) of the Code denies a deduction to any corporation, whose
common shares are publicly held, for compensation paid to certain covered
employees in a taxable year to the extent that such compensation exceeds
$1,000,000. Covered employees are a company's chief executive officer on the
last day of the taxable year and any other individual whose compensation is
required to be reported to shareholders under the Securities Exchange Act by
reason of being among the four highest compensated officers for the taxable
year and who are employed on the last day of the taxable year. Subject to an
exception described below, the amount of compensation income recognized by a
participant is considered in determining whether a covered employee's
compensation exceeds $1,000,000. Compensation paid under certain qualified
performance based compensation arrangements, which (among other things)
provide for compensation based on pre-established performance goals
established by a compensation committee that is comprised solely of two or
more outside directors and which is disclosed to, and approved by, the
majority of our stockholders, is not considered in determining whether a
covered employee's compensation exceeds $1,000,000. It is intended that the
options with an exercise price equal to the fair market value of the shares
on the date of exercise and the corresponding share appreciation rights
granted under the 2000 Incentive Plan (and in certain circumstances, the
restricted share awards and other share based awards), will satisfy the
requirements of Section 162(m) of the Internal Revenue Code so that such
awards will not be included in a covered employee's compensation for the
purposes of determining whether such covered participant's compensation
exceeds $1,000,000; however the effect of Section 162(m) of the Internal
Revenue Code on the deductibility of such covered employee compensation
cannot be ascertained with certainty. As a result, notwithstanding the
foregoing discussion, no assurance can be given as to the deductibility of
the covered compensation under Section 162(m) of the Internal Revenue Code.
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Termination, Amendment and ERISA Status
The 2000 Incentive Plan will terminate by its terms and without any
action by the Kramont board of trustees on the tenth anniversary of the
earlier of its date of adoption or shareholder approval. No awards may be
made after that date. Awards outstanding on that date will remain valid in
accordance with their terms.
The committee, subject to the terms and provisions of the 2000 Incentive
Plan, may amend or alter the terms of awards under the 2000 Incentive Plan.
For example, the committee may provide for the forgiveness in whole or in
part of share purchase loans, the release of the Kramont common shares
securing such loans, or the termination or modification of the vesting or
performance provisions of the grants of restricted Kramont common shares.
However, no such action shall in any way impair the rights of a participant
under any award without such participant's consent.
The Kramont Compensation Committee may amend, alter, suspend or
terminate the 2000 Incentive Plan. No such amendment, alteration,
suspension, or termination of the 2000 Incentive Plan shall in any way impair
the rights of a participant (or permitted assignee) under any award
previously granted without such participant's consent. In addition, any
amendment or termination will be subject to shareholder approval if approval
is required by Federal or state law or regulation (including, without
limitation, to the extent required by Section 162(m) or Section 422 of the
Internal Revenue Code), or rule of any stock exchange or quotation system on
which the Kramont common shares are listed or quoted.
The 2000 Incentive Plan is not subject to the provisions of the Employee
Retirement Income Security Act of 1974, as amended and is not, nor is it
intended to be, qualified under Section 401(a) of the Internal Revenue Code.
LEGAL MATTERS
Some legal matters in connection with the merger of KRT Trust into
Kramont will be passed upon for Kranzco by Robinson Silverman Pearce Aronsohn
& Berman LLP. Some legal matters in connection with the merger of CV into
Kramont will be passed upon for CV by Proskauer Rose LLP and by Roberts &
Holland LLP. Ballard Spahr Andrews & Ingersoll, LLP, Baltimore, Maryland
will pass upon matters of Maryland law relating to the merger agreement and
the Articles of Merger, and Richards, Layton & Finger, P.A. will pass upon
matters of Delaware law relating to the merger agreement.
EXPERTS
The audited consolidated financial statements of CV at December 31, 1999
and for each of the three years in the period ended December 31, 1999
incorporated by reference in this joint proxy statement/prospectus from CV's
Annual Report on Form 10-K for the year ended December 31, 1999 have been
audited by BDO Seidman, LLP, independent certified public accountants, in
reliance upon such reports given upon the authority of said firm as experts
in accounting and auditing.
The audited consolidated financial statements of Kranzco at December 31,
1999 and for each of the three years in the period ended December 31, 1999
incorporated by reference in this joint proxy statement/prospectus have been
audited by Arthur Andersen LLP, independent public accountants, as indicated
in their reports with respect thereto, and are incorporated herein by
reference, in reliance upon the authority of said firm as experts in giving
said reports.
Representatives of BDO Seidman, LLP are expected to be present at the CV
special meeting and representatives of Arthur Andersen LLP, are expected to
be present at the Kranzco special meeting where
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<PAGE>
they will have the opportunity to make a statement if they desire to do so
and will be available to respond to appropriate questions.
FUTURE SHAREHOLDER PROPOSALS
Due to the contemplated consummation of the mergers, neither Kranzco nor
CV currently expects to hold a 2000 annual meeting of shareholders because
Kranzco and CV will be merged with and into Kramont and will cease to exist.
However, if the mergers are not consummated, Kranzco and CV do intend to hold
their 2000 annual meeting in the normal course of business or as promptly as
reasonably practicable. In this case, the shareholders of Kranzco and CV
would continue to be entitled to attend and participate in their respective
annual meeting.
In the event the mergers are not consummated and the meetings are held,
because the date of Kranzco's and CV's 2000 annual meeting may have to be
changed by more than 30 days from the date of each company's 1999 annual
meeting, the regulations of the Securities and Exchange Commission provide
that, to be eligible for inclusion in Kranzco or CV's proxy statement and
form of proxy relating to the annual meeting, proposals of Kranzco
shareholders and CV shareholders intended to be presented at the annual
meetings of their companies must be received by the Secretary of Kranzco or
CV, as the case may be, at their respective place of business within a
reasonable time before Kranzco or CV begin to print and mail their respective
proxy statements to their shareholders in connection with the meeting.
Kranzco and CV will inform their respective shareholders of the date by which
the proposals must be received.
If you wish to submit proposals for consideration at CV's 2000 annual
meeting without including them in CV's proxy statement for that meeting, you
must notify CV of your intentions a reasonable time before CV mails its proxy
materials for that meeting. If you wish to submit proposals for
consideration at Kranzco's 2000 annual meeting without including them in
Kranzco's proxy statement for that meeting, you must have notified Kranzco of
your intentions to do so no earlier than March 4, 2000 and not later than
April 3, 2000. If you do not or did not, as the case may be, the persons
named as proxies in CV's or Kranzco's proxy statement for its 2000 annual
meeting may exercise their discretionary authority to vote on your proposals.
WHERE YOU CAN FIND MORE INFORMATION
Kramont has filed a registration statement on Form S-4 to register with
the SEC the Kramont common shares, the Kramont Series B-1 preferred shares
and the Kramont Series D preferred shares to be issued in connection with the
combination of the businesses of CV and Kranzco. The registration statement,
including the attached exhibits and schedules, contains additional relevant
information about CV and Kranzco. As allowed by SEC rules, this joint proxy
statement/prospectus does not contain all the information you can find in the
registration statement or the exhibits to the registration statement.
In addition, CV and Kranzco file annual, quarterly and special reports,
proxy statements and other information with the SEC. Please call the SEC at
1-800-SEC-0330 for further information on the public reference rooms. You may
read and copy any reports, statements or other information we file at the
following locations of the SEC:
Public Reference Room
450 Fifth Street, N.W.
Room 1024
Washington, D.C. 20539
You may also obtain copies of this information by mail from the Public
Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, at prescribed rates. Our SEC filings are
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<PAGE>
also available to the public from commercial document retrieval services and
at the Internet website maintained by the SEC at http://www.sec.gov. The
SEC's website contains reports, proxy and information statements, and other
information regarding issuers that file electronically with the SEC.
The SEC allows us to "incorporate by reference" information into this
joint proxy statement/ prospectus, which means that we can disclose important
information to you by referring you to another document filed separately with
the SEC. The information incorporated by reference is deemed to be part of
this joint proxy statement/prospectus. This joint proxy statement/prospectus
incorporates by reference the documents set forth below that we have
previously filed with the SEC. These documents contain important information
about our companies and their financial condition.
CV SEC Filings (File No. 001-08073) Description or Period/As of Date
- ---------------------------------- --------------------------------
Annual Report on Form 10-K Year ended December 31, 1999
Kranzco SEC Filings (File No. 001-11478) Description or Period/As of Date
- ---------------------------------------- --------------------------------
Annual Report on Form 10-K Year ended December 31, 1999
CV and Kranzco also incorporate by reference in this joint proxy
statement/prospectus additional documents that they file with the SEC under
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act from the date of this
joint proxy statement/prospectus to the date of the special meetings of the
CV and Kranzco shareholders. These include periodic reports, such as Annual
Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on
Form 8-K, as well as proxy statements.
CV has supplied all information contained or incorporated by reference
in this joint proxy statement/prospectus relating to CV, and Kranzco has
supplied all the information relating to Kranzco.
If you are a shareholder, we may have sent you some of the documents
incorporated by reference, but you can obtain any of them through us, the SEC
or the SEC's Internet world wide website as described above. Documents
incorporated by reference are available from us without charge, excluding all
exhibits unless we have specifically incorporated by reference an exhibit in
this joint proxy statement/prospectus. Shareholders may obtain documents
incorporated by reference in this joint proxy statement/prospectus by
requesting them in writing, by telephone or by the Internet from the
appropriate company at the following addresses:
CV Reit, Inc.
100 Century Boulevard
West Palm Beach, FL 33417
Tel.: (561) 640-3155
Attention: Elaine Hauff
Internet: http://www.cvreit.com
Kranzco Realty Trust
128 Fayette Street
Conshohocken, PA 19428
Tel.: (610) 941-9292
Attention: Mary Gannon
Internet: http://www.kranzco.com
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<PAGE>
If you would like to request documents from us, please do so by May 26,
2000 to receive them before the special meetings. If you request any
incorporated documents from us, we will mail them to you by first class mail,
or other equally prompt means, within one business day after we receive your
request.
We have not authorized anyone to give you any information or to make any
representation about the proposed mergers or our companies that differs from
or adds to the information contained in this document or in the documents our
companies have publicly filed with the SEC. Therefore, if anyone should give
you any different or additional information, you should not rely on it.
If you live in a jurisdiction where it is unlawful to offer or exchange
or sell, or to ask for offers to exchange or buy, the securities offered by
this document, or to ask for proxies, or, if you are a person to whom it is
unlawful to direct such offers or requests, then the offer and request
presented by this document does not extend to you.
The information contained in this document speaks only as of the date
indicated on the cover of this document unless the information specifically
indicates that another date applies.
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<PAGE>
Appendix A
=============================================================================
AGREEMENT AND PLAN OF REORGANIZATION AND MERGER
among
KRANZCO REALTY TRUST,
KRT TRUST,
CV REIT, INC.
and
KRAMONT REALTY TRUST
Dated as of December 10, 1999
=============================================================================
TABLE OF CONTENTS
Page
1. The Reorganization. . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1. The CV Merger. . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2. The KRT Trust Merger . . . . . . . . . . . . . . . . . . . . . 3
1.3. The Closing. . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.4. Effective Time . . . . . . . . . . . . . . . . . . . . . . . . 3
2. Declaration of Trust and By-laws of Kramont . . . . . . . . . . . . . 3
2.1. Declaration of Trust . . . . . . . . . . . . . . . . . . . . . 3
2.2. By-laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3. Trustees and Executive Officers of Kramont. . . . . . . . . . . . . . 4
3.1. Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.2. Executive Officers . . . . . . . . . . . . . . . . . . . . . . 4
4. KRT Trust Common and Preferred Shares, CV Common Stock
and Kramont Common and Preferred Shares . . . . . . . . . . . . . . . 4
4.1. Conversion of KRT Trust Common Shares, and CV Common Stock . . 4
4.2. Exchange of Certificates . . . . . . . . . . . . . . . . . . . 8
4.3. Cancellation of Kramont Common Shares. . . . . . . . . . . . .10
5. Certain Transactions Relating to the Kranzco Reorganization and the
Trust Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
5.1. Preliminary Transactions . . . . . . . . . . . . . . . . . . .11
5.2. Merger of CV Trust into CV.. . . . . . . . . . . . . . . . . .12
5.3. Transactions Relating to CV Partnership. . . . . . . . . . . .12
6. Representations and Warranties of Kranzco and KRT Trust . . . . . . .14
6.1. Existence; Good Standing; Authority; Compliance With Law . . .14
6.2. Authorization, Validity and Effect of Agreements . . . . . . .15
6.3. Capitalization . . . . . . . . . . . . . . . . . . . . . . . .16
6.4. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . .17
6.5. Other Interests. . . . . . . . . . . . . . . . . . . . . . . .17
6.6. No Violation . . . . . . . . . . . . . . . . . . . . . . . . .17
6.7. SEC Documents. . . . . . . . . . . . . . . . . . . . . . . . .18
6.8. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . .19
6.9. Absence of Certain Changes . . . . . . . . . . . . . . . . . .19
6.10. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
6.11. Books and Records. . . . . . . . . . . . . . . . . . . . . . .21
6.12. Properties . . . . . . . . . . . . . . . . . . . . . . . . . .22
6.13. Environmental Matters. . . . . . . . . . . . . . . . . . . . .23
6.14. Employee Benefit Plans; ERISA. . . . . . . . . . . . . . . . .26
6.15. Labor Matters. . . . . . . . . . . . . . . . . . . . . . . . .28
6.16. No Brokers . . . . . . . . . . . . . . . . . . . . . . . . . .28
6.17. Opinion of Financial Advisor . . . . . . . . . . . . . . . . .28
6.18. CV Share Ownership . . . . . . . . . . . . . . . . . . . . . .28
6.19. [Intentionally Omitted]. . . . . . . . . . . . . . . . . . . .28
6.20. Convertible Securities . . . . . . . . . . . . . . . . . . . .28
6.21. Related Party Transactions . . . . . . . . . . . . . . . . . .29
6.22. Contracts and Commitments. . . . . . . . . . . . . . . . . . .29
6.23. Certain Payments Resulting From Transactions . . . . . . . . .29
6.24. Leases.. . . . . . . . . . . . . . . . . . . . . . . . . . . .30
6.25. Investment Company Act of 1940 . . . . . . . . . . . . . . . .30
6.26. Mortgage Notes . . . . . . . . . . . . . . . . . . . . . . . .30
6.27. State Takeover Statutes. . . . . . . . . . . . . . . . . . . .31
6.28. FFO Agreements . . . . . . . . . . . . . . . . . . . . . . . .31
6.29. No Prior Activities; Other Interests . . . . . . . . . . . . .31
7. Representations and Warranties of CV. . . . . . . . . . . . . . . . .31
7.1. Existence; Good Standing; Authority; Compliance With Law . . .31
7.2. Authorization, Validity and Effect of Agreements . . . . . . .33
7.3. Capitalization . . . . . . . . . . . . . . . . . . . . . . . .33
7.4. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . .34
7.5. Other Interests. . . . . . . . . . . . . . . . . . . . . . . .34
7.6. No Violation . . . . . . . . . . . . . . . . . . . . . . . . .35
7.7. SEC Documents. . . . . . . . . . . . . . . . . . . . . . . . .35
7.8. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . .36
7.9. Absence of Certain Changes . . . . . . . . . . . . . . . . . .36
7.10. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
7.11. Books and Records. . . . . . . . . . . . . . . . . . . . . . .38
7.12. Properties . . . . . . . . . . . . . . . . . . . . . . . . . .38
7.13. Environmental Matters. . . . . . . . . . . . . . . . . . . . .40
7.14. Employee Benefit Plans; ERISA. . . . . . . . . . . . . . . . .42
7.15. Labor Matters. . . . . . . . . . . . . . . . . . . . . . . . .44
7.16. No Brokers . . . . . . . . . . . . . . . . . . . . . . . . . .44
7.17. Opinion of Financial Advisor . . . . . . . . . . . . . . . . .44
7.18. Kranzco Stock Ownership. . . . . . . . . . . . . . . . . . . .44
7.19. Related Party Transactions . . . . . . . . . . . . . . . . . .44
7.20. Contracts and Commitments. . . . . . . . . . . . . . . . . . .45
7.21. Certain Payments Resulting From Transactions . . . . . . . . .45
7.22. Leases.. . . . . . . . . . . . . . . . . . . . . . . . . . . .46
7.23. Investment Company Act of 1940 . . . . . . . . . . . . . . . .46
7.24. State Takeover Statutes. . . . . . . . . . . . . . . . . . . .46
7.25. Mortgage Notes . . . . . . . . . . . . . . . . . . . . . . . .47
7.26. FFO Agreements . . . . . . . . . . . . . . . . . . . . . . . .48
7A. Representations and Warranties of Kramont. . . . . . . . . . .49
7A.1. Existence: Good Standing; Authority. . . . . . . . . . . . . .49
7A.2. Authorization, Validity and Effect of Agreements . . . . . . .49
7A.3. Capitalization . . . . . . . . . . . . . . . . . . . . . . . .49
7A.4. No Prior Activities; Other Interests . . . . . . . . . . . . .50
8. Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50
8.1. Acquisition Proposals. . . . . . . . . . . . . . . . . . . . .50
8.2. Conduct of Businesses. . . . . . . . . . . . . . . . . . . . .53
8.3. Meetings of Shareholders . . . . . . . . . . . . . . . . . . .58
8.4. Filings; Other Action. . . . . . . . . . . . . . . . . . . . .59
8.5. Notification of Certain Matters. . . . . . . . . . . . . . . .59
8.6. Inspection of Records. . . . . . . . . . . . . . . . . . . . .59
8.7. Publicity. . . . . . . . . . . . . . . . . . . . . . . . . . .60
8.8. Registration Statement . . . . . . . . . . . . . . . . . . . .60
8.9. Listing Application. . . . . . . . . . . . . . . . . . . . . .61
8.10. Further Action . . . . . . . . . . . . . . . . . . . . . . . .61
8.11. Affiliates of CV and Kranzco . . . . . . . . . . . . . . . . .61
8.12. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . .62
8.13. Indemnification. . . . . . . . . . . . . . . . . . . . . . . .62
8.14. Governance . . . . . . . . . . . . . . . . . . . . . . . . . .63
8.15. Employees and Employee Benefit Plans . . . . . . . . . . . . .63
8.16. Reorganization . . . . . . . . . . . . . . . . . . . . . . . .64
8.17. REIT Status. . . . . . . . . . . . . . . . . . . . . . . . . .64
8.18. Other Agreements . . . . . . . . . . . . . . . . . . . . . . .65
8.19. Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . .65
8.20. The Kranzco Reorganization Transactions. . . . . . . . . . . .65
8.21. CV Limited Partner Contribution. . . . . . . . . . . . . . . .66
8.22. Termination of CV Related Party Transactions; Termination
of FFO Agreements. . . . . . . . . . . . . . . . . . . . . . .66
8.23. Drexel Agreement. . . . . . . . . . . . . . . . . . . . . . .66
8.24. Life Insurance . . . . . . . . . . . . . . . . . . . . . . . .67
8.25. Consents . . . . . . . . . . . . . . . . . . . . . . . . . . .67
8.26. Performance by Kramont . . . . . . . . . . . . . . . . . . . .67
9. Conditions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .67
9.1. Conditions to Each Party's Obligation to Effect the
Reorganization . . . . . . . . . . . . . . . . . . . . . . . .67
9.2. Conditions to Obligations of Kranzco to Effect the
Reorganization . . . . . . . . . . . . . . . . . . . . . . . .68
9.3. Conditions to Obligation of CV to Effect the Reorganization. .70
10. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . .72
10.1. Termination by Mutual Consent. . . . . . . . . . . . . . . . .72
10.2. Termination by Either Kranzco or CV. . . . . . . . . . . . . .72
10.3. Termination by Kranzco . . . . . . . . . . . . . . . . . . . .73
10.4. Termination by CV. . . . . . . . . . . . . . . . . . . . . . .73
10.5. Certain Fees and Expenses Upon Termination and Abandonment . .74
10.6. Extension; Waiver. . . . . . . . . . . . . . . . . . . . . . .78
11. General Provisions. . . . . . . . . . . . . . . . . . . . . . . . . .78
11.1. Nonsurvival of Representations, Warranties and Agreements. . .78
11.2. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . .78
11.3. Assignment; Binding Effect; Benefit. . . . . . . . . . . . . .79
11.4. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . .80
11.5. Confidentiality. . . . . . . . . . . . . . . . . . . . . . . .80
11.6. Definition of Knowledge. . . . . . . . . . . . . . . . . . . .80
11.7. Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . .80
11.8. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . .80
11.9. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . .81
11.10. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . .81
11.11. Interpretation . . . . . . . . . . . . . . . . . . . . . . . .81
11.12. Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . .81
11.13. Incorporation. . . . . . . . . . . . . . . . . . . . . . . . .81
11.14. Severability . . . . . . . . . . . . . . . . . . . . . . . . .81
11.15. Enforcement of Agreement . . . . . . . . . . . . . . . . . . .81
11.16. Non-Recourse . . . . . . . . . . . . . . . . . . . . . . . . .81
EXHIBIT A Amended and Restated Declaration of Trust of Kramont
EXHIBIT B By-laws of Kramont
EXHIBIT C Trustees of Kramont
EXHIBIT D Executive Officers of the Kramont
EXHIBIT E Certificate of Merger regarding Merger of Kranzco into KRT Trust
II (Delaware)
EXHIBIT F Articles of Merger regarding Merger of Kranzco into KRT Trust II
(Maryland)
EXHIBIT G Certificate of Merger regarding Merger of KRT Trust II into KRT
Partnership (Delaware)
EXHIBIT H Certificate of Merger regarding merger of CV Trust into CV
(Delaware)
EXHIBIT I Unit Contribution Agreement
EXHIBIT J Second Amended and Restated Agreement of Limited Partnership of
CV Partnership
EXHIBIT K Affiliate Letter
EXHIBIT L Norman M. Kranzdorf Employment Agreement
EXHIBIT M Louis P. Meshon, Sr. Employment Agreement
EXHIBIT N Amended and Restated Agreement of Limited Partnership of KRT
Partnership
EXHIBIT O Press Release
EXHIBIT P Lease Amendment
INDEX OF DEFINED TERMS
Each of the following terms is defined in the Section set forth opposite
such term:
Defined Term Section
------------ -------
Affiliate 8.11(a)
Agreement Recitals
Ancillary Agreements 6.2
Average Price 4.2(e)
Break-Up Expenses 10.5(d)
Break-Up Expenses Tax Opinion 10.5(d)
CERCLA 6.13(a)(vi)
Closing 1.3
Closing Date 1.3
COBRA Coverage 8.15(d)
Code Recitals
Commitment 6.9
Confidentiality Agreement 11.5
Conversion Transactions 5.1
CV Recitals
CV Acquisition Proposal 8.1(a)
CV Base Amount 10.5(b)
CV Benefit Plans 7.14(a)
CV Break-Up Fee 10.5(b)
CV Break-Up Fee Tax Opinion 10.5(c)
CV Common Certificate 4.1(i)
CV Common Stock 4.1(h)
CV Disclosure Letter 7
CV Employment Agreements 7.19
CV Employee Arrangements 7.21
CV Employees 8.15(a)
CV Entities 7.2
CV ERISA Affiliate 7.14(a)
CV Exchange Ratio 4.1(h)
CV GP 5.3(b)
CV Ground Leases 7.12
CV IRS Fee Ruling 10.5(c)
CV Management Agreements 7.20
CV Material Adverse Effect 7.1
CV Merger Recitals
CV OP Units 5.3(a)
CV Option 4.1(k)
CV Options 4.1(k)
CV Partnership Recitals
CV Partnership Agreement 5.3(a)
CV Partnership Approvals 5.3(e)
CV Partnership Exchange Offer 5.3(a)
CV Properties 7.12
CV Reports 7.7
CV Shareholder Approval 7.2
CV Stock Option Plans 4.1(k)
CV Subsidiary 7.1
CV Trust Recitals
CV Unit Holders 5.3(a)
CV Voting Agreements Recitals
Declaration of Trust 6.1
Delaware Business Trust Laws 5.2
DGCL 1.1
DR Plan 4.2(i)
Drexel Shareholder Agreement 8.23
Effective Time 1.4
Encumbrances 6.12
Environmental Law 6.13(c)(i)
Environmental Permit 6.13(c)(ii)
ERISA 6.14, 7.14
Exchange Act 6.6
Exchange Agent 4.2(a)
Exchange Fund 4.2(a)
Expenses Recipient 10.5(d)
FFO Agreements 7.26
First CV Partnership Approval 5.3(b)
Form S-4 8.8
Funds From Operations 6.1
Governmental Entity 6.1
Hazardous Material 6.13(c)(iii)
Hilcoast 8.22(a)
Holdings Recitals
IRS 6.10(a)
IRS Expense Ruling 10.5(d)
Joint Proxy Statement/Prospectus 8.8
Kramont Recitals
Kramont Amended & Restated
Declaration of Trust 2.1
Kramont Common Shares 4.1(a)
Kramont OP Common Units 5.3(a)
Kramont Options 6.3
Kramont Preferred Exchange Ratio 4.1(f)
Kramont Preferred Shares 4.1(f)
Kramont Series A-1 Preferred Shares 4.1(c)
Kramont Series B-1 Preferred Shares 4.1(d)
Kramont Series B-2 Preferred Shares 4.1(e)
Kramont Series D Preferred Shares 4.1(f)
Kranzco Recitals
Kranzco Acquisition Proposal 8.1(c)
Kranzco Base Amount 10.5(c)
Kranzco Benefit Plans 6.14(a)
Kranzco Break-Up Fee 10.5(c)
Kranzco Break-Up Fee Tax Opinion 10.5(b)
Kranzco Common Share 4.2(e)
Kranzco Contribution 5.3(c)
Kranzco Disclosure Letter 6
Kranzco Employee Arrangements 6.23
Kranzco Entities 6.2
Kranzco Exchange Ratio 4.1(a)
Kranzco ERISA Affiliate 6.14(a)
Kranzco Ground Leases 6.12
Kranzco IRS Fee Ruling 10.5(b)
Kranzco Material Adverse Effect 6.1
Kranzco Preferred Shares 6.1
Kranzco Properties 6.12
Kranzco Reorganization Recitals
Kranzco Reorganization Transactions 8.20
Kranzco Reports 6.7
Kranzco Right 6.3
Kranzco Series A-1 Preferred Shares 6.1
Kranzco Series B-1 Preferred Shares 6.1
Kranzco Series B-2 Preferred Shares 6.1
Kranzco Series D Preferred Shares 6.1
Kranzco Series E Preferred Shares 6.1
Kranzco Shareholder Approval 6.2
Kranzco Subsidiary 6.1
Kranzco Voting Agreements Recitals
KRT Partnership Merger 5.1
KRT Partnership Recitals
KRT Trust Recitals
KRT Trust Common Certificate 4.1(b)
KRT Trust Common Share 4.1(a)
KRT Trust Common Shares 4.1(a), 4.1 (b)
KRT Trust Merger Recitals
KRT Trust Option Plans 4.1(k)
KRT Trust Option 4.1(k)
KRT Trust Options 4.1(k)
KRT Trust Preferred Certificate 4.1(g)
KRT Trust Preferred Shares 4.1(f)
KRT Trust Series A-1 Preferred Shares 4.1(c)
KRT Trust Series B-1 Preferred Shares 4.1(d)
KRT Trust Series B-2 Preferred Shares 4.1(e)
KRT Trust Series D Preferred Shares 4.1(f)
KRT Trust II Recitals
KRT Trust II Merger 5.1
Louis P. Meshon, Sr.
Employment Agreement 8.18
Louis P. Meshon, Sr. Insurance Policy 8.24
Maryland REIT Law 1.1
Material CV Lease 7.22(a)
Material CV Tenant 7.22(a)
Material Kranzco Lease 6.24(a)
Material Kranzco Tenant 6.24(a)
MGCL 1.1
Mortgage 7.25(a)
NAREIT 6.1
Necessary Consents 8.25
New Options 4.1
New York Courts 11.8
Non-Tendering Holders 4.2(c)
Norman M. Kranzdorf
Employment Agreement 8.18
Notice of Superior CV Proposal 8.1(a)
Notice at Superior Kranzco Proposal 8.1(c)
NYSE 4.2(e)
Partnership Contribution Recitals
Payor 10.5(d)
Property Restrictions 6.12
Qualifying Income 10.5(b)
REIT 6.10(b), 7.10(b)
REIT Income Requirements 10.5(b)
Registered Securities 8.8
Regulatory Filings 6.6
Reorganization Recitals, 5.1
Return 6.10(a)
Returns 6.10(a)
Rule 145 8.11(a)
Second CV Partnership Approval 5.3(d)
Securities Laws 6.7
Series A-1 Exchange Ratio 4.1(c)
Series B-1 Exchange Ratio 4.1(d)
Series B-2 Exchange Ratio 4.1(e)
Series D Exchange Ratio 4.1(f)
Superior CV Acquisition Proposal 8.1(a)
Superior Kranzco Acquisition Proposal 8.1(c)
Survivor Common Shares 4.1(a)
Tax 6.10(a)
Taxes 6.10(a)
Tender Deadline Date 4.2(c)
Third CV Partnership Approval 5.3(d)
Trust Merger Recitals, 5.2
Unit Contribution Agreement 5.3(a)
AGREEMENT AND PLAN OF REORGANIZATION AND MERGER
AGREEMENT AND PLAN OF REORGANIZATION AND MERGER (this "Agreement"),
dated as of December 10, 1999, among Kranzco Realty Trust, a Maryland real
estate investment trust ("Kranzco"), KRT Trust, a Maryland real estate
investment trust and a wholly owned subsidiary of Kranzco ("KRT Trust"), CV
Reit, Inc., a Delaware corporation ("CV"), and Kramont Realty Trust, a
Maryland real estate investment trust ("Kramont").
RECITALS
A. The Boards of Trustees of Kranzco, KRT Trust and Kramont and the
Board of Directors of CV each has determined that a business combination
between Kranzco and CV is in the best interests of their respective companies
and shareholders and presents an opportunity for their respective companies
to achieve long-term strategic and financial benefits, and accordingly have
agreed to effect the merger of CV (the "CV Merger") and the merger of KRT
Trust (the "KRT Trust Merger") into Kramont, upon the terms and subject to
the conditions set forth herein. The CV Merger and the KRT Trust Merger are
hereafter referred to collectively as the "Reorganization."
B. In connection with but prior to the Reorganization, the following
additional transactions will be effected: (i) Kranzco will convert all of
its corporate subsidiaries into single member limited liability companies or
limited partnerships and may elect to transfer certain of the assets owned
directly by Kranzco to single member limited liability companies or limited
partnerships, as more fully described in Section 5.1, but, KRT Trust will
continue to be wholly-owned by Kranzco, (ii) Kranzco will merge with and into
KRT Trust II LLC, a Delaware limited liability company and a wholly owned
subsidiary of KRT Trust ("KRT Trust II"), and in connection with such merger,
each shareholder of Kranzco will receive such number of common and preferred
shares in KRT Trust as is equal to the number of common and preferred shares
held by such shareholder in Kranzco and (iii) KRT Trust II will merge with
and into KRT Operating Partnership, L.P., a Delaware limited partnership of
which KRT Trust is the sole general partner ("KRT Partnership"), as more
fully described in Section 5.1 (the transactions referred to in clauses (i),
(ii) and (iii) of this Recital B are referred to herein as the "Kranzco
Reorganization"), (iv) Montgomery CV Realty Trust, a Delaware business trust
and a wholly owned subsidiary of CV ("CV Trust") will merge with and into CV,
as more fully described in Section 5.2 (the "Trust Merger") and (v)
immediately following the Reorganization, Kramont will contribute to KRT
Partnership the units of partnership interest then held by Kramont in
Montgomery CV Realty L.P., a Delaware limited partnership ("CV Partnership"),
solely in exchange for units of partnership interest in KRT Partnership, as
more fully described in Section 5.3 (the "Partnership Contribution").
C. Following the execution of this Agreement, KRT Partnership will
offer to each holder of units of limited partner interest in CV Partnership,
other than CV Trust, the right to (i) contribute to KRT Partnership the units
of limited partner interest in CV Partnership held by such holder solely in
exchange for units of limited partner interest in KRT Partnership or (ii)
provided such holder shall theretofore have contributed to CV Partner
Holdings, L.P., a Delaware limited partnership ("Holdings"), the units of
limited partner interest in CV Partnership held by such holder solely in
exchange for units of limited partner interest in Holdings, contribute to KRT
Partnership the units of limited partner interest in Holdings held by such
holder solely in exchange for units of limited partner interest in KRT
Partnership, all as more fully described in Section 5.3.
D. In order to induce Kranzco to enter into this Agreement,
concurrently herewith, Kranzco and Louis P. Meshon, Sr., H. Irwin Levy and
Alan Shulman are entering into Voting Agreements pursuant to which, among
other matters, Louis P. Meshon, Sr., H. Irwin Levy and Alan Shulman have
agreed in their capacities as shareholders to vote in favor of this Agreement
and the CV Merger provided for herein and against any other competing
transactions (the "Kranzco Voting Agreements").
E. In order to induce CV to enter into this Agreement, concurrently
herewith, CV, Norman M. Kranzdorf and Robert H. Dennis are entering into
Voting Agreements pursuant to which, among other matters, Norman M. Kranzdorf
and Robert H. Dennis have agreed in their capacities as shareholders to vote
in favor of this Agreement and the KRT Merger provided for herein and against
any other competing transactions (the "CV Voting Agreements").
F. For federal income tax purposes, it is intended that each of the
KRT Trust Merger and the CV Merger provided for herein shall qualify as a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code").
G. Kranzco and CV have each received a fairness opinion relating to
the transactions contemplated hereby as more fully described herein.
H. Kranzco and CV desire to make certain representations, warranties
and agreements in connection with the merger.
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE 1
1. The Reorganization.
1.1. The CV Merger. On the terms and subject to the conditions of
this Agreement, and in accordance with the Maryland General Corporation Law
("MGCL"), Title 8 of the Corporations and Associations Article of the
Annotated Code of Maryland (the "Maryland REIT Law"), and the Delaware
General Corporation Law ("DGCL") at the Effective Time (as defined in Section
1.4), CV shall be merged with and into Kramont in accordance with this
Agreement and the separate corporate existence of CV shall thereupon cease.
Kramont shall be the surviving real estate investment trust in the CV Merger.
The CV Merger shall have the effects provided in this Agreement, Section
8-501.1 of the Maryland REIT Law and the applicable provisions of the DGCL.
1.2. The KRT Trust Merger. On the terms and subject to the conditions
of this Agreement, and in accordance with the MGCL and the Maryland REIT Law,
at the Effective Time (as defined in Section 1.4), KRT Trust shall be merged
with and into Kramont in accordance with this Agreement and the separate
corporate existence of KRT Trust shall thereupon cease. Kramont shall be the
surviving real estate investment trust in the KRT Trust Merger. The KRT
Trust Merger shall have the effects provided in this Agreement and Section
8-501.1 of the Maryland REIT Law.
1.3. The Closing. Subject to the terms and conditions of this
Agreement, the closing of the Reorganization (the "Closing") shall take place
(a) at the offices of Robinson Silverman Pearce Aronsohn & Berman LLP, 1290
Avenue of the Americas, New York, New York, at 9:00 a.m., local time, on the
first business day immediately following the day on which the last to be
fulfilled or waived of the conditions set forth in Article 9 shall be
fulfilled or waived in accordance herewith or (b) at such other time, date or
place as Kranzco and CV may agree. The date on which the Closing occurs is
hereinafter referred to as the "Closing Date."
1.4. Effective Time. If all the conditions to the Reorganization set
forth in Article 9 shall have been fulfilled or waived in accordance herewith
and this Agreement shall not have been terminated as provided in Article 10,
the parties hereto shall, on the Closing Date, cause (i) Articles of Merger
meeting the requirements of the Maryland REIT Law to be properly executed,
verified and delivered for filing in accordance with the Maryland REIT Law
and (ii) this Agreement to be properly delivered for filing in accordance
with the DGCL. The Reorganization shall become effective upon the later of
the acceptance for record of the Articles of Merger by the State Department
of Assessments and Taxation of Maryland in accordance with the Maryland REIT
Law and the filing of this Agreement with the Secretary of State of the State
of Delaware in accordance with the DGCL or at such later time which the
parties hereto shall have agreed upon and designated in such filings in
accordance with applicable law as the effective time of the Reorganization
(the "Effective Time").
ARTICLE 2
2. Declaration of Trust and By-laws of Kramont.
2.1. Declaration of Trust. The Declaration of Trust of Kramont shall
be amended and restated at the Effective Time to read in its entirety as set
forth on Exhibit A attached hereto, until duly amended in accordance with
the terms thereof (the "Kramont Amended and Restated Declaration of Trust").
2.2. By-laws. The By-laws of Kramont shall be amended and restated at
the Effective Time to read in its entirety as set forth on Exhibit B attached
hereto, until duly amended in accordance with the terms thereof.
ARTICLE 3
3. Trustees and Executive Officers of Kramont.
3.1. Trustees. The trustees of Kramont as of the Effective Time shall
be those individuals listed in Exhibit C attached hereto. If any person
identified on Exhibit C is unable to serve, the Board of Directors of CV or
the Board of Trustees of Kranzco, as the case may be, whichever designated
such person (as indicated on Exhibit C) shall designate a successor who shall
serve in such capacity.
3.2. Executive Officers. The executive officers of Kramont as of the
Effective Time shall be those individuals listed in Exhibit D attached
hereto.
ARTICLE 4
4. KRT Trust Common and Preferred Shares, CV Common Stock and
Kramont Common and Preferred Shares.
4.1. Conversion of KRT Trust Common Shares, and CV Common Stock.
(a) At the Effective Time, each common share of beneficial
interest, $.01 par value per share of KRT Trust (each, a "KRT Trust Common
Share" and collectively, the "KRT Trust Common Shares") issued and
outstanding immediately prior to the Effective Time shall automatically, by
virtue of the KRT Trust Merger and without any action on the part of the
holder thereof, be converted into one common share of beneficial interest,
$.01 par value per share ("Survivor Common Shares" or "Kramont Common
Shares") of Kramont (the "Kranzco Exchange Ratio"). Each KRT Trust Common
Share to be converted in the KRT Trust Merger shall be converted without
further consideration.
(b) Subject to Section 4.1(a), as a result of the KRT Trust
Merger and without any action on the part of the holder thereof, all KRT
Trust Common Shares shall cease to be outstanding and shall be cancelled and
retired and shall cease to exist, and each holder of a certificate
representing any KRT Trust Common Shares (a "KRT Trust Common Certificate")
shall thereafter cease to have any rights with respect to such KRT Trust
Common Certificate, except the right to receive a certificate representing
Kramont Common Shares in accordance with Section 4.1(a) upon the surrender of
such KRT Trust Common Certificate subject to the first sentence of Section
4.2(c).
(c) At the Effective Time, each Series A-1 Increasing Rate
Cumulative Convertible Preferred Share of Beneficial Interest of KRT Trust
(the "KRT Trust Series A-1 Preferred Shares") issued and outstanding
immediately prior to the Effective Time shall automatically, by virtue of the
KRT Trust Merger and without any action on the part of the holder thereof, be
converted into one Series A-1 Increasing Rate Cumulative Convertible
Preferred Share of Beneficial Interest (the "Kramont Series A-1 Preferred
Shares") of Kramont (the "Series A-1 Exchange Ratio"), which Kramont Series
A-1 Preferred Shares shall have the terms, rights and preferences designated
in the Kramont Amended and Restated Declaration of Trust. Each KRT Trust
Series A-1 Preferred Share to be converted in the KRT Trust Merger shall be
converted without further consideration.
(d) At the Effective Time, each Series B-1 Cumulative
Convertible Preferred Share of Beneficial Interest of KRT Trust (the "KRT
Trust Series B-1 Preferred Shares") issued and outstanding immediately prior
to the Effective Time shall automatically, by virtue of the KRT Trust Merger
and without any action on the part of the holder thereof, be converted into
one Series B-1 Cumulative Convertible Preferred Share of Beneficial Interest
(the "Kramont Series B-1 Preferred Shares") of Kramont (the "Series B-1
Exchange Ratio"), which Kramont Series B-1 Preferred Shares shall have the
terms, rights and preferences designated in the Kramont Amended and Restated
Declaration of Trust. Each KRT Trust Series B-1 Preferred Share to be
converted in the KRT Trust Merger shall be converted without further
consideration.
(e) At the Effective Time, each Series B-2 Cumulative
Convertible Preferred Share of Beneficial Interest of KRT Trust (the "KRT
Trust Series B-2 Preferred Shares") issued and outstanding immediately prior
to the Effective Time shall automatically, by virtue of the KRT Trust Merger
and without any action on the part of the holder thereof, be converted into
one Series B-2 Cumulative Convertible Preferred Share of Beneficial Interest
(the "Kramont Series B-2 Preferred Shares") of Kramont (the "Series B-2
Exchange Ratio"), which Kramont Series B-2 Preferred Shares shall have the
terms, rights and preferences designated in the Kramont Amended and Restated
Declaration of Trust. Each KRT Trust Series B-2 Preferred Share to be
converted in the KRT Trust Merger shall be converted without further
consideration.
(f) At the Effective Time, each Series D Cumulative Redeemable
Preferred Share of Beneficial Interest of KRT Trust (the "KRT Trust Series D
Preferred Shares," and together with the KRT Trust Series A-1 Preferred
Shares, the KRT Trust Series B-1 Preferred Shares and the KRT Trust Series B-
2 Preferred Shares, the "KRT Trust Preferred Shares") issued and outstanding
immediately prior to the Effective Time shall automatically, by virtue of the
KRT Trust Merger and without any action on the part of the holder thereof, be
converted into one Series D Cumulative Redeemable Preferred Share of
Beneficial Interest (the "Kramont Series D Preferred Shares," together with
the Kramont Series A-1 Preferred Shares, the Kramont Series B-1 Preferred
Shares and the Kramont Series B-2 Preferred Shares, the "Kramont Preferred
Shares") of Kramont (the "Series D Exchange Ratio," and together with the
Series A-1 Exchange Ratio, the Series B-1 Exchange Ratio and the Series B-2
Exchange Ratio, the "Kramont Preferred Exchange Ratios"), which Kramont
Series D Preferred Shares shall have the terms, rights and preferences
designated in the Kramont Amended and Restated Declaration of Trust. Each
KRT Trust Series D Preferred Share to be converted in the KRT Trust Merger
shall be converted without further consideration.
(g) Subject to Sections 4.1(c), (d), (e) and (f), as a result of
the KRT Trust Merger and without any action on the part of the holder
thereof, all KRT Trust Preferred Shares shall cease to be outstanding and
shall be cancelled and retired and shall cease to exist, and each holder of a
certificate representing any KRT Trust Series A-1 Preferred Shares, KRT Trust
Series B-1 Preferred Shares, KRT Trust Series B-2 Preferred Shares or KRT
Trust Series D Preferred Shares (a "KRT Trust Preferred Certificate") shall
thereafter cease to have any rights with respect to such KRT Trust Preferred
Certificate, except the right to receive a certificate representing Kramont
Series A-1 Preferred Shares, Kramont Series B-1 Preferred Shares, Kramont
Series B-2 Preferred Shares and Kramont Series D Preferred Shares,
respectively, upon the surrender of such KRT Trust Preferred Certificate.
(h) At the Effective Time, each share of common stock, $.01 par
value per share ("CV Common Stock") of CV issued and outstanding immediately
prior to the Effective Time shall automatically, by virtue of the CV Merger
and without any action on the part of the holder thereof, be converted into
one Kramont Common Share (the "CV Exchange Ratio"). Each share of CV Common
Stock to be converted in the CV Merger shall be converted without further
consideration.
(i) Subject to Section 4.1(h), as a result of the CV Merger and
without any action on the part of the holder thereof, all shares of CV Common
Stock shall cease to be outstanding and shall be cancelled and retired and
shall cease to exist, and each holder of a certificate representing any
shares of CV Common Stock (a "CV Common Certificate") shall thereafter cease
to have any rights with respect to such CV Common Certificate, except the
right to receive a certificate representing Kramont Common Shares in
accordance with Section 4.1(b) upon the surrender of such CV Common
Certificate subject to the first sentence of Section 4.2(c).
(j) Each share of CV Common Stock issued and held in CV's
treasury at the Effective Time, if any, shall, by virtue of the CV Merger,
cease to be outstanding and shall be cancelled and retired and shall cease to
exist without payment of any consideration therefor.
(k) All options to purchase KRT Trust Common Shares
(individually, a "KRT Trust Option," and collectively, the "KRT Trust
Options") outstanding by reason of the actions described in Section 8.20(e)
of this Agreement under Kranzco's 1992 Employee Share Option Plan, Kranzco's
1992 Trustee Share Option Plan and Kranzco's 1995 Incentive Plan (as assumed
by KRT Trust hereafter, collectively, the "KRT Trust Option Plans") shall
remain outstanding following the Effective Time. All options to purchase
shares of CV Common Stock (individually, a "CV Option" and collectively, the
"CV Options") outstanding under the CV Trust Executive Stock Option Plan, the
Drexel Realty, Inc. 1997 Stock Option Plan and the CV Non-Employee Director
1998 Stock Option Plan (collectively, the "CV Stock Option Plans") shall
remain outstanding following the Effective Time.
At the Effective Time, such KRT Trust Options and CV Options
shall, by virtue of the KRT Trust Merger and CV Merger, respectively, and
without any further action on the part of KRT Trust or CV, as the case may
be, or the holder of any such KRT Trust Options or CV Options, as the case
may be, be assumed by Kramont in such manner that Kramont (i) is a
corporation "assuming a stock option in a transaction to which Section 424(a)
applies" within the meaning of Section 424 of the Code, or (ii) to the extent
that Section 424 of the Code does not apply to any such KRT Trust Options and
CV Options, would be such a corporation were Section 424 of the Code
applicable to such options. Each KRT Trust Option and CV Option assumed by
Kramont shall be subject to and exercisable upon the same terms and
conditions (including expiration date, vesting and exercise provisions) as
under the applicable KRT Trust Option Plans or CV Stock Option Plans, as the
case may be, except that (i) each such KRT Trust Option or CV Option, as the
case may be, shall be exercisable for that whole number of Kramont Common
Shares into which the number of KRT Trust Common Shares or shares of CV
Common Stock, as the case may be, subject to the KRT Trust or CV Option, as
the case may be, immediately prior to the Effective Time would have been
converted under this Article 4 had such option been exercised in full
immediately prior to the Reorganization, (ii) with respect to each assumed CV
Option, the option price per Kramont Common Share shall be equal to the
option price per share of CV Common Stock subject to such CV Option in effect
immediately prior to the Effective Time, and (iii) with respect to each
assumed KRT Trust Option, the option price per Kramont Common Share shall be
equal to the option price per KRT Trust Common Share subject to such KRT
Trust Option in effect immediately prior to the Effective Time. At the
Effective Time, Kramont will cause to be filed one or more registration
statements on Form S-8 under the Securities Act (or any successor form) in
order to register the Kramont Common Shares issuable in connection with the
assumed KRT Trust Options and the assumed CV Options, and Kramont shall use
its best efforts to maintain the effectiveness of such registration
statements (and maintain the current status of the prospectuses contained
therein or used pursuant thereto) for so long as such assumed KRT Trust
Options and assumed CV Options remain outstanding. At or prior to the
Effective Time, Kramont shall take all corporate action necessary to reserve
for issuance a sufficient number of Kramont Common Shares for delivery in
connection with the assumed KRT Trust Options and assumed CV Options.
In addition, as of the Effective Time, the Board of Trustees of
Kramont shall (i) adopt a new management incentive plan, which, among other
things, will provide for the issuance of options and restricted shares, the
form and substance of which shall have been mutually agreed upon by KRT Trust
and CV, and (ii) grant new options (which new options, when taken together
with all of the assumed KRT Trust Options and the assumed CV Options, shall
not exceed 10% of the number of Kramont Common Shares issued and outstanding
immediately following the Reorganization) (the "New Options") to purchase
Kramont Common Shares to the individuals, in the amounts and upon the terms
mutually agreed upon by KRT Trust and CV. At the Effective Time, Kramont
will cause to be filed one or more registration statements on Form S-8 under
the Securities Act (or any successor form) in order to register the Kramont
Common Shares issuable in connection with the New Options, and Kramont shall
use its best efforts to maintain the effectiveness of such registration
statements (and maintain the current status of the prospectuses contained
therein or used pursuant thereto) for so long as such New Options remain
outstanding. At or prior to the Effective Time, Kramont shall take all
corporate action necessary to reserve for issuance a sufficient number of
Kramont Common Shares for delivery in connection with the New Options.
4.2. Exchange of Certificates.
(a) As of the Effective Time, Kramont shall deposit, or shall
cause to be deposited, with an exchange agent selected by Kramont, which
shall be KRT Trust's transfer agent or such other party reasonably
satisfactory to KRT Trust and CV (the "Exchange Agent"), for the benefit of
the holders of KRT Trust Common Shares, KRT Trust Preferred Shares and shares
of CV Common Stock, for exchange in accordance with this Article 4,
certificates representing Kramont Common Shares or Kramont Preferred Shares,
as the case may be (such certificates for Kramont Common Stock and Kramont
Preferred Shares, being hereinafter referred to as the "Exchange Fund"), to
be issued pursuant to Section 4.1 in exchange for outstanding KRT Trust
Common Shares, KRT Trust Preferred Shares and shares of CV Common Stock.
(b) Promptly after the Effective Time, Kramont shall cause the
Exchange Agent to mail to each holder of record of one or more KRT Trust
Common Certificates, CV Common Certificates and KRT Trust Preferred
Certificates (i) a letter of transmittal which shall specify that delivery
shall be effected, and risk of loss and title to the KRT Trust Common
Certificates, CV Common Certificates or KRT Trust Preferred Certificates, as
the case may be, shall pass, only upon delivery of the KRT Trust Common
Certificates, CV Common Certificates or KRT Trust Preferred Certificates, as
the case may be, to the Exchange Agent and shall be in such form and have
such other provisions as KRT Trust and CV may reasonably specify and (ii)
instructions for use in effecting the surrender of the KRT Trust Common
Certificates, CV Common Certificates or KRT Trust Preferred Certificates, as
the case may be, in exchange for certificates representing shares of Kramont
Common Stock or Kramont Preferred Stock, as the case may be. Subject to the
first sentence of Section 4.2(c) upon surrender of a KRT Trust Common
Certificate, CV Common Certificate or KRT Trust Preferred Certificate for
cancellation to the Exchange Agent together with such letter of transmittal,
duly executed and completed in accordance with the instructions thereto, the
holder of such KRT Trust Common Certificate, CV Common Certificate or KRT
Trust Preferred Certificate, as the case may be, shall be entitled to receive
in exchange therefor a certificate representing the number of Kramont Common
Shares or Kramont Preferred Shares, as the case may be, which such holder has
the right to receive in respect of the KRT Trust Common Certificate, CV
Common Certificate or KRT Trust Preferred Certificate, as the case may be,
surrendered pursuant to the provisions of this Article 4, in each case after
giving effect to any required withholding tax, and the KRT Trust Common
Certificate, CV Common Certificate or KRT Trust Preferred Certificate so
surrendered shall forthwith be cancelled. In the event of a transfer of
ownership of KRT Trust Common Shares, shares of CV Common Stock or KRT Trust
Preferred Shares which is not registered in the transfer records of KRT Trust
or CV, as the case may be, a certificate representing the proper number of
Kramont Common Shares or Kramont Preferred Shares, as the case may be, may be
issued to such a transferee if the KRT Trust Common Certificate, CV Common
Certificate or KRT Trust Preferred Certificate, as the case may be,
representing shares of such KRT Trust Common Shares, shares of CV Common
Stock or KRT Trust Preferred Shares, as the case may be, are presented to the
Exchange Agent, accompanied by all documents required to evidence and effect
such transfer and to evidence that any applicable stock transfer taxes have
been paid.
(c) Notwithstanding the foregoing, holders of KRT Trust Common
Certificates, CV Common Certificates and KRT Trust Preferred Certificates who
do not surrender their KRT Trust Common Certificates, CV Common Certificates
or KRT Trust Preferred Certificates, as the case may be, for cancellation to
the Exchange Agent in accordance with this Section 4.2(c) shall, until
December 31, 2001 (the "Tender Deadline Date"), continue to receive dividends
and distributions, if any, on the Kramont Common Shares or Kramont Preferred
Shares into which such KRT Trust Common Shares, shares of CV Common Stock and
KRT Trust Preferred Shares shall have been converted pursuant to Section 4.1.
Distributions on Kramont Common Shares and Kramont Preferred Shares payable
after the Tender Deadline Date shall not be paid to holders ("Non-Tendering
Holders") of KRT Trust Common Certificates, CV Common Certificates and KRT
Trust Preferred Certificates who do not surrender their KRT Trust Common
Certificates, CV Common Certificates and KRT Trust Preferred Certificates, as
the case may be, for cancellation prior to the Tender Deadline Date, but
rather shall be paid by Kramont, without interest, to such Non-Tendering
Holders at the time such Non-Tendering Holders surrender their KRT Trust
Common Certificates, CV Common Certificates or KRT Trust Preferred
Certificates, as the case may be, for cancellation pursuant to this Section
4.2(c).
(d) At and after the Effective Time, there shall be no transfers
on the stock transfer books of KRT Trust of the KRT Trust Common Shares or
KRT Trust Preferred Shares which were outstanding immediately prior to the
Effective Time. At and after the Effective Time, there shall be no transfers
on the stock transfer books of CV of the shares of CV Common Stock which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, any KRT Trust Common Certificates, CV Common Certificates or KRT Trust
Preferred Certificates are presented to Kramont, they shall be cancelled and
exchanged for certificates for Kramont Common Shares or Kramont Preferred
Shares, as the case may be, deliverable in respect thereof pursuant to this
Agreement in accordance with the procedures set forth in this Article 4. KRT
Trust Common Certificates, CV Common Certificates and KRT Trust Preferred
Certificates surrendered for exchange by any person constituting an
"affiliate" of KRT Trust or CV for purposes of Rule 145(c) under the
Securities Act, shall not be exchanged until Kramont has received a written
agreement from such person as provided in Section 8.11.
(e) No fractional Kramont Common Shares shall be issued pursuant
hereto. In lieu of the issuance of any fractional Kramont Common Shares to
holders of KRT Trust Common Shares pursuant to Section 4.1(i), cash
adjustments will be paid to holders in respect of any fractional Kramont
Common Share that would otherwise be issuable, and the amount of such cash
adjustment shall be equal to such fractional proportion of the "Average
Price" of a common share of beneficial interest, $.01 par value per share of
Kranzco (a "Kranzco Common Share"). The "Average Price" of a Kranzco Common
Share, shall be the closing sale price thereof on the New York Stock Exchange
(the "NYSE") (as reported by The Wall Street Journal or, if not reported
thereby, by another authoritative source) on the trading day on which the
Effective Time occurs, or if the Effective Time is not a trading day, then on
the trading day immediately preceding the Effective Time.
(f) Any portion of the Exchange Fund (including any Kramont
Common Shares) that remains unclaimed by the former shareholders of KRT Trust
or CV, as the case may be, after the Tender Deadline Date shall be delivered
to Kramont. Any former shareholders of KRT Trust or CV, as the case may be,
who have not theretofore complied with this Article 4 shall thereafter look
only to Kramont for delivery of certificates evidencing their Kramont Common
Shares, Kramont Preferred Shares and payment of unpaid dividends or
distributions, if any, deliverable in respect of each KRT Trust Common Share
such shareholder holds as determined pursuant to this Agreement without any
interest thereon.
(g) None of Kranzco, KRT Trust, CV, Kramont, the Exchange Agent
or any other person shall be liable to any former holder of Kranzco Common
Shares, Kranzco Preferred Shares, KRT Trust Common Shares, shares of CV
Common Stock or KRT Trust Preferred Shares for any amount properly delivered
to a public official pursuant to applicable abandoned property, escheat or
similar laws.
(h) In the event any KRT Trust Common Certificate, CV Common
Certificate or KRT Trust Preferred Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming such KRT Trust Common Certificate, CV Common Certificate or KRT
Trust Preferred Certificate to be lost, stolen or destroyed and, if required
by Kramont, the posting by such person of a bond in such reasonable amount as
Kramont may direct as indemnity against any claim that may be made against it
with respect to such KRT Trust Common Certificate, CV Common Certificate or
KRT Trust Preferred Certificate, the Exchange Agent or Kramont will issue in
exchange for such lost, stolen or destroyed KRT Trust Certificate, CV Common
Certificate or KRT Trust Preferred Certificate a certificate representing the
Kramont Common Shares or Kramont Preferred Shares, as the case may be.
(i) In connection with the Reorganization, appropriate action
shall be taken without any action on behalf of the holders thereof (i) to
reflect the conversion of Kranzco Common Shares held by First Union National
Bank pursuant to the Kranzco Dividend Reinvestment Plan (the "DR Plan") into
an equal number of KRT Trust Common Shares and conversion of such shares into
an equal number of Kramont Common Shares and (ii) to reflect the conversion
of fractional Kranzco Common Shares held pursuant to the DR Plan into an
equal number of fractional shares of KRT Trust and the subsequent conversion
of such fractional shares of KRT Trust into a right to receive cash, without
interest, in lieu of such fractional interests as provided in Section 4.2(e).
4.3. Cancellation of Kramont Common Shares. Pursuant to the
Reorganization, the Kramont Common Shares held by its shareholders
immediately prior to the Reorganization will be canceled in the
Reorganization for no consideration.
4.4. Service of Process. Kramont agrees that it may be served with
process in the State of Delaware in any proceeding for the enforcement of any
obligation of any constituent corporation of the State of Delaware, as well
as enforcement of any obligation of Kramont arising from the Reorganization,
including any suit or other proceeding to enforce the right of any
stockholders as determined in appraisal proceedings pursuant to the
provisions of Section 262 of the DGCL, and hereby irrevocably appoints the
Secretary of State of the State of Delaware as its agent to accept service of
process in any such suit or other proceeding. The address to which a copy of
such service of process shall be mailed by the Secretary of State is:
Corporation Service Company, 1013 Centre Road, Wilmington, DE 19805.
ARTICLE 5
5. Certain Transactions Relating to the Kranzco Reorganization and
the Trust Merger. Subject to the satisfaction of the conditions set forth in
Article 9 of this Agreement the following transactions will be consummated in
the order described below.
5.1. Preliminary Transactions. Prior to the Effective Time, Kranzco
(i) will cause all of its corporate subsidiaries to either convert into or
merge with and into single-member limited liability companies or limited
partnerships (in each case the sole owner of any such limited liability
company or limited partnership, for Federal income tax purposes, shall be
Kranzco and such limited liability company or limited partnership shall be,
directly and indirectly, owned by Kranzco and its wholly-owned subsidiaries)
but, KRT Trust will continue to be wholly owned by Kranzco, and (ii) may
elect to transfer certain of the assets currently owned directly by Kranzco
to single-member limited liability companies or limited partnerships of
which, for Federal income tax purposes, the sole owner shall be Kranzco and
which shall be, directly and indirectly, owned by Kranzco and its wholly-
owned subsidiaries (collectively, the "Conversion Transactions").
Immediately following the Conversion Transactions, Kranzco will merge with
and into KRT Trust II and in connection with such merger, (i) the shares of
KRT Trust owned by Kranzco shall be canceled without any consideration and
(ii) each shareholder of Kranzco will receive such number of common and
preferred shares in KRT Trust as is equal to the number of common and
preferred shares held by such shareholder in Kranzco (in each case with
substantially the same economic terms, rights, privileges, designations and
preferences as the shares formerly held in Kranzco) and such former Kranzco
shareholders shall thereupon and as of the Effective Time be the only
shareholders of KRT Trust and KRT Trust II shall be the surviving entity (the
"KRT Trust II Merger"). Immediately prior to the effective time of the KRT
Trust II Merger, Kranzco and KRT Trust II will cause to be filed with (i) the
Delaware Secretary of State, a Certificate of Merger in the form attached
hereto as Exhibit E and (ii) the State Department of Assessments and Taxation
of Maryland, the Articles of Merger in the form attached hereto as Exhibit F,
which documents shall set forth the effects of the KRT Trust II Merger.
Immediately following the KRT Trust II Merger, (i) KRT Trust II will merge
with and into KRT Partnership, and KRT Partnership shall be the surviving
entity (the "KRT Partnership Merger") and (ii) the agreement of limited
partnership of KRT Partnership shall be amended and restated to read as set
forth on Exhibit N hereto. Immediately prior to the effective time of the
KRT Partnership Merger, KRT Trust II and KRT Partnership will cause to be
filed with the Delaware Secretary of State, a Certificate of Merger in the
form attached hereto as Exhibit G, which document will set forth the effects
of the KRT Partnership Merger. Immediately following the KRT Partnership
Merger, the number of common and preferred partnership interests in KRT
Partnership held by KRT Trust (which, together with the non-economic interest
of KRT Trust I in KRT Partnership shall thereupon be the only outstanding
partnership interests) shall be equal in number and have substantially
identical economic terms, rights, privileges, designations and preferences to
the respective outstanding common shares and preferred shares of KRT Trust.
Effective the day prior to the Effective Time, an election shall be made
pursuant to Treasury Regulation Section 301.7701-3 for each of Kramont and
KRT Trust to be treated as a corporation for federal income tax purposes.
5.2. Merger of CV Trust into CV. Immediately prior to the Effective
Time, CV Trust shall merge with and into CV in accordance with the DGCL and
Title XII, Chapter 38 of the Delaware Code (the "Delaware Business Trust
Laws"), and CV shall be the surviving entity. Immediately prior to the
Effective Time, CV Trust and CV shall cause to be filed with the Delaware
Secretary of State a Certificate of Merger meeting the requirements of the
DGCL and the Delaware Business Trust Laws in the form attached hereto as
Exhibit H.
5.3. Transactions Relating to CV Partnership.
(a) Following the execution of this Agreement, KRT Trust shall
cause KRT Partnership to offer (the "Contribution Offer") to each holder of
units of partnership interest ("CV OP Units") in CV Partnership (other than
CV Trust) (the "CV Unit Holders") the right to (i) contribute to KRT
Partnership all the CV OP Units held by such CV Unit Holder in exchange for
an equal number of common units of partnership interest of KRT Partnership
("Kramont OP Common Units") or (ii) at the option of such CV Unit Holder, and
provided (x) such holder shall theretofore have contributed to Holdings all
of the CV OP Units held by such CV Unit Holder in exchange for an equal
number of units of partnership interest in Holdings, and (y) immediately
prior to such contribution: the sole general partner of Holdings is CV OP
Holdings LLC, the sole limited partner of Holdings is Louis P. Meshon, Sr.,
and Holdings has no assets or liabilities, contribute to KRT Partnership all
of the units of partnership interest in Holdings held by such former CV Unit
Holder (except that Louis P. Meshon, Sr. may retain units of limited partner
interest in Holdings equal to 0.1% of the total units of limited partner
interest in Holdings (the "Meshon Retained Interest")) in exchange for an
equal number of Kramont OP Common Units, in each case pursuant to a Unit
Contribution Agreement in substantially the form attached hereto as Exhibit I
(the "Unit Contribution Agreement"). At the same time, CV Partnership and
Kramont shall offer (the "CV Partnership Exchange Offer") each CV Unit
Holder, other than CV Trust, the alternative right to exchange such holder's
CV OP Units under Section 11.2D of the Amended and Restated Agreement of
Limited Partnership of Montgomery CV Realty L.P. (the "CV Partnership
Agreement") for an equal number of Kramont Common Shares, effective upon and
subject to the consummation of the Reorganization. Each such offer shall be
terminated as to any CV Unit Holder if not accepted by such CV Unit Holder by
the day before the date the Proxy Statement/Prospectus (defined below) is
mailed to the holders of beneficial interest of Kranzco and shareholders of
CV unless extended by KRT Partnership or CV Partnership, as the case may be,
in its sole discretion. If the Contribution Offer is accepted, the closing
of the contribution of CV OP Units for which such offer is accepted shall be
conditioned upon the occurrence of the Reorganization and shall not occur
until the Effective Time. If the CV Partnership Exchange Offer is accepted,
the CV OP Units of holders accepting such offer shall, at the Effective Time,
automatically by virtue of the Reorganization be converted into an equal
number of Kramont Common Shares.
(b) Following the execution of this Agreement, CV shall seek the
requisite approval of the partners of CV Partnership to (i) Kramont becoming
the general partner of CV Partnership, (ii) the Kranzco Contribution (as
defined below) and (iii) any other matters reasonably requested by either
party to effectuate the transactions contemplated by this Agreement and the
Ancillary Agreements (collectively, the "First CV Partnership Approval").
The limited partners of CV Partnership immediately prior to the consummation
of the transactions contemplated by the Unit Contribution Agreement shall be
asked to consent to the adoption of the Second Amended and Restated Agreement
of Limited Partnership of CV Partnership by CV GP LLC, a Delaware limited
partnership ("CV GP").
(c) Immediately following the Effective Time, Kramont shall
contribute to KRT Partnership all of the units of partnership interests then
held by Kramont in CV Partnership (the "Kranzco Contribution") pursuant to
the Unit Contribution Agreement in exchange for a number of common units of
partnership interest in KRT Partnership equal to the number of units of
partnership interest in CV Partnership contributed by Kramont.
(d) In connection with the transactions contemplated by the Unit
Contribution Agreement, KRT Partnership shall (i) transfer to CV GP (x) all
of the units of general and limited partner interests in CV Partnership
acquired by KRT Partnership pursuant to the Unit Contribution Agreement, (y)
all of the units of limited partner interests in Holdings acquired by KRT
Partnership pursuant to the Unit Contribution Agreement and (z) all of the
limited liability company interests in CV OP Holdings LLC that it acquired
pursuant to the Unit Contribution Agreement and (ii) consent to the transfer
of the units of general and limited partner interests in CV Partnership to CV
GP (the "Second CV Partnership Approval").
(e) CV GP, in its capacity as the sole general and a limited
partner of CV Partnership, will consent to the execution of the Second
Amended and Restated Agreement of Limited Partnership of CV Partnership in
substantially the form attached hereto as Exhibit J (the "Third CV
Partnership Approval" and, together with the First CV Partnership Approval
and the Second CV Partnership Approval, the "CV Partnership Approvals").
ARTICLE 6
6. Representations and Warranties of Kranzco and KRT Trust. Except
as set forth in the disclosure letter delivered at or prior to the execution
hereof to CV (the "Kranzco Disclosure Letter") (it being understood and
agreed that disclosure set forth in the Kranzco Disclosure Letter shall be
deemed applicable to each particular representation and warranty of Kranzco
herein contained to the extent it is reasonably evident on the face of such
disclosure that such disclosure applies to such representation and warranty)
Kranzco and KRT Trust, jointly and severally, represent and warrant to CV as
follows:
6.1. Existence; Good Standing; Authority; Compliance With Law.
Kranzco and KRT Trust are each a real estate investment trust, KRT
Partnership is a limited partnership, and each is duly organized or formed,
validly existing and in good standing under the laws of its jurisdiction of
incorporation, organization or formation. Kranzco is duly licensed or
qualified to do business as a foreign trust and is in good standing under the
laws of any other state of the United States in which the character of the
properties owned or leased by it therein or in which the transaction of its
business makes such qualification necessary, except where the failure to be
so qualified would not have a Kranzco Material Adverse Effect (as hereinafter
defined). For purposes of this Agreement, a "Kranzco Material Adverse
Effect" shall mean a material adverse effect on the business, results of
operations or financial condition (including, without limitation, Funds from
Operations (as defined below)) or prospects of Kranzco and the Kranzco
Subsidiaries taken as a whole; provided, however, that a Kranzco Material
Adverse Effect shall not be deemed to have occurred by reason of (i) changes
or conditions affecting real estate investment trusts regionally or generally
or the real estate industry regionally or generally, (ii) changes in
financial or equity markets or economic, regulatory or political conditions
regionally or generally, or (iii) the events set forth on Section 6.1 of the
Disclosure Letter. It is understood and agreed that for purposes of this
Agreement, a change in the market price of the Kranzco Common Shares or a
reduction in Kranzco's Funds from Operations will not in and of itself
constitute a Kranzco Material Adverse Effect. However, a restatement of the
previously issued financial statements of Kranzco, as a result of which the
Funds from Operations of Kranzco, as restated by Kranzco and calculated in
the same manner as required to be calculated in connection with the
originally issued financial statements, are materially adversely different
from the Funds from Operations of Kranzco reported by Kranzco prior to such
restatement, shall be deemed a Kranzco Material Adverse Effect. As used in
this Agreement, "Funds from Operations" shall have the meaning given such
term by the National Association of Real Estate Investment Trusts ("NAREIT")
from time to time. As used in this Agreement, the term "Kranzco Subsidiary"
when used with respect to Kranzco means any corporation, partnership, joint
venture, limited liability company, business trust or other entity, of which
Kranzco directly or indirectly owns or controls more than 50% of the equity
interests, including, without limitation, KRT Trust, KRT Trust II, KRT
Partnership and, upon its formation, each new limited liability company and
limited partnership which is a party to any of the Conversion Transactions.
Kranzco has all requisite trust power and authority to own, operate, lease
and encumber its properties and carry on its business as now conducted. Each
Kranzco Subsidiary is a corporation, partnership, limited liability company
or real estate investment trust duly organized, formed or created, validly
existing and in good standing under the laws of its jurisdiction of
incorporation, organization, formation or creation, has the corporate,
partnership, limited liability company or trust power and authority to own
its properties and to carry on its business as it is now being conducted, and
is duly qualified to do business and is in good standing in those
jurisdictions listed in Section 6.1 to the Kranzco Disclosure Letter, which
are the jurisdictions in which the ownership of its property or the conduct
of its business requires such qualification, except for jurisdictions in
which such failure to be so qualified or to be in good standing would not
have a Kranzco Material Adverse Effect. To the best knowledge of Kranzco,
neither Kranzco nor any Kranzco Subsidiary is in violation of any order of
any federal, state, local or foreign governmental body, court, arbitration
board, tribunal, commission, agency or authority ("Governmental Entity"), or
any law, ordinance, governmental rule or regulation to which Kranzco or any
Kranzco Subsidiary or any of their respective properties or assets is
subject, where such violation would have a Kranzco Material Adverse Effect.
Kranzco (i) has not received any notice of any violation of any licenses,
permits or other authorizations that are necessary to the operation of its
business as now conducted, (ii) to its knowledge, has not violated any
licenses, permits or other authorizations that are necessary to the operation
of its business as now conducted, and (iii) has not received any written
notice of revocation of any licenses, permits or other authorizations that
are necessary to the operation of its business as now conducted. Copies of
Kranzco's and the Kranzco Subsidiaries' declaration of trust, as amended and
restated, together with the Articles Supplementary for the Kranzco Series A-1
Increasing Rate Cumulative Convertible Preferred Shares of Beneficial
Interest (the "Kranzco Series A-1 Preferred Shares"), the Kranzco Series B-1
Cumulative Convertible Preferred Shares of Beneficial Interest (the "Kranzco
Series B-1 Preferred Shares"), the Kranzco Series B-2 Cumulative Convertible
Preferred Shares (the "Kranzco Series B-2 Preferred Shares"), the Kranzco
Series D Cumulative Redeemable Preferred Shares of Beneficial Interest (the
"Kranzco Series D Preferred Shares") and the Kranzco Series E Junior
Participating Preferred Shares of Beneficial Interest (the "Kranzco Series E
Preferred Shares", and together with the Kranzco Series A-1 Preferred Shares,
the Kranzco Series B-1 Preferred Shares, the Kranzco Series B-2 Preferred
Shares and the Kranzco Series D Preferred Shares, the "Kranzco Preferred
Shares") (collectively, the "Declaration of Trust"), Certificate of
Incorporation, By-laws, organization documents and partnership, joint venture
and limited liability company agreements, as the case may be, have been
previously delivered or made available to CV and are true and correct.
6.2. Authorization, Validity and Effect of Agreements. Each of
Kranzco, KRT Trust, KRT Trust II and KRT Partnership (collectively, the
"Kranzco Entities") has the requisite power and authority to enter into the
transactions contemplated hereby and to execute and deliver this Agreement
(to the extent a party hereto) and all agreements and documents contemplated
hereby (collectively, the "Ancillary Agreements") to which it is a party.
Subject only to the approval of this Agreement and the transactions
contemplated hereby by the holders of two-thirds of the outstanding Kranzco
Common Shares (collectively, the "Kranzco Shareholder Approval"), the
consummation by the Kranzco Entities of this Agreement to the extent parties
hereto and the consummation by the Kranzco Entities of the Ancillary
Agreements and the transactions contemplated hereby and thereby have been
duly authorized by all requisite action on the part of each of the Kranzco
Entities. This Agreement has been and the Ancillary Agreements when executed
will be, duly executed and delivered by Kranzco and KRT Trust and constitutes
the valid and legally binding obligation of Kranzco and KRT Trust enforceable
against Kranzco and KRT Trust in accordance with its terms, and the Ancillary
Agreements to which any of the Kranzco Entities is a party (when executed and
delivered pursuant hereto) will constitute the valid and legally binding
obligations of each of the Kranzco Entities enforceable against each of them
in accordance with their respective terms, subject in each case to applicable
bankruptcy, insolvency, moratorium or other similar laws relating to
creditors' rights and general principles of equity.
6.3. Capitalization. The authorized shares of beneficial interest of
Kranzco consist of 100,000,000 shares of beneficial interest, $.01 par value
per share. As of November 30, 1999, Kranzco had issued and outstanding:
10,562,832 Kranzco Common Shares; 11,155 Kranzco Series A-1 Preferred Shares;
274,029 Kranzco Series B-1 Preferred Shares; 909,248 Kranzco Series B-2
Preferred Shares; and 1,800,000 Kranzco Series D Preferred Shares. No other
shares of Kranzco Preferred Shares are authorized, issued or outstanding
except Kranzco has authorized 140,000 Kranzco Series E Preferred Shares, none
of which is issued or outstanding. Except for Kranzco Preferred Shares and
Kramont Options (as defined below), Kranzco has no outstanding bonds,
debentures, notes or other obligations the holders of which have the right to
vote (or which are convertible into or exercisable for securities having the
right to vote) with the holders of Kranzco Common Shares on any matter. As
used in this Agreement, "Kramont Options" means options to purchase shares of
Kranzco Common Shares outstanding under Kranzco's 1992 Employee Share Option
Plan, 1992 Trustee Share Option Plan or 1995 Incentive Plan. All such issued
and outstanding Kranzco Common Shares and Kranzco Preferred Shares are duly
authorized, validly issued, fully paid, nonassessable and free of preemptive
rights, except that shareholders may be subject to further assessment with
respect to certain claims for tort, contract, taxes, statutory liability and
otherwise in some jurisdictions to the extent such claims are not satisfied
by Kranzco. There are not at the date of this Agreement any existing
options, warrants, calls, subscriptions, convertible securities, or other
rights, agreements or commitments which obligate Kranzco or any of the
Kranzco Subsidiaries to issue, transfer or sell any shares of capital stock
of Kranzco or any of the Kranzco Subsidiaries other than the issuance by
Kranzco (i) of Kranzco Common Shares issuable upon the conversion of Kranzco
Preferred Shares, (ii) of Kranzco Common Shares issuable upon exercise of
share options issued to employees and trustees and (iii) of preferred stock
purchase rights (each a "Kranzco Right" and collectively, the "Kranzco
Rights") to the holders of Kranzco Common Shares issuable pursuant to a right
to purchase Kranzco Common Shares pursuant to that certain Rights Agreement,
dated November 10, 1998, between Kranzco and First Union National Bank, as
rights agent. As of November 30, 1999 (i) the Kranzco Series A-1 Preferred
Shares would be convertible into 500,000 Kranzco Common Shares, (ii) the
Kranzco Series B-1 Preferred Shares and the Kranzco Series B-2 Preferred
Shares would be convertible into 1,582,979 Kranzco Common Shares in the
aggregate, and (iii) 928,750 Kranzco Common Shares are issuable upon the
exercise of share options issuable to employees and trustees. Kranzco has
paid all declared and unpaid dividends on the Kranzco Preferred Shares
through November 30, 1999. Section 6.3 of the Kranzco Disclosure Letter sets
forth the names of the holders, number of shares underlying and exercise
price of each outstanding Kramont Option and the names of the holders of
restricted shares, number of restricted shares held and the vesting schedule
and other restrictions for such restricted shares. There are no agreements
or understandings to which Kranzco is a party with respect to the voting of
any of Kranzco Common Shares or which restrict the transfer of any such
shares, nor does Kranzco have knowledge of any such agreements or
understandings with respect to the voting of any such shares or which
restrict the transfer of any such shares other than those set forth in the
Declaration of Trust with respect to the maintenance of Kranzco as a REIT and
the share ownership limits set forth therein and the CV Voting Agreements.
There are no outstanding contractual obligations of Kranzco to repurchase,
redeem or otherwise acquire any Kranzco Common Shares or any other securities
of Kranzco. Kranzco is not under any obligation, contingent or otherwise, by
reason of any agreement to register any of its or any Kranzco Subsidiary's
securities under the Securities Act.
6.4. Subsidiaries. Kranzco owns directly or indirectly each of the
outstanding shares of capital stock or all of the partnership or other equity
interests of each of the Kranzco Subsidiaries. Each of the outstanding
shares of capital stock of or other equity interest in each of the Kranzco
Subsidiaries is duly authorized, validly issued, fully paid and
nonassessable, and is owned, directly or indirectly, by Kranzco or such other
parties set forth in Section 6.4 of the Kranzco Disclosure Letter free and
clear of all liens, pledges, security interests, claims or other encumbrances
other than liens imposed by local law which are not material. The following
information for each Kranzco Subsidiary is set forth on the Kranzco
Disclosure Letter, if applicable: (i) its name and jurisdiction of
incorporation, organization, formation or creation and (ii) the name of each
shareholder or owner of an equity interest and the number of issued and
outstanding shares of capital stock or share capital or percentage ownership
for non-corporate entities held by it. Except for the shares or partnership
interests required to be issued under this Agreement at the Effective Time or
as set forth in Section 6.4 of the Kranzco Disclosure Letter, none of the
Kranzco Subsidiaries shall have outstanding any other shares, partnership
interests or other capital stock or securities of any kind whatsoever nor any
agreement, warrants, options, rights or other obligations to issue or sell
any such securities or any securities exercisable for or convertible into any
such securities.
6.5. Other Interests. Except for interests in the Kranzco
Subsidiaries, neither Kranzco nor any Kranzco Subsidiary owns directly or
indirectly any interest or investment (whether equity or debt) in any
corporation, partnership, joint venture, business, limited liability company,
trust or entity (other than investments in short-term investment securities).
6.6. No Violation. Neither the execution and delivery by Kranzco or
KRT Trust of this Agreement nor the consummation by the Kranzco Entities of
the transactions contemplated hereby in accordance with the terms hereof,
will: (i) subject to obtaining Kranzco Shareholder Approval, conflict with
or result in a breach of any provisions of the Declaration of Trust of
Kranzco or KRT Trust, the provisions of the certificate of limited
partnership or the partnership agreement of KRT Partnership or the provisions
of the respective By-laws of Kranzco or KRT Trust; (ii) result in a breach or
violation of, a default under, or the triggering of any payment or other
material obligations pursuant to, or accelerate vesting under any Kramont
Options, or any grant or award made under any of the foregoing; (iii)
violate, or conflict with, or result in a breach of any provision of, or
constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, or result in the termination or in a
right of termination or cancellation of, or accelerate the performance
required by, or result in the creation of any lien, security interest, charge
or encumbrance upon any of the properties of Kranzco or any of the Kranzco
Subsidiaries under, or result in being declared void, voidable or without
further binding effect, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, deed of trust or any license, franchise,
permit, lease, contract, agreement or other instrument, commitment or
obligation to which Kranzco or any of the Kranzco Subsidiaries is a party, or
by which Kranzco or any of the Kranzco Subsidiaries or any of their
properties is bound or affected, except for any of the foregoing matters
which, individually or in the aggregate, would not have a Kranzco Material
Adverse Effect; or (iv) other than (x) the filings provided for in Article 1
and Article 5, (y) any filings required under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), the Securities Act or applicable state
securities and "Blue Sky" laws (collectively, the "Regulatory Filings") and
(z) any filings with the NYSE, require any consent, approval or authorization
of, declaration, filing or registration with, or notification to, any
Governmental Entity, except where the failure to obtain any such consent,
approval or authorization of, or make any such declaration, filing or
registration with, or notification to, any governmental or regulatory
authority would not prevent or materially delay the consummation of the
transactions contemplated by this Agreement or otherwise prevent Kranzco or
KRT Trust from performing, or materially impair Kranzco or KRT Trust's
ability to perform, their obligations under this Agreement or have a Kranzco
Material Adverse Effect.
6.7. SEC Documents. Kranzco has timely filed all required forms,
reports and documents with the SEC since November 19, 1992 (the "Kranzco
Reports"). The Kranzco Reports were filed with the SEC in a timely manner
and constitute all forms, reports and documents required to be filed by
Kranzco under the Securities Act, the Exchange Act and the rules and
regulations promulgated thereunder (the "Securities Laws"). As of their
respective dates, the Kranzco Reports (i) complied in all material respects
with the applicable requirements of the Securities Laws and (ii) did not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading. Each of the consolidated balance sheets of Kranzco included in
or incorporated by reference into the Kranzco Reports (including the related
notes and schedules) fairly presents, in all material respects the
consolidated financial position of Kranzco and the Kranzco Subsidiaries as of
its date and each of the consolidated statements of income, retained earnings
and cash flows of Kranzco included in or incorporated by reference into the
Kranzco Reports (including any related notes and schedules) fairly presents
in all material respects the results of operations, retained earnings or cash
flows, as the case may be, of Kranzco and the Kranzco Subsidiaries for the
periods set forth therein (subject, in the case of unaudited statements, to
normal year-end audit adjustments which would not be material in amount or
effect), in each case in accordance with generally accepted accounting
principles consistently applied during the periods involved, except as may be
noted therein and except, in the case of the unaudited statements, as
permitted by Form 10-Q or Form 8-K of the SEC. Funds from Operations for
Kranzco set forth in the Kranzco Reports, including the financial statements
included in or incorporated by reference in the Kranzco Reports (including
any related notes and schedules) for the periods set forth therein, was
calculated in accordance with applicable NAREIT guidelines then in effect
consistently applied during the periods involved. All offerings of securities
by Kranzco or any Kranzco Subsidiary were effected in compliance with
applicable law and no party participating in such offerings has any
rescission rights resulting therefrom.
6.8. Litigation. There are (i) no continuing orders, injunctions or
decrees of any Governmental Entity to which Kranzco or any Kranzco Subsidiary
is a party or by which any of its properties or assets are bound or, to the
best knowledge of Kranzco, to which any of its trustees, officers, employees
or agents is a party, and (ii) no actions, suits or proceedings pending (of
which service or notice of process has been received by an employee of
Kranzco) against Kranzco or any Kranzco Subsidiary or, to the best knowledge
of Kranzco, against any of its directors, trustees, officers, employees or
agents in such capacity or, to the actual knowledge of Kranzco, threatened
against Kranzco or any Kranzco Subsidiary or against any of its directors,
trustees, officers, employees or agents in such capacity, at law or in
equity, or before or by any federal or state commission, board, bureau,
agency or instrumentality, that, if decided adversely, could, individually or
in the aggregate, have a Kranzco Material Adverse Effect. Section 6.8 to the
Kranzco Disclosure Letter lists all actions, suits and proceedings pending
which, if decided adversely, would individually result in the imposition of
liability, directly or indirectly, against Kranzco or any Kranzco Subsidiary
in an amount in excess of $50,000. Excluding the actions, suits or
proceedings set forth on Section 6.8 to the Kranzco Disclosure Letter,
Kranzco and the Kranzco Subsidiaries are not subject to any actions, suits or
proceedings which if decided adversely would, in the aggregate, result in the
imposition of liability, directly or indirectly, against Kranzco or any
Kranzco Subsidiary in an amount in excess of $500,000.
6.9. Absence of Certain Changes. Except as disclosed in the Kranzco
Reports filed with the SEC prior to the date hereof, since December 31, 1998,
Kranzco and the Kranzco Subsidiaries have conducted their business only in
the ordinary course of such business and there has not been (i) any Kranzco
Material Adverse Effect, (ii) as of the date hereof, any declaration, setting
aside or payment of any dividend or other distribution with respect to (A)
the Kranzco Common Shares, except dividends of $0.48 per share declared on
March 16, 1999 and June 2, 1999 and dividends of $0.325 per share declared on
September 29, 1999, (B) the Kranzco Preferred Shares except in accordance
with the terms thereof and the redemption of the outstanding Kranzco Series C
Cumulative Redeemable Preferred Shares of Beneficial Interest, (iii) any
commitment, contractual obligation, borrowing, refinancing, capital
expenditure or transaction (each, a "Commitment") entered into by Kranzco or
any of the Kranzco Subsidiaries, other than Commitments not exceeding
$250,000 individually in the ordinary course of business, or (iv) any
material change in Kranzco's accounting principles, practices or methods.
6.10. Taxes. (a) Except as set forth in Section 6.10 of the Kranzco
Disclosure Letter and except as has not resulted and would not result in a
Kranzco Material Adverse Effect: Kranzco and each of the Kranzco Subsidiaries
(i) has timely filed all Returns required to be filed by any of them for tax
years ended prior to the date of this Agreement or requests for extensions
have been timely filed and any such request has not been rejected and has not
expired and all such Returns are correct and complete in all material
respects and (ii) has paid or caused to be paid or adequately accrued or
reserved on its most recent balance sheet for all Taxes shown to be due and
payable on such returns or which have become due and payable pursuant to any
assessment, deficiency notice, 30-day letter or other notice received by it
and (iii) has paid all Taxes shown to be due and payable on any Returns and
(iv) has complied with all applicable laws relating to withholding Taxes.
Kranzco has not received any notice of any audit (not since closed) of any
Return filed by Kranzco with respect to any tax year ending after December
31, 1995, and Kranzco has not been notified by the Internal Revenue Service
("IRS") or any State taxing authority that any such audit is contemplated or
pending. Neither Kranzco nor any of the Kranzco Subsidiaries has executed or
filed with the IRS or any other taxing authority any agreement now in effect
extending the period for assessment or collection of any income or other
Taxes. Neither Kranzco nor any of the Kranzco Subsidiaries is a party to any
pending audit, action or proceeding by any governmental authority for
assessment or collection of Taxes, and no claim for assessment or collection
of Taxes has been asserted against it. True, correct and complete copies of
all Returns filed by Kranzco and each of the Kranzco Subsidiaries since
December 31, 1992, and all material communications relating thereto have been
made available for inspection to representatives of CV. Since January 1,
1998, Kranzco has incurred no liability for Taxes under Sections 857(b)
(other than 857(b)(1) or (3)), 860C or 4981 of the Code or, other than as
reported on Returns, Internal Revenue Service Notice 88-19, including without
limitation, any Tax arising from a prohibited transaction described in
Section 857(b)(6) of the Code) and neither Kranzco nor any Kranzco Subsidiary
has incurred any liability for Taxes other than in the ordinary course of
business. There are no Tax liens upon the assets of Kranzco or any of the
Kranzco Subsidiaries except liens for Taxes not yet due. Neither Kranzco nor
any Kranzco Subsidiary is a party to any agreement relating to a sharing or
allocation of Taxes (other than customary provisions contained in leases
relating to real estate or similar taxes), or has any liability for Taxes of
any person other than Kranzco and the Kranzco Subsidiaries under Treas. Reg.
Section 1.1502-6 (or similar provision of state, local or foreign law), by
contract or otherwise, or is a party to any agreement, contract, or
arrangement that could result in the payment of any "excess parachute
payments" under Section 280G of the Code or any amount that would be non-
deductible under Section 162(m) of the Code. As used in this Agreement,
"Taxes" shall include all federal, state, local and foreign income, property,
sales, franchise, employment, excise, withholding and other taxes, tariffs or
governmental charges of any nature whatsoever, together with penalties,
interest or additions to Tax with respect thereto and the term "Tax" means
any of the foregoing Taxes. The term "Returns" means all returns,
declarations, reports, statements, and other documents required to be filed
in respect of Taxes, and the term "Return" means any one of the foregoing
Returns.
(b) Kranzco (i) has met the definition of a "real estate
investment trust" ("REIT") in section 856 of the Code, as in effect for each
taxable year commencing with its taxable year ended December 31, 1992, for
each such taxable year, (ii) has been (A) a REIT to which the provisions of
part II of subchapter M of chapter 1 of the Code apply and (B) a "corporation
subject to a tax imposed by Subchapter M" (as that term is used in Section
11(c) of the Code) for each such taxable year, (iii) has operated, since
December 31, 1998, to the date of this representation, and intends to
continue to operate in such a manner, for all periods from the date of this
representation through the end of its taxable year that includes the Closing
Date, as to meet the requirements described in clauses (i) and (ii) above,
(iv) has not taken or omitted to take any action which would reasonably be
expected to result in a challenge regarding whether it has met the
requirements described in clauses (i) and (ii) above, (v) has no knowledge
that any such challenge is pending or threatened, and (vi) has complied with
(and intends to continue to comply with) section 857(f)(1) of the Code for
each taxable year that such provision was (or is) applicable to it. Kranzco
represents that each of its corporate subsidiaries is, and at all times since
its affiliation with Kranzco has qualified as, a qualified REIT subsidiary as
defined in Section 856(i) of the Code, and that each partnership, limited
liability company, joint venture or other legal entity (other than a
corporation) in which Kranzco (either directly or indirectly) owns any of the
capital stock or other equity interests thereof has been treated since its
formation and continues to be treated for federal income tax purposes as a
partnership or disregarded as an entity separate from its owner and not as an
association taxable as a corporation. None of Kranzco or the Kranzco
Subsidiaries has a net unrealized built-in gain within the meaning of Section
1374(d)(1) of the Code that is subject to an election under IRS Notice 88-19
or has any accumulated earnings and profits from the years ending on or prior
to December 31, 1998, in each case to the extent the foregoing would result
in a Kranzco Material Adverse Effect. None of Kranzco, KRT Trust, KRT Trust
II, KRT Partnership, or any shareholder, member, or partner of any of them
will recognize any income or gain for Federal income tax purposes as a result
of the Kranzco Reorganization (except that incidental items of income not
greater than $1,000,000 for all such parties in the aggregate may be so
recognized). The Kranzco Reorganization will not cause the KRT Trust Merger
to fail to be treated for Federal income tax purposes as a reorganization
within the meaning of Section 368(a)of the Code. Kranzco owns 100% of the
residual interest in a REMIC established by KRT Origination Corp. pursuant to
a trust and servicing agreement dated as of June 18, 1996, which constitutes,
for purposes of Section 856 of the Code, a residual interest in a REMIC at
least 95% of the assets of which consists of "real estate assets." Kranzco
and the Kranzco Subsidiaries own no other interest in any REMIC.
(c) Kranzco has not agreed to and is not required to make any
adjustment under Section 481(a) of the Code.
(d) Kranzco has not, with regard to any assets or property held
or acquired by it, filed a consent to the application of Section 341(f) of
the Code or agreed to have Section 341(f)(2) of the Code apply to any
disposition of a subsection (f) asset (as such term is defined in Section
341(f)(4) of the Code) owned by Kranzco.
(e) Kranzco is not a "foreign person" as such term is defined in
Section 1445(f) of the Code.
6.11. Books and Records. (a) The books of account and other financial
records of Kranzco and the Kranzco Subsidiaries are in all material respects
true, complete and correct, have been maintained in accordance with good
business practices, and are accurately reflected in the financial statements
included in the Kranzco Reports.
(b) The minute books and other records of Kranzco and the
Kranzco Subsidiaries, have been made available to CV, contain in all material
respects accurate records of all meetings and accurately reflect in all
material respects all other trust and corporate action of the shareholders,
trustees and directors and any committees of the Board of Trustees of Kranzco
and the Kranzco Subsidiaries and all actions of the partners of the Kranzco
Subsidiaries.
6.12. Properties. Kranzco and the Kranzco Subsidiaries own fee simple
title to, or hold ground leases in, each of the real properties identified in
Section 6.12 of the Kranzco Disclosure Letter (the "Kranzco Properties"),
which are all of the real estate properties owned or leased by them. The
Kranzco Properties are not subject to any rights of way, written agreements
(other than leases), laws, ordinances and regulations affecting building use
or occupancy, or reservations of an interest in title (collectively,
"Property Restrictions"), except for (i) liens, mortgages or deeds of trust,
charges which are liens and security interests ("Encumbrances") and other
Property Restrictions set forth in Section 6.12 of the Kranzco Disclosure
Letter, (ii) Property Restrictions imposed or promulgated by law or any
governmental body or authority with respect to real property, including
zoning regulations, provided such Property Restrictions do not adversely
affect in any material respect the current use of the applicable property
(other than liens under Environmental Laws which are addressed in Section
6.13(a)(ix)), (iii) Encumbrances and other Property Restrictions disclosed on
existing title reports or current surveys (in either case copies of which
title reports and surveys have been delivered or made available to CV), and
(iv) mechanics', carriers', workmen's and repairmen's liens, and other
Property Restrictions and limitations, if any, which individually or in the
aggregate are not substantial in amount, do not materially interfere with the
present use of any of the Kranzco Properties subject thereto or affected
thereby, and do not otherwise materially impair business operations conducted
by Kranzco and the Kranzco Subsidiaries. Valid policies of title insurance
have been issued insuring Kranzco's or any of the Kranzco Subsidiaries' fee
simple or leasehold title to the Kranzco Properties owned in fee or by
leasehold in amounts at least equal to the purchase price thereof, subject
only to the matters set forth therein or disclosed above, and such policies
are, at the date hereof, in full force and effect and there are no pending
claims against any such policy where the amount involved exceeds $50,000 and
such policies will be enforceable by Kramont with respect to such properties
after the Effective Time. Section 6.12 of the Kranzco Disclosure Letter
contains a true and correct list of all Kranzco Properties which are leased
by Kranzco pursuant to Ground Leases (collectively, the "Kranzco Ground
Leases") as well as a list of all the Kranzco Ground Leases. All of such
Kranzco Ground Leases are in full force and effect. Each of the Kranzco
Properties is assessed as one or more tax lot(s) separate and distinct from
the tax lot allocated to any other parcel of land or improvements. Except as
disclosed in Section 6.12 of the Kranzco Disclosure Letter, there is no
action, suit, proceeding, claim, order, decree or judgment affecting any
Kranzco Subsidiary or any Kranzco Property, or any portion thereof, or
relating to or arising out of the ownership, management, operation, use or
occupancy of any Kranzco Property, pending or being prosecuted in any court
or by or before any federal, state, county or municipal department,
commission, board, bureau or agency or other governmental instrumentality
that, if adversely determined, would individually or in the aggregate have a
Kranzco Material Adverse Effect, nor is any such action, suit, proceeding,
claim, order, decree or judgment, to the knowledge of Kranzco or any Kranzco
Subsidiary, threatened or being asserted. No Kranzco Subsidiary is a party
to or subject to any judgment, writ, decree, injunction or order enjoining or
restraining it from conducting any business in respect of the Kranzco
Property that it owns. There are no outstanding unpaid judgments against any
Kranzco Subsidiary, except for the judgments described in Section 6.12 of the
Kranzco Disclosure Letter which are covered by insurance and on appeal. Any
material certificate, permit or license from any government authority having
jurisdiction over any of the Kranzco Properties and any agreement, easement
or other right which is necessary to permit the material lawful use and
operation of the buildings and improvements on any of the Kranzco Properties
or which is necessary to permit the lawful use and operation in all material
respects of all driveways, roads and other means of egress and ingress to and
from any of the Kranzco Properties which are currently occupied and are
material to the operation of the property have been obtained and are in full
force and effect. Neither (i) Kranzco nor, (ii) to the knowledge of Kranzco,
any Material Kranzco Tenant (as herein defined) to the extent it imposes an
obligation on the part of Kranzco, is in receipt of any written notice of any
violation of any material federal, state or municipal law, ordinance, order,
regulation or requirement affecting any portion of any of the Kranzco
Properties issued by any governmental authority other than such violations
which would not reasonably be expected to have a Kranzco Material Adverse
Effect. To the knowledge of Kranzco, (A) there are no material structural
defects relating to the Kranzco Properties, (B) there are no Kranzco
Properties whose building systems are not in working order in any material
respect (except for normal maintenance and operating systems failures which
in any event are the subject of adequate pending repair procedures), (C)
there is no physical damage to any Kranzco Property in excess of $50,000 for
which there is no insurance in effect covering the cost of the restoration as
of the date hereof, or (D) no current renovation or restoration of any
Kranzco Property is underway or for which contracts have been entered into
the cost of which exceeds $50,000, except in each case, as set forth in
Section 6.12 of the Kranzco Disclosure Letter. Neither Kranzco nor any of
the Kranzco Subsidiaries has received any written notice to the effect that
(x) any condemnation or material rezoning proceedings are pending or
threatened with respect to any of the Kranzco Properties where the fair
market value of the object of such proceeding exceeds $50,000 or (y) any
zoning, building or similar law, code, ordinance, order or regulation is or
will be violated in any material respect by Kranzco or the Kranzco
Subsidiaries by the continued maintenance, operation or use of any buildings
or other improvements on any of the Kranzco Properties as currently
maintained, used or operated by Kranzco or the Kranzco Subsidiaries or by the
continued maintenance, operation or use of the parking areas as currently
maintained, used or operated by Kranzco or the Kranzco Subsidiaries which is
not insured over and where the remedying of such violations would materially
and adversely affect the relevant Kranzco Property. All work to be
performed, payments to be made and actions to be taken by Kranzco or the
Kranzco Subsidiaries prior to the date hereof pursuant to any agreement
entered into with a governmental body or authority in connection with a site
approval, zoning reclassification or other similar action relating to the
Kranzco Properties (e.g., Local Improvement District, Road Improvement
District, Environmental Mitigation) has been performed, paid or taken, as the
case may be, in all material respects, and Kranzco is not aware of any
planned or proposed work, payments or actions that may be required after the
date hereof pursuant to such agreements. Kranzco owns less than $15,000,000
of nonexempt assets under Section 802.4 of the rules and regulations
promulgated under the Hart-Scott-Rodino Antitrust Improvements Act.
6.13. Environmental Matters. (a) Except as set forth in Section 6.13
of the Kranzco Disclosure Letter, (i) Kranzco and each of the Kranzco
Subsidiaries possess all Environmental Permits (as defined below) currently
required under applicable Environmental Laws (as defined below) to conduct
their business and are, and within the last five years, have been, in
compliance with the terms and conditions of such Environmental Permits,
except where such failures to possess or comply, individually or in the
aggregate, would not have a Kranzco Material Adverse Effect, nor has Kranzco
received written notice that any Environmental Permits possessed by Kranzco
or any of the Kranzco Subsidiaries and material to their business will be
revoked, suspended or will not be renewed;
(ii) to the knowledge of Kranzco, all Environmental Permits
currently held by Kranzco and the Kranzco Subsidiaries pursuant to
Environmental Laws and material to their business are identified in Section
6.13 of the Kranzco Disclosure Letter and represent all Environmental Permits
necessary and material for the conduct of the business of Kranzco and the
Kranzco Subsidiaries as currently conducted;
(iii) to the knowledge of Kranzco, the execution and
delivery of this Agreement and the consummation by Kranzco of the
transactions contemplated hereby will not affect the validity or require the
transfer of any Environmental Permits, and will not require any notification,
registration, reporting, filing, investigation, or remediation under any
Environmental Law including any transfer law;
(iv) Kranzco and each of the Kranzco Subsidiaries are
currently in compliance, and within applicable statutory and regulatory time
limitations, have complied, with all applicable Environmental Laws, except
where such failures to comply, individually or in the aggregate, would not
have a Kranzco Material Adverse Effect;
(v) except as would not have a Kranzco Material Adverse
Effect, (a) there is currently no civil, criminal or administrative action,
suit, demand, claim, hearing, notice of violation, investigation, notice or
demand letter, or request for information pending or, to the knowledge of
Kranzco, threatened, which asserts liability under any Environmental Law
against Kranzco or any of the Kranzco Subsidiaries; and (b) neither Kranzco
nor any of the Kranzco Subsidiaries has received written notice of actual or
potential liability or of violations under any applicable Environmental Law
that remains outstanding and has not been resolved, including, but not
limited to, any liability that Kranzco or the Kranzco Subsidiaries may have
retained or assumed either contractually or by operation of law;
(vi) as of the date hereof, no property or facility
currently, or to the knowledge of Kranzco, formerly owned, operated or leased
by Kranzco or any of its present or former Kranzco Subsidiaries, or by any
respective predecessor in interest, is listed or proposed for listing on the
National Priorities List or the Comprehensive Environmental Response,
Compensation and Liability Information System, both promulgated under the
United States Comprehensive Environmental Response, Compensation, and
Liability Act, as amended ("CERCLA"), or on any comparable foreign or state
list established under any Environmental Law;
(vii) to the knowledge of Kranzco, (a) there has been no
disposal, spill, discharge or release of any Hazardous Material (as defined
below), on, at, or under any property presently or formerly owned, leased or
operated by Kranzco, any of the Kranzco Subsidiaries, or any predecessor in
interest, except for such disposals, spills, discharges and releases that,
individually or in the aggregate, would not have a Kranzco Material Adverse
Effect; and (b) there are no Hazardous Materials located in, at, on, or under
such facility or property, or at any other location, in either case that
could reasonably be expected to require investigation, removal, remedial or
corrective action by Kranzco or any of the Kranzco Subsidiaries or that would
reasonably likely result in material liabilities of, or losses, damages or
costs to Kranzco or any of the Kranzco Subsidiaries under any Environmental
Law;
(viii) except as would not have a Kranzco Material Adverse
Effect, (a) there are not any underground or aboveground storage tanks or
other underground storage receptacles or related piping, or any impoundment
or other disposal area in each case containing Hazardous Materials located on
any facility or property currently owned, leased or operated by Kranzco, any
of the Kranzco Subsidiaries or respective predecessors in interest, and (b)
no friable asbestos-containing materials or polychlorinated biphenyls in
concentrations or amounts regulated under Environmental Laws are being used
or have been disposed of during Kranzco's ownership or operation, or are
located at, on, or under any such facility or property in violation of any
applicable Environmental Law; and
(ix) to the knowledge of Kranzco, no lien has been recorded
against any properties, assets or facilities currently owned, leased or
operated by Kranzco or any of the Kranzco Subsidiaries under any
Environmental Law.
(b) Kranzco has made available to CV and its authorized
representatives all records and files, including but not limited to, all
assessments, reports, studies, analyses, tests and data in Kranzco's or
Kranzco's Subsidiaries' possession or custody concerning the presence of
Hazardous Materials or any other environmental condition at properties,
assets or facilities currently or formerly owned, operated or leased by
Kranzco or any present or former Kranzco Subsidiary or predecessor in
interest, or concerning compliance by Kranzco and the Kranzco Subsidiaries
with, or liability under, any Environmental Law.
(c) For purposes of this Section 6.13 and Section 7.13:
(i) "Environmental Law" shall mean CERCLA, the Resource
Conservation and Recovery Act of 1976, as amended, and any other applicable
federal, state, local, or foreign statute, rule, regulation, code, order,
judgment, directive, ordinance, decree or common law as now or previously in
effect and regulating, relating to, or imposing liability or standards of
conduct concerning air emissions, water discharges, noise emissions, the
release or threatened release or discharge of any Hazardous Material into the
environment, the generation, handling, treatment, storage, transport or
disposal of any Hazardous Material, or otherwise concerning pollution or the
protection of the outdoor or indoor environment, or human health and safety.
(ii) "Environmental Permit" shall mean any permit, license,
approval, consent or other authorization by a federal, state, local or
foreign government or regulatory entity pursuant to any Environmental Law.
(iii) "Hazardous Material" shall mean any pollutant,
contaminant or hazardous, toxic, or dangerous waste, substance, constituent
or material, defined or regulated as such in, or for purposes of, any
Environmental Law, including, without limitation, any asbestos, any
petroleum, petroleum product or oil (including crude oil or any fraction
thereof), any radioactive substance, any pesticide, any polychlorinated
biphenyls, any lead-based paint, any chemical, and any other substance that
can give rise to liability under any Environmental Law, or is regulated or
classified by reason of its toxicity, carcinogenicity, ignitability,
corrosivity, reactivity or other characteristic under any Environmental Law.
6.14. Employee Benefit Plans; ERISA. (a) All employee benefit plans
within the meaning of Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended, ("ERISA") and each bonus, profit sharing,
compensation, pension, severance, deferred compensation, fringe benefit,
insurance, welfare, post-retirement, health, life, stock option, stock
purchase, restricted stock, disability, accident, sick, vacation,
termination, unemployment, individual employment, consulting, executive
compensation, incentive, commission or sales arrangement, change in control,
noncompetition, and other plan, agreement, policy, trust fund, or arrangement
(whether written or unwritten, insured or self-insured) covering employees or
independent contractors of Kranzco and the Kranzco Subsidiaries (whether
current, former or retired) or their beneficiaries (collectively, the
"Kranzco Benefit Plans") are listed in Section 6.14 of the Kranzco Disclosure
Letter. True and complete copies of the Kranzco Benefit Plans have been made
available to CV. To the extent applicable, each Kranzco Benefit Plan
complies, in all material respects, with the requirements of ERISA, the Code,
and with the terms of such Kranzco Benefit Plan's plan documents, and any
Kranzco Benefit Plan intended to be qualified under Section 401(a) of the
Code has received a favorable determination letter from the Internal Revenue
Service (which may be a favorable determination letter issued to a prototype
sponsor for any Kranzco Benefit Plan which is a standardized prototype plan)
and is administered in compliance in all material respects with ERISA and the
Code and all applicable regulations thereunder and with the terms of such
Kranzco Benefit Plan's plan document. None of Kranzco, any of the Kranzco
Subsidiaries, any entity that would be deemed a single-employer with Kranzco
or any of the Kranzco Subsidiaries under Section 414(b), (c), (m) or (o) of
the Code (each an "Kranzco ERISA Affiliate") or any of their respective
predecessors has ever contributed to, contributes to, has ever been required
to contribute to, or otherwise participated in or participates in or in any
way, directly or indirectly, has any liability with respect to any employee
pension benefit plan (within the meaning of ERISA Section 3(2)) which is
subject to Title IV of ERISA, Section 412 of the Code or Section 302 of
ERISA, including, without limitation any, "multiemployer plan" (within the
meaning of Sections 3(37) or 4001(a)(3) of ERISA or Section 414(f) of the
Code), or any single employer pension plan. None of Kranzco, any of the
Kranzco Subsidiaries or any Kranzco Benefit Plan has incurred or is expected
to incur any liability or penalty under Section 4975 of the Code or Sections
406 or 502(i) of ERISA. To the knowledge of Kranzco, there are no
anticipated claims against or otherwise involving any of the Kranzco Benefit
Plans and no suit, action or other litigation (excluding claims for benefits
incurred in the ordinary course of Kranzco Benefit Plan activities) is
pending or has been brought against or with respect to any such Kranzco
Benefit Plan. All contributions required to be made as of the date hereof to
the Kranzco Benefit Plans have been made or provided for by Kranzco by full
accruals as if all targets required by such Kranzco Benefit Plan had been or
will be met at maximum levels in its financial statements. Except as
provided in the Kranzco Disclosure Letter, the execution of and performance
of the transactions contemplated by this Agreement will not (either alone or
upon the occurrence of any additional or subsequent events including, without
limitation, a termination of employment following the transactions
contemplated by this Agreement) constitute an event under any Kranzco Benefit
Plan that will or may reasonably be expected to result in any payment,
acceleration, vesting or increase in benefits with respect to any employee,
trustee, director, former employee or director of Kranzco or any of the
Kranzco Subsidiaries, whether or not any such Kranzco Benefit Plan would be
an "excess parachute payment" (within the meaning of Section 280G of the
Code).
(b) None of Kranzco, any of the Kranzco Subsidiaries or any
Kranzco ERISA Affiliate has any unfunded liabilities for benefits or claims
accrued pursuant to any Kranzco Benefit Plan, which Kranzco Benefit Plan is
not intended to be qualified under Section 401(a) of the Code, and that is an
employee pension benefit plan within the meaning of ERISA Section 3(2), a
nonqualified deferred compensation plan or an excess benefit plan.
(c) None of Kranzco, any of the Kranzco Subsidiaries or any
Kranzco ERISA Affiliate maintains any plan which is a "group health plan" (as
such term is defined in Section 5000(b)(1) of the Code) that has not been
administered and operated in all respects in compliance with the applicable
requirements of Section 601 of ERISA and Section 4980B of the Code, and none
of Kranzco, any of the Kranzco Subsidiaries or any Kranzco ERISA Affiliate is
subject to or expected to be subject to any liability, including without
limitation, additional contributions, fines, penalties or loss of tax
deduction as a result of such administration and operation. None of Kranzco,
any of the Kranzco Subsidiaries or any Kranzco ERISA Affiliate has incurred
or is expected to incur any liability from tax, excise tax, penalty or fee
with respect to any Plan, including, but not limited to, taxes arising under
Sections 4971 through 4980B of the Code, and no event has occurred and no
circumstance has existed that could give rise to any such liability. Except
as required by Section 4980B of the Code and Sections 601 through 607 of
ERISA and the regulations promulgated thereunder, the Federal Social Security
Act or a plan qualified under Section 401(a) of the Code, and except as
otherwise disclosed in the Kranzco Disclosure Letter, none of Kranzco, any of
the Kranzco Subsidiaries or any Kranzco ERISA Affiliate maintains or
contributes to any plan or arrangement which provides, or has any liability
to provide life insurance, medical or other employee welfare benefits
(whether or not vested) to any employee or former employee upon his
retirement or termination of employment with Kranzco or any of the Kranzco
Subsidiaries.
(d) No amounts payable under any Kranzco Benefit Plan will fail
to be deductible for federal income tax purposes by virtue of Section 280G or
162(m) of the Code. None of Kranzco, any Kranzco Subsidiaries or any Kranzco
ERISA Affiliate, or any officer or employee thereof, has made any promises or
commitments, whether legally binding or not, to create any additional plan,
agreement, arrangement, or to modify or change any existing Kranzco Benefit
Plan. No event, condition or circumstance exists that would prevent the
amendment or termination of any Kranzco Benefit Plan.
6.15. Labor Matters. Neither Kranzco nor any of the Kranzco
Subsidiaries is a party to, or bound by, any collective bargaining agreement,
contract or other agreement or understanding with a labor union or labor
union organization. There is no unfair labor practice or labor arbitration
proceeding pending or, to the knowledge of Kranzco, threatened against
Kranzco or any of the Kranzco Subsidiaries relating to their business, except
for any such proceeding which would not have a Kranzco Material Adverse
Effect. To the knowledge of Kranzco, there are no organizational efforts
with respect to the formation of a collective bargaining unit presently being
made or threatened involving employees of Kranzco or any of the Kranzco
Subsidiaries.
6.16. No Brokers. Kranzco has not entered into any contract,
arrangement or understanding with any person or firm which may result in the
obligation of Kranzco or CV to pay any finder's fees, brokerage or agent's
commissions or other like payments in connection with the negotiations
leading to this Agreement or the consummation of the transactions
contemplated hereby, except that Kranzco has retained ING Baring Furman Selz
LLC as its financial advisor, the arrangements with which have been disclosed
in writing to CV prior to the date hereof. Other than the foregoing
arrangements, Kranzco is not aware of any claim for payment of any finder's
fees, brokerage or agent's commissions or other like payments in connection
with the negotiations leading to this Agreement or the consummation of the
transactions contemplated hereby.
6.17. Opinion of Financial Advisor. The Board of Trustees of Kranzco
has received the opinion of ING Baring Furman Selz LLC, to the effect that,
as of the date of this Agreement, the Kranzco Exchange Ratio is fair to the
holders of Kranzco Common Shares from a financial point of view.
6.18. CV Share Ownership. Neither Kranzco nor any of the Kranzco
Subsidiaries owns any shares of Common Stock of CV or other securities
convertible into any shares of capital stock of CV.
6.19. [Intentionally Omitted]
6.20. Convertible Securities. Except for the Kranzco Preferred Shares
and the Kramont Options, Kranzco, KRT Partnership, KRT Trust and KRT Trust II
have no outstanding options, warrants or other securities exercisable for, or
convertible into, shares of Kranzco Common Shares or KRT Trust Common Shares,
the terms of which would require any anti-dilution adjustments by reason of
the consummation of the transactions contemplated hereby and the Kranzco
Subsidiaries have no outstanding options, warrants or other securities
exercisable for, or convertible into, Kranzco Common Shares or KRT Trust
Common Shares.
6.21. Related Party Transactions. Set forth in Section 6.21 of the
Kranzco Disclosure Letter is a list of all arrangements, agreements and
contracts entered into by Kranzco or any of the Kranzco Subsidiaries with any
person who is an officer, trustee or affiliate of Kranzco or any of the
Kranzco Subsidiaries, any relative of any of the foregoing or any entity of
which any of the foregoing is an affiliate. The copies of such documents,
all of which have previously been delivered or made available to CV, are
listed in Section 6.21 of the Kranzco Disclosure Letter and are true and
correct.
6.22. Contracts and Commitments. The Kranzco Disclosure Letter sets
forth (i) all notes, debentures, bonds and other evidence of indebtedness of
Kranzco or any of the Kranzco Subsidiaries in each case in excess of
$250,000, whether or not secured or collateralized by mortgages, deeds of
trust or other security interests in the Kranzco Properties or personal
property of Kranzco and the Kranzco Subsidiaries and (ii) each Commitment
entered into by Kranzco or any of the Kranzco Subsidiaries (excluding tenant
allowances, reimbursements and leases entered into the ordinary course) which
may result in total payments or liability in excess of $250,000 per
Commitment. Copies of the foregoing have been previously delivered or made
available to CV, are listed in Section 6.22 of the Kranzco Disclosure Letter
and are true and correct. None of Kranzco or any of the Kranzco Subsidiaries
has received any notice of a default that has not been cured under any of the
documents described in clause (i) above or is in default respecting any
payment obligations thereunder beyond any applicable grace periods and to the
knowledge of Kranzco, no event has occurred with respect to the other party
thereto which, with notice or the lapse of time, or both, would give rise to
an event of default and the transactions contemplated in this Agreement will
not result in any obligations by Kranzco to pay a fee to any lender,
mortgagee or other party or result in any debt owing to any such party
becoming due and payable. Excluding the Commitments set forth in Section
6.22 of the Kranzco Disclosure Letter, Kranzco and the Kranzco Subsidiaries
are not subject to any Commitments that, in the aggregate, exceed $3,000,000
(excluding Commitments that may be terminated by Kranzco or any Kranzco
Subsidiary on not more than 60 days' notice, without cost or penalty). All
options of Kranzco or any of the Kranzco Subsidiaries to purchase real
property are set forth on the Kranzco Disclosure Letter and such options and
Kranzco's or the Kranzco Subsidiaries' rights thereunder are in full force
and effect. All joint venture agreements to which Kranzco or any of the
Kranzco Subsidiaries is a party are set forth on the Kranzco Disclosure
Letter and neither Kranzco nor any of the Kranzco Subsidiaries are in default
with respect to any obligations, which individually or in the aggregate are
material, thereunder.
6.23. Certain Payments Resulting From Transactions. The execution of,
and performance of the transactions contemplated by, this Agreement will not
(either alone or upon the occurrence of any additional or subsequent events)
(i) constitute an event under any Kranzco Benefit Plan, policy, practice,
agreement or other arrangement or any trust or loan (the "Kranzco Employee
Arrangements") that will or may result in any payment (whether of severance
pay or otherwise), acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligation to fund benefits with
respect to any employee, director or consultant of Kranzco or any of the
Kranzco Subsidiaries, or (ii) result in the triggering or imposition of any
restrictions or limitations on the right of Kranzco or CV to amend or
terminate any Kranzco Employee Arrangement and receive the full amount of any
excess assets remaining or resulting from such amendment or termination,
subject to applicable taxes. No payment or benefit will be required to be
made pursuant to the terms of any agreement, commitment or Kranzco Benefit
Plan, as a result of the transactions contemplated by this Agreement, to any
officer, director, trustee or employee of Kranzco or any of the Kranzco
Subsidiaries, except as set forth in Section 6.23 to the Kranzco Disclosure
Letter.
6.24. Leases.
(a) Section 6.24 of the Kranzco Disclosure Letter sets forth a
list of all Kranzco Properties that are subject to or encumbered by any non-
residential lease (i) accounting for 1% or more of Kranzco's rental revenues
for the most recent period reflected in the financial statements included in
the Kranzco Reports or (ii) involving at least 25,000 square feet of gross
leasable area (each, a "Material Kranzco Lease" and each tenant with respect
thereto, a "Material Kranzco Tenant") and, with respect to each such Material
Kranzco Lease, sets forth the following information:
(i) the name of the lessee;
(ii) the expiration date of the lease;
(iii) the amount (or method of determining the amount) of
annual rentals due under the lease;
(iv) with respect to any Material Kranzco Lease with a
remaining term of less than 24 months, whether the lessee has notified
Kranzco in writing of any intention not to renew, or seek to renew, the
lease; and
(v) any notices with respect to a material default given
by a lessee under a Material Kranzco Lease which has not been cured.
(b) Except as set forth in Section 6.24 of the Kranzco
Disclosure Letter, (i) all rental payments due under each Material Kranzco
Lease have been paid during the period January 1, 1999 through November 30,
1999, and (ii) to Kranzco's knowledge, no lessee is in material default, and
no condition or event exists which with the giving of notice or the passage
of time, or both, would constitute a material default by any lessee, under
any Material Kranzco Lease.
6.25. Investment Company Act of 1940. Neither Kranzco nor any of the
Kranzco Subsidiaries is, or at the Effective Time will be, required to be
registered under the Investment Company Act of 1940, as amended.
6.26. Mortgage Notes. Neither Kranzco nor any of its Subsidiaries
holds any notes or related mortgages.
6.27. State Takeover Statutes. To the knowledge of Kranzco, the
provisions of Sections 3-602 and 3-702 of the Maryland General Corporation
Law will not apply to Kranzco, KRT Trust, KRT Trust II or any acquisition of
shares of any of them in connection with this Agreement and the transactions
contemplated hereby. The Board of Trustees of Kranzco has adopted a
resolution as follows: "RESOLVED, that, pursuant to Section 3-603(c) of the
MGCL, any business combination entered into as a result of, or which results
from the Reorganization or the transactions contemplated thereby between
Kranzco, KRT Trust or Kramont (or any affiliate of Kranzco, KRT Trust or
Kramont) and CV (or any officer, director, shareholder or affiliate thereof),
is hereby exempted from the provisions of Section 3-602 of the MGCL;
provided, however, that this resolution may be altered, amended or repealed
by either the Kranzco Board of Trustees or the KRT Trust Board of Trustees,
in whole or in part, at any time before the consummation of such business
combination."
6.28. FFO Agreements. Kranzco has no agreements or arrangements
pursuant to which any officer, trustee or employee of Kranzco or any other
Person receives any payment or benefit based in any way on the Funds from
Operations generated by Kranzco.
6.29. No Prior Activities; Other Interests. Except for the obligations
and liabilities incurred in connection with its organization and the
negotiation and consummation of the transactions contemplated by this
Agreement and the Ancillary Agreements, KRT Trust, KRT Trust II and KRT
Partnership have not engaged, and prior to the Effective Time KRT Trust, KRT
Trust II and KRT Partnership will not engage, in any business of any type or
kind, or have incurred any liabilities or obligations, or entered into or
will enter into, any agreements or arrangements with any person or entity.
Except as contemplated by this Agreement and the transactions contemplated
hereby, KRT Trust, KRT Trust II and KRT Partnership do not own and, prior to
the Effective Time will not own, directly or indirectly, any interest or
investment (whether equity or debt) in any corporation, partnership, joint
venture, business, trust or other entity.
ARTICLE 7
7. Representations and Warranties of CV. Except as set forth in the
disclosure letter delivered at or prior to the execution hereof to Kranzco
(the "CV Disclosure Letter") (it being understood and agreed that disclosure
set forth in the CV Disclosure Letter shall be deemed applicable to each
particular representation and warranty of CV herein contained to the extent
it is reasonably evident on the face of such disclosure that such disclosure
applies to such representation and warranty), CV represents and warrants to
Kranzco and KRT Trust, as follows:
7.1. Existence; Good Standing; Authority; Compliance With Law. CV is
a corporation, CV Trust is a business trust, and CV Partnership is a limited
partnership, and each of them is duly organized, created or formed, validly
existing and in good standing under the laws of the State of Delaware. CV is
duly licensed or qualified to do business as a foreign corporation and is in
good standing under the laws of any other state of the United States in which
the character of the properties owned or leased by it therein or in which the
transaction of its business makes such qualification necessary, except where
the failure to be so qualified would not have a CV Material Adverse Effect
(as hereinafter defined). For purposes of this Agreement, "CV Material
Adverse Effect" shall mean a material adverse effect on the business, results
of operations, financial condition (including, without limitation, Funds from
Operations) or prospects of CV and the CV Subsidiaries taken as a whole;
provided, however, that a CV Material Adverse Effect shall not be deemed to
have occurred by reason of (i) changes or conditions affecting real estate
investment trusts regionally or generally or the real estate industry
regionally or generally or (ii) changes in financial or equity markets or
economic, regulatory or political conditions regionally or generally or (iii)
the events set forth in Schedule 7.1 of the Disclosure Letter. However, a
restatement of the previously issued financial statements of CV, as a result
of which Funds from Operations of CV, as restated by CV and calculated in the
same manner as required to be calculated in connection with the originally
issued financial statements, are materially adversely different from the
Funds from Operations of CV reported by CV prior to such restatement, shall
be deemed a CV Material Adverse Effect. It is understood and agreed that for
purposes of this Agreement, a change in the market price of CV Common Stock
or a reduction in CV's Funds from Operations will not in and of itself
constitute a CV Material Adverse Effect. As used in the Agreement, the term
"CV Subsidiary" when used with respect to CV means any corporation,
partnership, joint venture, limited liability company, business trust or
other entity, of which CV directly or indirectly owns or controls more than
50% of the equity interests, including, without limitation, CV Trust, CV
Partnership, Drexel Realty, Inc., Royce Realty, Inc. and MGA Payroll, Inc.,
CV has all requisite corporate power and authority to own, operate, lease and
encumber its properties and carry on its business as now conducted. Each CV
Subsidiary is a corporation, business trust, limited liability company or
partnership duly organized, formed or created, validly existing and in good
standing under the laws of its jurisdiction of incorporation, formation or
creation, has the corporate, partnership or trust power and authority to own
its properties and to carry on its business as it is now being conducted, and
is duly qualified to do business and is in good standing in those
jurisdictions listed in Schedule 7.1 to the CV Disclosure Letter, which are
the jurisdictions in which the ownership of its property or the conduct of
its business requires such qualification, except for jurisdictions in which
such failure to be so qualified or to be in good standing would not have a CV
Material Adverse Effect. To the best knowledge of CV, neither CV nor any CV
Subsidiary is in violation of any order of any Governmental Entity, or any
law, ordinance, governmental rule or regulation to which CV or any of the CV
Subsidiaries or any of their respective properties or assets is subject,
where such violation would have a CV Material Adverse Effect. To the best
knowledge of CV, CV and the CV Subsidiaries have obtained all licenses,
permits and other authorizations and have taken all actions required by
applicable law or governmental regulations in connection with their business
as now conducted, where the failure to obtain any such item or to take any
such action would have a CV Material Adverse Effect. CV (i) has not received
any notice of any violation of any licenses, permits or other authorizations
that are necessary to the operation of its business as now conducted, (ii) to
its knowledge, has not violated any licenses, permits or other authorizations
that are necessary to the operation of its business as now conducted, and
(iii) has not received any written notice of revocation of any licenses,
permits or other authorizations that are necessary to the operation of its
business as now conducted. Copies of CV's and the CV Subsidiaries'
Certificate of Incorporation, By-laws, organization documents, and
partnership and joint venture agreements (including, without limitation, the
partnership agreement of CV Partnership) have been previously delivered or
made available to Kranzco and are true and correct.
7.2. Authorization, Validity and Effect of Agreements. CV has the
requisite corporate power and authority, CV Trust has the requisite trust
power and authority, and CV Partnership has the requisite partnership power
and authority to enter into the transactions contemplated hereby and to
execute and deliver this Agreement (to the extent a party hereto) and the
Ancillary Agreements to which it is a party. Subject only to the approval of
this Agreement and the transactions contemplated hereby by the holders of a
majority of the outstanding shares of CV Common Stock (the "CV Shareholder
Approval") and the requisite CV Partnership Approvals, the consummation by
the CV Entities (as defined below) of this Agreement to the extent parties
hereto and the consummation by CV, CV Trust and CV Partnership (collectively
the "CV Entities") of the Ancillary Agreements, and the consummation of the
transactions contemplated hereby and thereby, have been duly authorized by
all requisite action on the part of each of the CV Entities. This Agreement
has been, and the Ancillary Agreements when executed will be, duly executed
and delivered by CV and this Agreement constitutes the valid and legally
binding obligation of CV, enforceable against CV in accordance with its
terms, and the Ancillary Agreements to which any of the CV Entities is party
(when executed and delivered pursuant hereto) will constitute the valid and
legally binding obligations of each of the CV Entities enforceable against
each of them in accordance with their respective terms, in each case subject
to applicable bankruptcy, insolvency, moratorium or other similar laws
relating to creditors' rights and general principles of equity.
7.3. Capitalization. The authorized shares of common stock of CV
consist of 20,000,000 shares of common stock , $.01 par value per share. As
of November 30, 1999, CV had issued and outstanding 7,966,621 shares of CV
Common Stock. No shares of preferred stock of CV are authorized, issued or
outstanding. CV has no outstanding bonds, debentures, notes or other
obligations the holders of which have the right to vote (or which are
convertible into or exercisable for securities having the right to vote) with
the holders of CV Common Stock on any matter. All such issued and
outstanding shares of CV Common Stock are duly authorized, validly issued,
fully paid, nonassessable and free of preemptive rights. There are not at
the date of this Agreement any existing options, warrants, calls,
subscriptions, convertible securities, or other rights, agreements or
commitments which obligate CV or any of the CV Subsidiaries to issue,
transfer or sell any shares of stock or other equity interest of CV or any of
the CV Subsidiaries, other than the issuance, by CV of 1,462,406 shares of CV
Common Stock upon redemption of limited partner units in CV Partnership
(which limited partner units in CV Partnership, subject to certain
restrictions, may be offered for redemption by the holders thereof in
exchange for cash or, at CV Trust's option, shares of CV Common Stock on a
one-for-one basis) except pursuant to the CV Options. After the Effective
Time, Kramont will have no obligation to issue, transfer or sell any shares
of capital stock or other equity interest of CV or Kramont pursuant to any CV
Benefit Plan (as defined in Section 7.14) except pursuant to the CV Options.
As of November 30, 1999, 295,000 shares of CV Common Stock are issuable upon
the exercise of share options issuable to employees and trustees. Schedule
7.3 of the CV Disclosure Letter sets forth the names of the holders, number
of shares underlying and exercise price of each outstanding CV Option and the
names of the holders of restricted shares, number of restricted shares held
and the vesting schedule and other restrictions for such restricted shares.
There are no agreements or understandings to which CV is a party with respect
to the voting of any shares of CV Common Stock or which restrict the transfer
of any such shares, nor does CV have knowledge of any such agreements or
understandings with respect to the voting of any such shares or which
restrict the transfer of any such shares other than those set forth in the
Certificate of Incorporation with respect to the maintenance of CV as a REIT
and the share ownership limits set forth therein and the Kranzco Voting
Agreements. There are no outstanding contractual obligations of CV to
repurchase, redeem or otherwise acquire any shares of CV Common Stock or any
other securities of CV. CV is not under any obligation, contingent or
otherwise, by reason of any agreement to register any of its or any CV
Subsidiaries' securities under the Securities Act, except as set forth in the
CV Partnership Agreement.
7.4. Subsidiaries. CV owns directly or indirectly each of the
outstanding shares of capital stock or all of the partnership or other equity
interests of each of the CV Subsidiaries. Each of the outstanding shares of
capital stock of or other equity interest in each of the CV Subsidiaries is
duly authorized, validly issued, fully paid and nonassessable, and is owned,
directly or indirectly, by CV or such other parties set forth in Schedule 7.4
of the CV Disclosure Letter, free and clear of all liens, pledges, security
interests, claims or other encumbrances other than liens imposed by local law
which are not material. The following information for each CV Subsidiary is
set forth on the CV Disclosure Letter, if applicable: (i) its name and
jurisdiction of incorporation, organization, formation or creation and (ii)
the name of each shareholder or owner of an equity interest and each holder
of a partnership interest and the number of issued and outstanding shares of
capital stock or share capital or percentage interest for non-corporate
entities held by it. Schedule 7.4 of the CV Disclosure Letter sets forth (i)
the number of units of limited partner interest and general partner interest
in CV Partnership held by CV Trust, (ii) the total number of units of limited
partner interest and general partner interest in CV Partnership held by CV
Trust that were not originally issued to CV Trust by CV Partnership but were
acquired by CV Trust from other limited partners of CV Partnership and (iii)
the total number of outstanding units of limited partner interest and general
partner interest in CV Partnership. All redemptions or repurchases of units
of partnerships interests in CV Partnership were effected in compliance with
the terms of the partnership agreement of CV Partnership and all applicable
federal and state securities laws. Except for the shares or partnership
interests required to be issued under this Agreement or disclosed on the CV
Disclosure Letter, at the Effective Time, none of CV Subsidiaries shall have
outstanding any other shares, partnership interests or other capital stock or
securities of any kind whatsoever nor any agreement, warrants, options,
rights or other obligations to issue or sell any such securities or any
securities exercisable for or convertible into any such securities.
7.5. Other Interests. Except for interests in the CV Subsidiaries,
neither CV nor any CV Subsidiary owns directly or indirectly any interest or
investment (whether equity or debt) in any corporation, partnership, joint
venture, business, limited liability company, trust or entity (other than
investments in short-term investment securities).
7.6. No Violation. Neither the execution and delivery by CV of this
Agreement nor the consummation by the CV Entities of the transactions
contemplated hereby in accordance with the terms hereof, will: (i) subject
to obtaining CV Shareholder Approval, conflict with or result in a breach of
any provisions of the Certificate of Incorporation or By-laws of CV or the
Declaration of Trust or By-laws of CV Trust or the certificate of partnership
or partnership agreement of CV Partnership; (ii) result in a breach or
violation of, a default under, or the triggering of any payment or other
material obligations pursuant to, or accelerate vesting under, any of CV's
Stock Option Plans, or any grant or award under any of the foregoing; (iii)
violate, or conflict with, or result in a breach of any provision of, or
constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, or result in the termination or in a
right of termination or cancellation of, or accelerate the performance
required by, or result in the creation of any lien, security interest, charge
or encumbrance upon any of the properties of CV or its Subsidiaries under, or
result in being declared void, voidable, or without further binding effect,
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust or any license, franchise, permit, lease, contract,
agreement or other instrument, commitment or obligation to which CV or any of
the CV Subsidiaries is a party, or by which CV or any of the CV Subsidiaries
or any of their properties is bound or affected, except for any of the
foregoing matters which, individually or in the aggregate, would not have a
CV Material Adverse Effect; or (iv) other than (x) the filings provided for
in Article 1 and Article 5, (y) the Regulatory Filings and (z) any filings
with the NYSE, require any consent, approval or authorization of,
declaration, filing or registration with, or notification to, any
Governmental Entity, except where the failure to obtain any such consent,
approval or authorization of, or make any such declaration, filing or
registration with, or notification to, any governmental or regulatory
authority would not prevent or materially delay the consummation of the
transactions contemplated by this Agreement or otherwise prevent CV from
performing, or materially impair its ability to perform, its obligations
under this Agreement or have a CV Material Adverse Effect.
7.7 SEC Documents. CV has timely filed all required forms, reports
and documents with the SEC since January, 1992 (the "CV Reports"). The CV
Reports were filed with the SEC in a timely manner and constitute all forms,
reports and documents required to be filed by CV under the Securities Laws.
As of their respective dates, the CV Reports (i) complied in all material
respects with the applicable requirements of the Securities Laws and (ii) did
not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements made therein, in the light of the circumstances under which they
were made, not misleading. Each of the consolidated balance sheets of CV
included in or incorporated by reference into the CV Reports (including the
related notes and schedules) fairly presents in all material respects the
consolidated financial position of CV and the CV Subsidiaries as of its date
and each of the consolidated statements of income, retained earnings and cash
flows of CV included in or incorporated by reference into the CV Reports
(including any related notes and schedules) fairly presents in all material
respects the results of operations, retained earnings or cash flows, as the
case may be, of CV and the CV Subsidiaries for the periods set forth therein
(subject, in the case of unaudited statements, to normal year-end audit
adjustments which would not be material in amount or effect), in each case in
accordance with generally accepted accounting principles consistently applied
during the periods involved, except as may be noted therein and except, in
the case of the unaudited statements, as permitted by Form 10-Q or Form 8-K
of the SEC. Funds from Operations for CV set forth in the CV Reports,
including the financial statements included in or incorporated by reference
in the CV Reports (including any related notes and schedules) for the periods
set forth therein, was calculated in accordance with applicable NAREIT
guidelines then in effect consistently applied during the periods involved.
All offerings of securities by CV or any CV Subsidiary were effected in
compliance with applicable law and no party participating in such offerings
has any rescission rights resulting therefrom.
7.8. Litigation. There are (i) no continuing orders, injunctions or
decrees of any Governmental Entity to which CV or any CV Subsidiary is a
party or by which any of its properties or assets are bound or, to the best
knowledge of CV, to which any of its directors, officers, employees or agents
is a party or by which any of their properties or assets are bound, and (ii)
no actions, suits or proceedings pending (of which service or notice of
process has been received by an employee of CV) against CV or any CV
Subsidiary or, to the best knowledge of CV, against any of its directors,
officers, employees or agents or, to the actual knowledge of CV, threatened
against CV or any CV Subsidiary or against any of its directors, officers,
employees or agents in such capacity, at law or in equity, or before or by
any federal or state commission, board, bureau, agency or instrumentality,
that, if decided adversely, could, individually or in the aggregate, have a
CV Material Adverse Effect. Schedule 7.8 to the CV Disclosure Letter lists
all actions, suits and proceedings pending which, if decided adversely, would
individually result in the imposition of liability, directly or indirectly,
against CV or any CV Subsidiary in an amount in excess of $50,000. Excluding
the actions, suits or proceedings set forth in Schedule 7.8 to the CV
Disclosure Letter, CV and the CV Subsidiaries are not subject to any actions,
suits or proceedings which if decided adversely would in the aggregate result
in the imposition of liability, directly or indirectly, against CV or any CV
Subsidiary in an amount in excess of $500,000.
7.9. Absence of Certain Changes. Except as disclosed in the CV
Reports filed with the SEC prior to the date hereof, since December 31, 1998,
CV and the CV Subsidiaries have conducted their business only in the ordinary
course of such business and there has not been (i) any CV Material Adverse
Effect, (ii) as of the date hereof, any declaration, setting aside or payment
of any dividend or other distribution with respect to the CV Common Stock,
except dividends of $0.29 per share declared on March 10, 1999, June 7, 1999,
August 19, 1999 and November 12, 1999, (iii) any Commitment entered into by
CV or any of the CV Subsidiaries, other than Commitments not exceeding
$250,000 individually in the ordinary course of business, or (iv) any
material change in CV's accounting principles, practices or methods.
7.10. Taxes.
(a) Except as set forth in Schedule 7.10 of the CV Disclosure
Letter and except as has not resulted and would not result in a CV Material
Adverse Effect: CV and each of the CV Subsidiaries (i) has timely filed all
Returns required to be filed by any of them for tax years ended prior to the
date of this Agreement or requests for extensions have been timely filed and
any such request has not been rejected and has not expired and all such
Returns are correct and complete in all material respects and (ii) has paid
or caused to be paid or adequately accrued or reserved on its most recent
balance sheet for all Taxes shown to be due and payable on such returns or
which have become due and payable pursuant to any assessment, deficiency
notice, 30-day letter or other notice received by it and (iii) has paid all
Taxes shown to be due and payable on any Returns and (iv) has complied with
all applicable laws relating to withholding Taxes. CV has not received any
notice of any audit (not since closed) of any Return filed by CV with respect
to any tax year ending after December 31, 1995, and CV has not been notified
by the IRS or any State taxing authority that any such audit is contemplated
or pending. Neither CV nor any of the CV Subsidiaries has executed or filed
with the IRS or any other taxing authority any agreement now in effect
extending the period for assessment or collection of any income or other
Taxes. Neither CV nor any of the CV Subsidiaries is a party to any pending
audit, action or proceeding by any governmental authority for assessment or
collection of Taxes, and no claim for assessment or collection of Taxes has
been asserted against it. True, correct and complete copies of all Returns
filed by CV and each of the CV Subsidiaries since December 31, 1995, and all
material communications relating thereto have been made available for
inspection to representatives of Kranzco. Since January 1, 1998, CV has
incurred no liability for Taxes under Sections 857(b) (other than 857(b)(1)
or (3)), 860C or 4981 of the Code or, other than as reported on Returns,
Internal Revenue Service Notice 88-19, including without limitation, any Tax
arising from a prohibited transaction described in Section 857(b)(6) of the
Code) and neither CV nor any CV Subsidiary has incurred any liability for
Taxes other than in the ordinary course of business. There are no Tax liens
upon the assets of CV or any of the CV Subsidiaries except liens for Taxes
not yet due. Neither CV nor any CV Subsidiary is a party to any agreement
relating to a sharing or allocation of Taxes (other than customary provisions
contained in leases relating to real estate or similar taxes), or has any
liability for Taxes of any person other than CV and the CV Subsidiaries under
Treas. Reg. Section 1.1502-6 (or similar provision of state, local or foreign
law), by contract or otherwise, or is a party to any agreement, contract, or
arrangement that could result in the payment of any "excess parachute
payments" under Section 280G of the Code or any amount that would be non-
deductible under Section 162(m) of the Code.
(b) CV (i) has met the definition of a REIT in section 856 of
the Code, as in effect for each taxable year commencing with its taxable year
ended December 31, 1982, for each such taxable year, (ii) has been (A) a REIT
to which the provisions of part II of subchapter M of chapter 1 of the Code
apply and (B) a "corporation subject to a tax imposed by subchapter M" (as
that term is used in section 11(c) of the Code) for each such taxable year,
(iii) has operated, since December 31, 1998, to the date of this
representation, and intends to continue to operate in such a manner, for all
periods from the date of this representation, through the end of its taxable
year that includes the Closing Date, as to meet the requirements described in
clauses (i) and (ii) above, (iv) has not taken or omitted to take any action
which would reasonably be expected to result in a challenge regarding whether
it has met the requirements described in clauses (i) and (ii) above, (v) has
no knowledge that any such challenge is pending or threatened, and (vi) has
complied with (and intends to continue to comply with) section 857(f)(1) of
the Code for each taxable year that such provision was (or is ) applicable to
it. CV represents that each of its corporate subsidiaries is, and at all
times since its affiliation with CV has qualified as, a qualified REIT
subsidiary as defined in Section 856(i) of the Code, and that each
partnership, limited liability company, joint venture or other legal entity
(other than a corporation) in which CV (either directly or indirectly) owns
any of the capital stock or other equity interests thereof has been treated
since its formation and continues to be treated for federal income tax
purposes as a partnership or disregarded as an entity separate from its owner
and not as an association taxable as a corporation. None of CV or the CV
Subsidiaries has a net unrealized built-in gain within the meaning of Section
1374(d)(1) of the Code that is subject to an election under IRS Notice 88-19
or has any accumulated earnings and profits from the years ending on or prior
to December 31, 1998 in each case to the extent the foregoing would result in
a CV Material Adverse Effect. None of CV, CV Trust or any shareholder of CV
will recognize any income or gain for Federal income tax purposes as a result
of the merger of CV Trust into CV.
(c) CV has not agreed to and is not required to make any
adjustment under Section 481(a) of the Code.
(d) CV has not, with regard to any assets or property held or
acquired by it, filed a consent to the application of Section 341(f) of the
Code or agreed to have Section 341(f)(2) of the Code apply to any disposition
of a subsection (f) asset (as such term is defined in Section 341(f)(4) of
the Code) owned by CV.
(e) CV is not a "foreign person" as such term is defined in
Section 1445(f) of the Code.
7.11. Books and Records. (a) The books of account and other financial
records of CV and the CV Subsidiaries are in all material respects true,
complete and correct, have been maintained in accordance with good business
practices, and are accurately reflected in the financial statements included
in the CV Reports.
(b) The minute books and other records of CV and the CV
Subsidiaries, have been made available to Kranzco, contain in all material
respects accurate records of all meetings and accurately reflect in all
material respects all other trust and corporate action of the shareholders,
trustees and directors and any committees of the Board of Trustees and
Directors of CV and the CV Subsidiaries and all actions of the partners of
the CV Subsidiaries.
7.12. Properties. CV and the CV Subsidiaries own fee simple title to,
or hold ground leases in, each of the real properties identified in Schedule
7.12 of the CV Disclosure Letter (the "CV Properties"), which are all of the
real estate properties owned or leased by them. The CV Properties are not
subject to any Property Restrictions, except for (i) Encumbrances and other
Property Restrictions set forth in Schedule 7.12 of the CV Disclosure Letter,
(ii) Property Restrictions imposed or promulgated by law or any governmental
body or authority with respect to real property, including zoning
regulations, provided such Property Restrictions do not adversely affect in
any material respect the current use of the applicable property (other than
liens under Environmental Laws, which are addressed in Section 7.13(a)(ix)),
(iii) Encumbrances and other Property Restrictions disclosed on existing
title reports or current surveys (in either case copies of which title
reports and surveys have been delivered or made available to Kranzco), and
(iv) mechanics', carriers', workmen's and repairmen's liens, and other
Property Restrictions and limitations, if any, which individually or in the
aggregate are not substantial in amount, do not materially interfere with the
present use of any of the CV Properties subject thereto or affected thereby,
and do not otherwise materially impair business operations conducted by CV
and the CV Subsidiaries. Valid policies of title insurance have been issued
insuring CV's or any of the CV Subsidiaries' fee simple or leasehold title to
the CV Properties owned in fee or by leasehold in amounts at least equal to
the purchase price thereof, subject only to the matters set forth therein or
disclosed above, and such policies are, at the date hereof, in full force and
effect and there are no pending claims against any such policy where the
amount involved exceeds $50,000 and such policies will be enforceable by
Kramont with respect to such properties after the Effective Time. Schedule
7.12 of the CV Disclosure Letter contains a true and correct list of all CV
Properties which are leased by CV pursuant to Ground Leases (collectively,
the "CV Ground Leases") as well as a list of all the CV Ground Leases. All
of such CV Ground Leases are in full force and effect. Each of the CV
Properties is assessed as one or more tax lot(s) separate and distinct from
the tax lot allocated to any other parcel of land or improvements. Except as
disclosed in Schedule 7.12 of the CV Disclosure Letter, there is no action,
suit, proceeding, claim, order, decree or judgment affecting any CV
Subsidiary or any CV Property, or any portion thereof, or relating to or
arising out of the ownership, management, operation, use or occupancy of any
CV Property, pending or being prosecuted in any court or by or before any
federal, state, county or municipal department, commission, board, bureau or
agency or other governmental instrumentality that, if adversely determined,
would individually or in the aggregate have a CV Material Adverse Effect, nor
is any such action, suit, proceeding, claim, order, decree or judgment, to
the knowledge of CV or any CV Subsidiary, threatened or being asserted. No
CV Subsidiary is a party to or subject to any judgment, writ, decree,
injunction or order enjoining or restraining it from conducting any business
in respect of the CV Property that it owns. There are no outstanding unpaid
judgments against any CV Subsidiary, except for the judgments described in
Schedule 7.12 of the CV Disclosure Letter which are covered by insurance and
on appeal. Any material certificate, permit or license from any government
authority having jurisdiction over any of the CV Properties and any
agreement, easement or other right which is necessary to permit the material
lawful use and operation of the buildings and improvements on any of the CV
Properties or which is necessary to permit the lawful use and operation in
all material respects of all driveways, roads and other means of egress and
ingress to and from any of the CV Properties which are currently occupied and
are material to the operation of the property have been obtained and are in
full force and effect. Neither (i) CV nor (ii) to the knowledge of CV, any
Material CV Tenant (as herein defined) to the extent it imposes an obligation
on the part of CV, is in receipt of any written notice of any violation of
any material federal, state or municipal law, ordinance, order, regulation or
requirement affecting any portion of any of the CV Properties issued by any
governmental authority other than such violations which would not reasonably
be expected to have a CV Material Adverse Effect. To the knowledge of CV,
(A) there are no material structural defects relating to the CV Properties,
(B) there are no CV Properties whose building systems are not in working
order in any material respect (except for normal maintenance and operating
systems failures which in any event are the subject of adequate pending
repair procedures), (C) there is no physical damage to any CV Property in
excess of $50,000 for which there is no insurance in effect covering the cost
of the restoration as of the date hereof, or (D) no current renovation or
restoration of any CV Property is underway or for which contracts have been
entered into the cost of which exceeds $50,000, except in each case, as set
forth in Schedule 7.12 of the CV Disclosure Letter. Neither CV nor any of
the CV Subsidiaries has received any written notice to the effect that (x)
any condemnation or material rezoning proceedings are pending or threatened
with respect to any of the CV Properties where the fair market value of the
object of such proceeding exceeds $50,000 or (y) any zoning, building or
similar law, code, ordinance, order or regulation is or will be violated in
any material respect by CV or the CV Subsidiaries by the continued
maintenance, operation or use of any buildings or other improvements on any
of the CV Properties as currently maintained, used or operated by CV or the
CV Subsidiaries or by the continued maintenance, operation or use of the
parking areas as currently maintained, used or operated by CV or the CV
Subsidiaries which is not insured over and where the remedying of such
violations would materially and adversely affect the relevant CV Property.
All work to be performed, payments to be made and actions to be taken by CV
or the CV Subsidiaries prior to the date hereof pursuant to any agreement
entered into with a governmental body or authority in connection with a site
approval, zoning reclassification or other similar action relating to the CV
Properties (e.g., Local Improvement District, Road Improvement District,
Environmental Mitigation) has been performed, paid or taken, as the case may
be, in all material respects, and CV is not aware of any planned or proposed
work, payments or actions that may be required after the date hereof pursuant
to such agreements. CV owns less than $15,000,000 of nonexempt assets under
Section 802.4 of the rules and regulations promulgated under the Hart-Scott-
Rodino Antitrust Improvements Act. For purposes of this Schedule 7.12, the
term "CV Properties" shall not be deemed to include properties managed by CV
or a CV Subsidiary but not owned by CV or any CV Subsidiary.
7.13. Environmental Matters. (a) Except as set forth in Schedule 7.13
of the CV Disclosure Letter,
(i) CV and each of the CV Subsidiaries possess all
Environmental Permits currently required under applicable Environmental
Laws to conduct their business and are, and within the last five years,
have been, in compliance with the terms and conditions of such
Environmental Permits, except where such failures to possess or comply,
individually or in the aggregate, would not have a CV Material Adverse
Effect, nor has CV received written notice that any Environmental
Permits possessed by CV or any of the CV Subsidiaries and material to
their business will be revoked, suspended or will not be renewed;
(ii) to the knowledge of CV, all Environmental Permits
currently held by CV and the CV Subsidiaries pursuant to Environmental
Laws and material to their business are identified in Schedule 7.13 of
the CV Disclosure Letter and represent all Environmental Permits
necessary and material for the conduct of the business of CV and the CV
Subsidiaries as currently conducted;
(iii) to the knowledge of CV, the execution and delivery of
this Agreement and the consummation by CV of the transactions
contemplated hereby will not affect the validity or require the transfer
of any Environmental Permits, and will not require any notification,
registration, reporting, filing, investigation, or remediation under any
Environmental Law including any transfer law;
(iv) CV and each of the CV Subsidiaries are currently in
compliance, and within applicable statutory and regulatory time
limitations, have complied, with all applicable Environmental Laws,
except where such failures to comply, individually or in the aggregate,
would not have a CV Material Adverse Effect;
(v) except as would not have a CV Material Adverse Effect,
(a) there is currently no civil, criminal or administrative action,
suit, demand, claim, hearing, notice of violation, investigation, notice
or demand letter, or request for information pending or, to the
knowledge of CV, threatened, which asserts liability under any
Environmental Law against CV or any of the CV Subsidiaries; and (b)
neither CV nor any of the CV Subsidiaries has received written notice of
actual or potential liability or of violations under any applicable
Environmental Law that remains outstanding and has not been resolved,
including, but not limited to, any liability that CV or any of the CV
Subsidiaries may have retained or assumed either contractually or by
operation of law;
(vi) as of the date hereof, no property or facility
currently, or to the knowledge of CV, formerly owned, operated or leased
by CV or any of its present or former CV Subsidiaries, or by any
respective predecessor in interest, or to CV's knowledge, any property
or facility for which CV holds a Mortgage (as defined herein), is listed
or proposed for listing on the National Priorities List or the
Comprehensive Environmental Response, Compensation and Liability
Information System, both promulgated under CERCLA, or on any comparable
foreign or state list established under any Environmental Law;
(vii) to the knowledge of CV, (a) there has been no
disposal, spill, discharge or release of any Hazardous Material, on, at,
or under any property presently or formerly owned, leased or operated by
CV, any of the CV Subsidiaries, or any predecessor in interest, except
for such disposals, spills, discharges and releases that, individually
or in the aggregate, would not have a CV Material Adverse Effect; and
(b) there are no Hazardous Materials located in, at, on, or under such
facility or property, or at any other location, including without
limitation, at any facility or property for which CV holds a Mortgage,
in either case that could reasonably be expected to require
investigation, removal, remedial or corrective action by CV or any of
the CV Subsidiaries or that would reasonably likely result in material
liabilities of, or losses, damages or costs to CV or any of the CV
Subsidiaries under any Environmental Law;
(viii) except as would not have a CV Material Adverse
Effect, (a) there are not any underground or aboveground storage tanks
or other underground storage receptacles or related piping, or any
impoundment or other disposal area in each case containing Hazardous
Materials located on any facility or property currently owned, leased or
operated by CV, any of the CV Subsidiaries or respective predecessors in
interest, or, to CV's knowledge, on any facility or property for which
CV holds a Mortgage, and (b) no friable asbestos-containing materials or
polychlorinated biphenyls in concentrations or amounts regulated under
Environmental Laws are being used or have been disposed of during CV's
ownership or operation, or are located at, on, or under any such
facility or property in violation of any applicable Environmental Law;
and
(ix) to the knowledge of CV, no lien has been recorded
against any properties, assets or facilities currently owned, leased or
operated by CV or any of the CV Subsidiaries or against any properties,
assets or facilities for which CV holds a Mortgage under any
Environmental Law.
(b) CV has made available to Kranzco and its authorized
representatives all records and files, including but not limited to, all
assessments, reports, studies, analyses, tests and data in CV's or CV's
Subsidiaries' possession or custody concerning the presence of Hazardous
Materials or any other environmental condition at properties, assets or
facilities currently or formerly owned, operated or leased by CV or any
present or former Subsidiary or predecessor in interest, or for which CV
holds a Mortgage, or concerning compliance by CV and the CV Subsidiaries
with, or liability under, any Environmental Law.
7.14. Employee Benefit Plans; ERISA. (a) All employee benefit plans
within the meaning of Section 3(3) of ERISA and each bonus, profit sharing,
compensation, pension, severance, deferred compensation, fringe benefit,
insurance, welfare, post-retirement, health, life, stock option, stock
purchase, restricted stock, disability, accident, sick, vacation,
termination, unemployment, individual employment, consulting, executive
compensation, incentive, commission or sales arrangement, change in control,
noncompetition, and other plan, agreement, policy, trust fund, or arrangement
(whether written or unwritten, insured or self-insured) covering employees or
independent contractors of CV and the CV Subsidiaries (whether current,
former or retired) or their beneficiaries (collectively, the "CV Benefit
Plans") are listed in Schedule 7.14 of the CV Disclosure Letter. True and
complete copies of the CV Benefit Plans have been made available to Kranzco.
To the extent applicable, each CV Benefit Plan complies, in all material
respects, with the requirements of ERISA, the Code, and with the terms of
such CV Benefit Plan's plan documents, and any CV Benefit Plan intended to be
qualified under Section 401(a) of the Code has received a favorable
determination letter from the Internal Revenue Service (which may be a
favorable determination letter issued to a prototype sponsor for any CV
Benefit Plan which is a standardized prototype plan) and is administered in
compliance in all material respects with ERISA and the Code and all
applicable regulations thereunder and with the terms of such CV Benefit
Plan's plan document. None of CV, any of the CV Subsidiaries, any entity
that would be deemed a single-employer with CV or any of the CV Subsidiaries
under Section 414(b), (c), (m) or (o) of the Code (each an "CV ERISA
Affiliate") or any of their respective predecessors has ever contributed to,
contributes to, has ever been required to contribute to, or otherwise
participated in or participates in or in any way, directly or indirectly, has
any liability with respect to any employee pension benefit plan (within the
meaning of ERISA Section 3(2)) which is subject to Title IV of ERISA, Section
412 of the Code or Section 302 of ERISA, including, without limitation any,
"multiemployer plan" (within the meaning of Sections 3(37) or 4001(a)(3) of
ERISA or Section 414(f) of the Code), or any single employer pension plan.
None of CV, any of the CV Subsidiaries or any CV Benefit Plan has incurred or
is expected to incur any liability or penalty under Section 4975 of the Code
or Sections 406 or 502(i) of ERISA. To the knowledge of CV, there are no
anticipated claims against or otherwise involving any of the CV Benefit Plans
and no suit, action or other litigation (excluding claims for benefits
incurred in the ordinary course of CV Benefit Plan activities) is pending or
has been brought against or with respect to any such CV Benefit Plan. All
contributions required to be made as of the date hereof to the CV Benefit
Plans have been made or provided for by CV by full accruals as if all targets
required by such CV Benefit Plan had been or will be met at maximum levels on
its financials. Except as provided in the CV Disclosure Letter, the
execution of and performance of the transactions contemplated by this
Agreement will not (either alone or upon the occurrence of any additional or
subsequent events including, without limitation, a termination of employment
following the transactions contemplated by this Agreement) constitute an
event under any CV Benefit Plan that will or may reasonably be expected to
result in any payment, acceleration, vesting or increase in benefits with
respect to any employee, trustee, director, former employee or director of CV
or any of the CV Subsidiaries, whether or not any such CV Benefit Plan would
be an "excess parachute payment" (within the meaning of Section 280G of the
Code).
(b) None of CV, any of the CV Subsidiaries or any CV ERISA
Affiliate has any unfunded liabilities for benefits or claims accrued
pursuant to any CV Benefit Plan, which CV Benefit Plan is not intended to be
qualified under Section 401(a) of the Code, and that is an employee pension
benefit plan within the meaning of ERISA Section 3(2), a nonqualified
deferred compensation plan or an excess benefit plan.
(c) None of CV, any of the CV Subsidiaries or any CV ERISA
Affiliate maintains any plan which is a "group health plan" (as such term is
defined in Section 5000(b)(1) of the Code) that has not been administered and
operated in all respects in compliance with the applicable requirements of
Section 601 of ERISA and Section 4980B of the Code, and none of CV, any of
the CV Subsidiaries or any CV ERISA Affiliate is subject to or expected to be
subject to any liability, including without limitation, additional
contributions, fines, penalties or loss of tax deduction as a result of such
administration and operation. None of CV, any of the CV Subsidiaries or any
CV ERISA Affiliate has incurred or is expected to incur any liability from
tax, excise tax, penalty or fee with respect to any Plan, including, but not
limited to, taxes arising under Sections 4971 through 4980B of the Code, and
no event has occurred and no circumstance has existed that could give rise to
any such liability. Except as required by Section 4980B of the Code and
Sections 601 through 607 of ERISA and the regulations promulgated thereunder,
the Federal Social Security Act or a plan qualified under Section 401(a) of
the Code, and except as otherwise disclosed in the CV Disclosure Letter, none
of CV, any of the CV Subsidiaries or any CV ERISA Affiliate maintains or
contributes to any plan or arrangement which provides, or has any liability
to provide life insurance, medical or other employee welfare benefits
(whether or not vested) to any employee or former employee upon his
retirement or termination of employment with CV or any of the CV
Subsidiaries.
(d) No amounts payable under any CV Benefit Plan will fail to be
deductible for federal income tax purposes by virtue of Section 280G or
162(m) of the Code. None of CV, any CV Subsidiaries or any CV ERISA
Affiliate, or any officer or employee thereof, has made any promises or
commitments, whether legally binding or not, to create any additional plan,
agreement, arrangement, or to modify or change any existing CV Benefit Plan.
No event, condition or circumstance exists that would prevent the amendment
or termination of any CV Benefit Plan.
7.15. Labor Matters. Neither CV nor any of the CV Subsidiaries is a
party to, or bound by, any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor union organization.
There is no unfair labor practice or labor arbitration proceeding pending or,
to the knowledge of CV, threatened against CV or any of the CV Subsidiaries
relating to their business, except for any such proceeding which would not
have a CV Material Adverse Effect. To the knowledge of CV, there are no
organizational efforts with respect to the formation of a collective
bargaining unit presently being made or threatened involving employees of CV
or any of the CV Subsidiaries.
7.16. No Brokers. CV has not entered into any contract, arrangement or
understanding with any person or firm which may result in the obligation of
Kranzco or CV to pay any finder's fees, brokerage or agent's commissions or
other like payments in connection with the negotiations leading to this
Agreement or the consummation of the transactions contemplated hereby, except
that CV has retained Salomon Smith Barney Inc. as its financial advisor, the
arrangements with which have been disclosed in writing to Kranzco prior to
the date hereof. Other than the foregoing arrangements, CV is not aware of
any claim for payment of any finder's fees, brokerage or agent's commissions
or other like payments in connection with the negotiations leading to this
Agreement or the consummation of the transactions contemplated hereby.
7.17. Opinion of Financial Advisor. The Board of Directors of CV has
received the opinion of Salomon Smith Barney Inc. to the effect that, as of
the date of this Agreement, the CV Exchange Ratio is fair to the holders of
CV Common Stock from a financial point of view.
7.18. Kranzco Stock Ownership. Neither CV nor any of the CV
Subsidiaries owns any shares of capital stock of Kranzco or other securities
convertible into any shares of beneficial interest of Kranzco.
7.19. Related Party Transactions. Set forth in Schedule 7.19 of the CV
Disclosure Letter is a list of all arrangements, agreements and contracts
entered into by CV or any of the CV Subsidiaries with any person who is an
officer, director or affiliate of CV or any of the CV Subsidiaries, any
relative of any of the foregoing or any entity of which any of the foregoing
is an affiliate, including, without limitation, all employment agreements to
which CV is a party (the "CV Employment Agreements"). The copies of such
documents, all of which have been previously delivered or made available to
Kranzco, are listed in Schedule 7.19 of the CV Disclosure Letter and are
true and correct.
7.20. Contracts and Commitments. The CV Disclosure Letter sets forth
(i) all notes, debentures, bonds and other evidence of indebtedness of CV or
any of the CV Subsidiaries in each case in excess of $250,000 whether or not
secured or collateralized by mortgages, deeds of trust or other security
interests in the CV Properties or personal property of CV and the CV
Subsidiaries, (ii) each Commitment entered into by CV or any of the CV
Subsidiaries (excluding tenant allowances, reimbursements and leases entered
into in the ordinary course of business) which may result in total payments
or liability in excess of $250,000 per Commitment. Copies of the foregoing
have been previously delivered or made available to Kranzco, are listed in
Schedule 7.20 the CV Disclosure Letter and are true and correct, (iii) all
management agreements with respect to any CV Property (the "CV Management
Agreements") and (iv) all management agreements to which CV or any CV
Subsidiary is a party that do not relate to any CV Property. None of CV or
any of the CV Subsidiaries has received any notice of a default that has not
been cured under any of the documents described in clause (i) above and or is
in default respecting any payment obligations thereunder beyond any
applicable grace periods and to the knowledge of CV, no event has occurred
with respect to the other party thereto which, with notice or the lapse of
time, or both, would give rise to an event of default. Excluding the
Commitments set forth in Schedule 7.20 of the CV Disclosure Schedule, CV and
the CV Subsidiaries are not subject to any Commitments that, in the
aggregate, exceed $3,000,000 (excluding Commitments that may be terminated by
CV or any CV Subsidiary in not more than 60 days' notice, without cost or
penalty). All options of CV or any of the CV Subsidiaries to purchase real
property are set forth on the CV Disclosure Letter and such options and CV's
or the CV Subsidiaries' rights thereunder are in full force and effect. All
joint venture agreements to which CV or any of the CV Subsidiaries is a party
are set forth on the CV Disclosure Letter and neither CV nor any of the CV
Subsidiaries is in default with respect to any obligations, which
individually or in the aggregate are material, thereunder.
7.21. Certain Payments Resulting From Transactions. The execution of,
and performance of the transactions contemplated by this Agreement will not
(either alone or upon the occurrence of any additional or subsequent events)
(i) constitute an event under any CV Benefit Plan, policy, practice,
agreement or other arrangement or any trust or loan (the "CV Employee
Arrangements") that will or may result in any payment (whether of severance
pay or otherwise), acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligation to fund benefits with
respect to any employee, director or consultant of CV or any of the CV
Subsidiaries, or (ii) result in the triggering or imposition of any
restrictions or limitations on the right of Kranzco, or CV to amend or
terminate any CV Employee Arrangement and receive the full amount of any
excess assets remaining or resulting from such amendment or termination,
subject to applicable taxes. No payment or benefit will be required to be
made pursuant to the terms of any agreement, commitment or CV Benefit Plan,
as a result of the transactions contemplated by this Agreement, to any
officer, director or employee of CV or any of the CV Subsidiaries.
7.22. Leases. (a) Schedule 7.22 of the CV Disclosure Letter sets
forth a list of all CV Properties that are subject to or encumbered by any
non-residential lease (i) accounting for 1% or more of CV's rental revenues
for the most recent period reflected in the financial statements included in
the CV Reports or (ii) involving at least 25,000 square feet of gross
leasable area (each, a "Material CV Lease" and each tenant with respect
thereto, a "Material CV Tenant") and, with respect to each such Material CV
Lease, sets forth the following information:
(i) the name of the lessee;
(ii) the expiration date of the lease;
(iii) the amount (or method of determining the amount) of
annual rentals due under the lease;
(iv) with respect to any Material CV Lease with a remaining
term of less than 24 months, whether the lessee has notified CV in
writing of any intention not to renew, or seek to renew, the lease; and
(v) any notices with respect to a material default given
by a lessee under a Material CV Lease which has not been cured.
(b) Except as set forth in Schedule 7.22 of the CV Disclosure
Letter, (i) all rental payments due under each Material CV Lease have been
paid during the period January 1, 1999 through November 30, 1999, and (ii) to
CV's knowledge, no lessee is in material default, and no condition or event
exists which with the giving of notice or the passage of time, or both, would
constitute a material default by any lessee, under any Material CV Lease.
7.23. Investment Company Act of 1940. Neither CV nor any of the CV
Subsidiaries is, or at the Effective Time will be, required to be registered
under the Investment Company Act of 1940, as amended.
7.24. State Takeover Statutes. To the knowledge of CV, CV has taken
all action necessary to exempt the transactions contemplated by this
Agreement from the operation of any applicable "fair price," "moratorium,"
"control share acquisition" or any other applicable anti-takeover statute or
similar statute enacted under the state or federal laws of the United States
or similar statute or regulation, including, without limitation, Section 203
of the DGCL. The Board of Directors of CV has adopted a resolution as
follows: "RESOLVED: that, pursuant to Section 203(a)(1) of the DGCL, the
transactions contemplated by the Agreement and Plan of Reorganization and
Merger, including the CV Merger and the Kranzco Voting Agreements, are hereby
authorized and approved with the intent that neither the restrictions
contained in Section 203 of the DGCL nor similar restrictions contained in
any other state takeover law be applicable to the CV Merger, the Kranzco
Voting Agreements, the Agreement and Plan of Reorganization and Merger or the
transactions contemplated thereby." Neither CV nor any of the CV
Subsidiaries has in effect any plan, scheme, device or arrangement commonly
or colloquially known as a "poison pill" or an "anti-takeover" plan or any
similar plan, scheme, device or arrangement.
7.25. Mortgage Notes.
(a) Mortgages. Set forth in Schedule 7.25 of the CV Disclosure
Letter is a list of each note and related mortgage and all amendments and
modifications thereof (each such note and mortgage, together with the loan
evidenced thereby, a "Mortgage") held by CV, including the original and
unpaid principal amounts thereof, the due date thereof and interest rate
thereon.
(b) Validity of Collateral Documents. To the knowledge of CV,
each Mortgage and equivalent documents related to a Mortgage creates in CV or
a wholly owned subsidiary thereof a valid security interest in the property
described therein. Valid policies of title insurance have been issued
insuring the first priority mortgage of CV or a wholly owned subsidiary of CV
in each Mortgage and equivalent documents relating to a Mortgage, and such
policies will be enforceable by Kramont with respect to such properties after
the Effective Time.
(c) (i) No Defense by Borrower. To the knowledge of CV, the
borrower under each Mortgage has no valid defense that prevents the holder
thereof or its assigns from enforcing the payment provisions thereof, or from
foreclosing against the property subject to such Mortgage, which defense
arises from applicable local, state or federal laws or regulations pertaining
to usury, if any, and any or all other requirements of any federal, state or
local law including, without limitation, truth-in-lending, real estate
settlement procedures, consumer credit protection, and equal credit
opportunity or disclosure laws applicable to such Mortgage, if any. To the
knowledge of CV, such Mortgage is not subject to any valid right of
rescission, setoff, abatement, diminution, counterclaim or defense that
prevents the holder thereof or its assigns from enforcing the payment
provisions of the Mortgage, if any, or from foreclosing against the mortgaged
property subject to such Mortgage, and no such claims have been asserted.
(ii) Defaults. To the knowledge of CV, there is no default
by the owner of any property covered by a Mortgage or by CV in the payment or
performance of any term or conditions of any Mortgage.
(iii) Disbursement of Loan Proceeds. The borrower under
each Mortgage does not have the right to disbursement of additional loan
proceeds or future advances with respect to such Mortgage.
(iv) Cross-Collateralization. Except as set forth in
Schedule 7.25(c)(iv) of the CV Disclosure Letter, each Mortgage is not cross-
collateralized with any other loan.
(v) Owner. Except as set forth in Schedule 7.25(c)(v) of
the CV Disclosure Letter, CV is the sole owner of and holds legal title to
each Mortgage, and each Mortgage has not been assigned or pledged and is
owned by CV free and clear of any right, interest or claim of any third
party.
(vi) Loan Documents. The documents representing the
Mortgages provided to Kranzco are true and correct copies of the documents
they purport to be, are all of the documents constituting the Mortgages, are
in full force and effect, and have not been superseded, amended, modified,
canceled or otherwise changed.
(d) Condemnation. To the best of CV's knowledge, there is no
pending or threatened condemnation proceeding or similar proceeding affecting
any property encumbered by a Mortgage or any part thereof which could have an
adverse effect upon the use of the property for its intended purposes.
(e) Litigation. To CV's knowledge, there is no litigation,
proceeding or governmental investigation pending, or any other injunction,
decree, notice of violation or claim outstanding, existing or relating to any
Mortgage or the property encumbered thereby.
(f) Compliance with Laws. To CV's knowledge, no written notice
has been issued by any governmental authority or any party entitled to
enforce a restrictive covenant affecting any property encumbered by a
Mortgage to the effect that (i) any zoning law, ordinance or regulation has
been violated by the maintenance, operation, occupancy or use of such
property which violation has not been cured and would adversely affect the
current operation, current occupancy or current use of such mortgaged
property, (ii) any building, or other federal, state or municipal law,
ordinance, regulation, or any restrictive covenant, including without
limitation, any Environmental Law, is currently violated by the current
maintenance, current operation, current occupancy, or current use of such
mortgaged property such that the violation would adversely affect the current
operation, currency occupancy or current use of such mortgaged property or
(iii) any licenses, permits, inspections, authorizations, certifications and
approvals, including without limitation, any Environmental Permits required
by any governmental authorities having jurisdiction over the operation of
such mortgaged property, in its present manner, have not been performed or
issued and paid for and are not in full force and effect, in each case
without which the operation of such mortgaged property would be adversely
affected.
(g) Title Insurance. Valid and enforceable ALTA policies of
title insurance have been issued insuring each Mortgage in an amount not less
than the original principal amount of such Mortgage and each such policy is
presently in full force and effect and there are no pending claims against
any such policy. Each such policy insures that the subject Mortgage is a
valid first lien on the mortgaged property and as of the date of such policy,
the mortgaged property was free and clear of encumbrances and liens of record
having priority over the lien of the subject Mortgage, subject only to the
matters set forth therein.
7.26. FFO Agreements. Schedule 7.26 of the CV Disclosure Letter lists
all agreements and arrangements pursuant to which any officer, director or
employee of CV or any other Person receives any payment or benefit based in
any way on the Funds from Operations generated by CV (the "FFO Agreements").
ARTICLE 7A
7A. Representations and Warranties of Kramont. Kramont represents to
CV and Kranzco as follows:
7A.1. Existence: Good Standing; Authority. Kramont is a real estate
investment trust, duly organized, validly existing and in good standing under
the laws of the State of Maryland. Kramont is or will be prior to the
Effective Time duly licensed or qualified to do business as a foreign trust
and is or will be prior to the Effective Time in good standing under the laws
of each other jurisdiction in which the character of the properties owned or
leased by it therein or in which the transaction of its business makes such
qualification necessary, except where the failure to be so qualified would
not have a material adverse effect on the business, results of operations or
financial condition or prospects of Kramont. Copies of Kramont's Declaration
of Trust, Bylaws and organization documents have been previously delivered or
made available to CV and Kranzco and are true and correct.
7A.2. Authorization, Validity and Effect of Agreements. Kramont has
the requisite power and authority to enter into the transactions contemplated
hereby and to execute and deliver this Agreement, and the Ancillary
Agreements to which it is a party. The consummation by Kramont of this
Agreement and the Ancillary Agreements and the transactions contemplated
hereby and thereby have been duly authorized by all requisite trust action on
the part of Kramont. Assuming the due authorization, execution and delivery
thereof by the other parties thereto, this Agreement constitutes, and the
Ancillary Agreements to which Kramont is a party (when executed and delivered
pursuant hereto for value received) will constitute, the valid and legally
binding obligations of Kramont, enforceable against Kramont in accordance
with their respective terms, subject to applicable bankruptcy, insolvency,
moratorium or other similar laws relating to creditors' rights and general
principles of equity.
7A.3. Capitalization. The authorized capital shares of beneficial
interest of Kramont consist of 2,000 shares of beneficial interest, $.01 par
value per share. As of the date hereof, there are 2,000 shares of Kramont
Common Stock issued and outstanding, 1,000 of which are owned by each of CV
and KRT Trust. Kramont has no outstanding bonds, debentures, notes or other
obligations the holders of which have the right to vote (or which are
convertible into or exercisable for securities having the right to vote) with
the shareholders of Kramont on any matter. All such issued and outstanding
Kramont Common Shares are duly authorized, validly issued, fully paid,
nonassessable and free of preemptive rights. Other than as contemplated by
this Agreement, there are not at the date of this Agreement any existing
options, warrants, calls, subscriptions, convertible securities, or other
rights, agreements or commitments which obligate Kramont to issue, transfer
or sell any Kramont Common Shares.
7A.4. No Prior Activities; Other Interests. Except for the obligations
and liabilities incurred in connection with its organization and the
negotiation and consummation of the transactions contemplated by this
Agreement and the Ancillary Agreements, Kramont has not engaged, and prior to
the Effective Time Kramont will not engage, in any business of any type or
kind or incurred any liabilities or obligations or entered into or will enter
into any agreements or arrangements with any person or entity. Kramont does
not own and, prior to the Effective Time will not own, directly or
indirectly, any interest or investment (whether equity or debt) in any
corporation, partnership, joint venture, business, trust or other entity.
ARTICLE 8
8. Covenants.
8.1. Acquisition Proposals. (a) Unless and until this Agreement
shall have been terminated in accordance with its terms, CV agrees and
covenants: (a) that neither it nor any of the CV Subsidiaries shall, and
each of them shall direct and use its best efforts to cause its respective
officers, directors, employees, agents and representatives (including,
without limitation, any investment banker, attorney or accountant retained by
it or any of the CV Subsidiaries) not to, directly or indirectly, initiate,
solicit or encourage any inquiries or the making or implementation of any
proposal or offer (including, without limitation, any proposal or offer to
its shareholders) with respect to a merger, acquisition, tender offer,
exchange offer, consolidation or similar transaction involving, or any
purchase of ten (10%) or more of the assets or any equity securities of, CV
or any of the CV Subsidiaries, other than the transactions contemplated by
this Agreement (any such proposal or offer being hereinafter referred to as a
"CV Acquisition Proposal") or engage in any negotiations concerning, or
provide any confidential information or data to, or have any discussions
with, any person relating to a CV Acquisition Proposal; (b) that it will
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with
respect to any of the foregoing and will take the necessary steps to inform
the individuals or entities referred to above of the obligations undertaken
in this Section 8.1(a); and (c) that it will notify Kranzco immediately if
any such inquiries or proposals are received by, any such information is
requested from, or any such negotiations or discussions are sought to be
initiated or continued with, it; provided, however, that nothing contained in
this Section 8.1(a) shall prohibit the Board of Directors of CV from (i)
furnishing information to, or entering into discussions or negotiations with,
any person or entity that makes an unsolicited bona fide CV Acquisition
Proposal, if, and only to the extent that, (A) a majority of the
disinterested members of the Board of Directors of CV determines in good
faith after consultation with outside counsel that such action is required
for the Board of Directors to comply with its fiduciary duties to
shareholders imposed by law or, as applicable, its duties under its
Certificate of Incorporation and that such Person has the ability and
financial wherewithal to consummate a Superior CV Acquisition Proposal, and
(B) CV complies with the provisions of Section 8.1(b); and (ii) to the extent
applicable, complying with Rule 14e-2 and Rule 14a-9 promulgated under the
Exchange Act with regard to a CV Acquisition Proposal. Nothing in this
Section 8.1(a) shall (x) permit CV to terminate this Agreement (except as
specifically provided in Article 10 hereof), (y) permit CV to enter into any
agreement with respect to a CV Acquisition Proposal during the term of this
Agreement (it being agreed that during the term of this Agreement, neither CV
nor any of the CV Subsidiaries shall enter into any agreement with any person
that provides for, or in any way facilitates, a CV Acquisition Proposal), or
(z) affect any other obligation of any party under this Agreement. Neither
the Board of Directors of CV nor any committee thereof shall (i) withdraw or
modify, or propose publicly to withdraw or modify, in a manner adverse to the
Kranzco Entities, the approval or recommendation by the Board of Directors of
CV or any committee thereof of this Agreement or the CV Merger or (ii)
approve or recommend, or propose to approve or recommend, any CV Acquisition
Proposal. Notwithstanding the foregoing, the Board of Directors of CV may
approve and recommend a Superior CV Acquisition Proposal and, in connection
therewith, withdraw or modify its approval or recommendation of this
Agreement and the CV Merger, but only (1) after providing written notice to
Kranzco (a "Notice of Superior CV Proposal") advising Kranzco that the Board
of Directors has received a Superior CV Acquisition Proposal, specifying the
material terms and conditions of such Superior CV Acquisition Proposal, and
(2) if Kranzco does not within five business days after Kranzco's receipt of
the Notice of Superior CV Proposal, make an offer which the Board of
Directors of CV determines in its good faith judgment (after consultation
with its independent financial advisor) to be as favorable to the holders of
CV's Common Stock as such Superior CV Acquisition Proposal. As used herein,
"Superior CV Acquisition Proposal" means a bona fide CV Acquisition Proposal
made by a third party which a majority of the disinterested members of the
Board of Directors of CV determines in good faith (after consultation with
independent financial advisors) to be more favorable to CV's shareholders
than the CV Merger and which the Board of Directors of CV intends to accept
and determines is reasonably capable of being consummated.
(b) CV shall promptly advise Kranzco orally and in writing of
any CV Acquisition Proposal or any inquiry with respect to or which could
reasonably be expected to lead to any CV Acquisition Proposal, and the
material terms and conditions of such CV Acquisition Proposal or inquiry. CV
will keep Kranzco fully informed of the status and details of any such CV
Acquisition Proposal or inquiry. CV shall give Kranzco at least one day's
advance notice of any information to be supplied to any Person making a CV
Acquisition Proposal.
(c) Unless and until this Agreement shall have been terminated
in accordance with its terms, Kranzco agrees and covenants: (a) that neither
it nor any of the Kranzco Subsidiaries shall, and each of them shall direct
and use its best efforts to cause its respective officers, trustees,
employees, agents and representatives (including, without limitation, any
investment banker, attorney or accountant retained by it or any of the
Kranzco Subsidiaries) not to, directly or indirectly, initiate, solicit or
encourage any inquiries or the making or implementation of any proposal or
offer (including, without limitation, any proposal or offer to its
shareholders) with respect to a merger, acquisition, tender offer, exchange
offer, consolidation or similar transaction involving, or any purchase of ten
(10%) or more of the assets or any equity securities of, Kranzco or any of
the Kranzco Subsidiaries, other than the transactions contemplated by this
Agreement (any such proposal or offer being hereinafter referred to as a
"Kranzco Acquisition Proposal") or engage in any negotiations concerning, or
provide any confidential information or data to, or have any discussions
with, any person relating to a Kranzco Acquisition Proposal; (b) that it will
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with
respect to any of the foregoing and will take the necessary steps to inform
the individuals or entities referred to above of the obligations undertaken
in this Section 8.1(c); and (c) that it will notify CV immediately if any
such inquiries or proposals are received by, any such information is
requested from, or any such negotiations or discussions are sought to be
initiated or continued with, it; provided, however, that nothing contained in
this Section 8.1(c) shall prohibit the Board of Trustees of Kranzco from (i)
furnishing information to or entering into discussions or negotiations with,
any person or entity that makes an unsolicited bona fide Kranzco Acquisition
Proposal, if, and only to the extent that, (A) a majority of the
disinterested members of the Board of Trustees of Kranzco determines in good
faith after consultation with outside counsel that such action is required
for the Board of Trustees to comply with its fiduciary duties to shareholders
imposed by law or, as applicable, its duties under its Declaration of Trust
and that such Person has the ability and financial wherewithal to consummate
a Superior Kranzco Acquisition Proposal, (B) Kranzco complies with the
provisions of Section 8.1(d), and (ii) to the extent applicable, complying
with Rule 14e-2 and Rule 14a-9 promulgated under the Exchange Act with regard
to a Kranzco Acquisition Proposal. Nothing in this Section 8.1(c) shall (x)
permit Kranzco to terminate this Agreement (except as specifically provided
in Article 10 hereof), (y) permit Kranzco to enter into any agreement with
respect to a Kranzco Acquisition Proposal during the term of this Agreement
(it being agreed that during the term of this Agreement, neither Kranzco nor
any of the Kranzco Subsidiaries shall enter into any agreement with any
person that provides for, or in any way facilitates, a Kranzco Acquisition
Proposal), or (z) affect any other obligation of any party under this
Agreement. Neither the Board of Trustees of Kranzco nor any committee
thereof shall (i) withdraw or modify, or propose publicly to withdraw or
modify, in a manner adverse to the CV Entities, the approval or
recommendation by the Board of Trustees of Kranzco or any committee thereof
of this Agreement or the KRT Trust Merger or (ii) approve or recommend, or
propose to approve or recommend, any Kranzco Acquisition Proposal.
Notwithstanding the foregoing, the Board of Trustees of Kranzco may approve
and recommend a Superior Kranzco Acquisition Proposal and, in connection
therewith, withdraw or modify its approval or recommendation of this
Agreement and the KRT Trust Merger, but only (1) after providing written
notice to CV (a "Notice of Superior Kranzco Proposal") advising CV that the
Board of Trustees has received a Superior Kranzco Acquisition Proposal,
specifying the material terms and conditions of such Superior Kranzco
Acquisition Proposal, and (2) if CV does not within five business days after
CV's receipt of the Notice of Superior Kranzco Proposal, make an offer which
the Board of Trustees of Kranzco determines in its good faith judgment (after
consultation with its independent financial advisor) to be as favorable to
the holders of Kranzco Common Shares as such Superior Kranzco Acquisition
Proposal. As used herein, "Superior Kranzco Acquisition Proposal" means a
bona fide Kranzco Acquisition Proposal made by a third party which a majority
of the disinterested members of the Board of Trustees of Kranzco determines
in good faith (after consultation with independent financial advisors) to be
more favorable to Kranzco's shareholders than the KRT Trust Merger and which
the Board of Trustees of Kranzco intends to accept and determines is
reasonably capable of being consummated.
(d) Kranzco shall promptly advise CV orally and in writing of
any Kranzco Acquisition Proposal or any inquiry with respect to or which
could reasonably be expected to lead to any Kranzco Acquisition Proposal, and
the material terms and conditions of such Kranzco Acquisition Proposal or
inquiry. Kranzco will keep CV fully informed of the status and details of
any such Kranzco Acquisition Proposal or inquiry. Kranzco shall give CV at
least one day's advance notice of any information to be supplied to any
Person making a Kranzco Acquisition Proposal.
(e) Notwithstanding anything to the contrary contained herein,
Kranzco and its affiliates shall not, without CV's consent, disclose to any
other person (except Kranzco's advisors in connection with this transaction)
any confidential, proprietary or non-public information of or about CV or its
affiliates. Notwithstanding anything to the contrary contained herein, CV or
its affiliates shall not, without Kranzco's consent, disclose to any other
person (except CV's advisors in connection with this transaction) any
confidential, proprietary or non-public information of or about Kranzco or
its affiliates.
8.2. Conduct of Businesses. (a) During the period from the date of
this Agreement until the earlier of the date of the termination of this
Agreement and the Effective Time, except as set forth in the Kranzco
Disclosure Letter or the CV Disclosure Letter or as contemplated by this
Agreement, unless the other party has consented in writing thereto, CV and
Kranzco:
(i) Shall use their reasonable best efforts, and shall
cause each of their respective Subsidiaries to use their reasonable best
efforts, to preserve intact their business organizations and goodwill
and keep available the services of their respective officers and
employees;
(ii) Shall confer on a regular basis with one or more
representatives of the other to report operational matters of
materiality and, subject to Section 8.1, any proposals to engage in
material transactions;
(iii) Except as provided in Sections 8.2(b)(v) and
8.2(c)(v), shall coordinate the record dates for any dividends payable
with respect to the CV Common Stock, the Kranzco Common Shares and the
Kranzco Preferred Shares until the Closing; and
(iv) Shall promptly deliver to the other true and correct
copies of any report, statement or schedule filed with the SEC
subsequent to the date of this Agreement.
(b) During the period from the date of this Agreement until the
earlier of the date of the termination of this Agreement and the Effective
Time, except as set forth in the Kranzco Disclosure Letter or unless CV has
consented in writing thereto, Kranzco:
(i) Shall, and shall cause each of the Kranzco
Subsidiaries to, conduct its operations according to their usual,
regular and ordinary course in substantially the same manner as
heretofore conducted, subject to the restrictions of this Agreement
below;
(ii) Shall not, and shall cause each of the Kranzco
Subsidiaries not to, acquire, enter into an option to acquire or
exercise an option or contract to acquire additional real property,
encumber assets or commence construction of (other than tenant
improvements, reimbursements and allowances in the ordinary course of
business), or enter into any agreement or commitment to develop or
construct retail shopping center properties or other real estate
projects, except as set forth in Section 8.2 of the Kranzco Disclosure
Letter;
(iii) Shall not amend its or KRT Trust's Declaration of
Trust or By-laws, or permit the amendment of the certificate of limited
partnership and limited partnership agreement of KRT Partnership or the
certificate of formation and limited liability company agreement of KRT
Trust II; and
(iv) Shall not, and shall cause each of the Kranzco
Subsidiaries not to, (i) except (x) pursuant to the exercise of
options, warrants, conversion rights and other contractual rights
(including pursuant to Kranzco Preferred Shares) existing on the date
hereof or (y) as payment of trustees's fees in accordance with past
practice or pursuant to Kranzco's dividend reinvestment plan or as
otherwise disclosed pursuant to this Agreement, issue any of its shares
of beneficial interest, effect any share split, reverse share split,
share dividend, recapitalization or other similar transaction, (ii)
grant, confer or award any option, warrant, conversion right or other
right not existing on the date hereof to acquire any of its shares of
beneficial interest, or (iii) increase any compensation or enter into or
amend any employment agreement with any of its present or future
trustees, officers or directors except Kranzco and the Kranzco
Subsidiaries shall be permitted to pay Christmas bonuses consistent with
past practice, or (iv) adopt any new employee benefit plan (including
any share option, share benefit or share purchase plan) or amend any
existing employee benefit plan in any material respect, except for
changes which are required by applicable law or are less favorable to
participants in such plans;
(v) Shall not (i) declare, set aside or pay any dividend
or make any other distribution or payment with respect to any of its
shares of beneficial interest, except regular quarterly dividends on the
Kranzco Common Shares and regular quarterly dividends on the Kranzco
Preferred Shares, as well as any other required dividends, distributions
or payments with respect to such Kranzco Preferred Shares (which, with
respect to the Kranzco Common Shares, shall have record dates to the
extent occurring prior to the Effective Time of December 31, 1999 and
March 31, 2000 and corresponding payment dates of January 21, 2000 and
April 21, 2000), and (ii) except in connection with (x) share-based
employee benefit plans of Kranzco or (y) the use of shares of beneficial
interest to pay the exercise price or tax withholding in connection with
share-based employee benefit plans of Kranzco, directly or indirectly
redeem, purchase or otherwise acquire any shares of beneficial interest
or capital stock of any of the Kranzco Subsidiaries, or make any
commitment for any such action;
(vi) Shall not, and shall not permit any of the Kranzco
Subsidiaries to, sell, lease or otherwise dispose of (i) any Kranzco
Properties or any of its capital stock of or other interests in the
Kranzco Subsidiaries or (ii) any of its other assets which are material,
individually or in the aggregate except the sale of certain properties
listed in Section 8.2 to the Kranzco Disclosure Letter;
(vii) Shall not, and shall not permit any of the Kranzco
Subsidiaries to, make any loans, advances or capital contributions to,
or investments in, any other person other than loans, advances or
capital contributions to the Kranzco Subsidiaries in existence on the
date hereof and advances to tenants;
(viii) Shall not, and shall not permit any of the Kranzco
Subsidiaries to, pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, in the
ordinary course of business consistent with past practice or in
accordance with their terms, of liabilities reflected or reserved
against in, or contemplated by, the most recent consolidated financial
statements (or the notes thereto) of Kranzco included in the Kranzco
Reports or incurred in the ordinary course of business consistent with
past practice;
(ix) Shall not, and shall not permit any of the Kranzco
Subsidiaries to, enter into any Commitment which may result in total
payments or liability by or to it in excess of $100,000 except (A)
tenant reimbursements and allowances and leases entered into in the
ordinary course of business consistent with past practice, (B) capital
expenditures incurred in the ordinary course of business consistent with
past practice, (C) pending Commitments listed in Section 8.2(b)(ix) of
the Kranzco Disclosure Letter and (D) payment of fees and expenses in
connection with obtaining the consents necessary to cure the violations
or conflicts set forth in Section 6.6 of the Kranzco Disclosure Letter;
(x) Shall not, and shall not permit any of the Kranzco
Subsidiaries to, enter into any Commitment with any officer, director,
trustee, consultant or affiliate of Kranzco or any of the Kranzco
Subsidiaries, except as set forth in Section 8.2 of the Kranzco
Disclosure Letter;
(xi) Shall not make any changes in its accounting methods
or policies except as required by law, the SEC or generally accepted
accounting principles;
(xii) Shall maintain, and cause the Kranzco Subsidiaries to
maintain, insurance in such amounts and against such risks as are
customary for companies like Kranzco;
(xiii) Shall take all actions necessary to cause KRT
Partnership not to own, directly or indirectly, more than 10% of the
voting interests in any corporation at the Effective Time; or
(xiv) Shall not, and shall not permit any of the Kranzco
Subsidiaries to, authorize, or commit or agree to take, any of the
foregoing actions.
(c) During the period from the date of this Agreement until the
earlier of the date of the termination of this Agreement and the Effective
Time, except as set forth in the CV Disclosure Letter or unless Kranzco has
consented in writing thereto, CV:
(i) Shall, and shall cause each of the CV Subsidiaries to,
conduct its operations according to their usual, regular and ordinary
course in substantially the same manner as heretofore conducted, subject
to the restrictions of this Agreement below;
(ii) Shall not, and shall cause each of the CV Subsidiaries
not to, acquire, enter into an option to acquire or exercise an option
or contract to acquire additional real property, encumber assets or
commence construction of (other than tenant improvements, reimbursements
and allowances in the ordinary course of business), or enter into any
agreement or commitment to develop or construct retail shopping center
properties or other real estate projects, except as set forth in
Schedule 8.2 of the CV Disclosure Letter;
(iii) Except as set forth in Section 5.3(e), shall not amend
its or Certificate of Incorporation or By-laws, permit the amendment of
CV Trust's Declaration of Trust or By-laws or permit the amendment of
the certificate of limited partnership or limited partnership agreement
of CV Partnership;
(iv) Shall not, and shall cause each of the CV Subsidiaries
not to, (i) except pursuant to the exercise of options, warrants,
conversion rights and other contractual rights existing on the date
hereof or otherwise disclosed pursuant to this Agreement, issue any
shares of its capital stock or any of its partnership interests or
beneficial interests, as the case may be, effect any stock split,
reverse stock split, stock dividend, recapitalization or other similar
transaction, (ii) grant, confer or award any option, warrant, conversion
right or other right not existing on the date hereof to acquire any
shares of its capital stock, (iii) increase any compensation or enter
into or amend any employment agreement with any of its present or future
officers or directors except CV and the CV Subsidiaries shall(x) be
permitted to pay Christmas bonuses consistent with past practice, (y)
make any remaining payments for bonuses based upon Funds from Operations
of CV for the calendar year ending December 31, 1999 and (z) make a
payment of a pro rata portion of bonuses based upon Funds from
Operations of CV for the period from January 1, 1999 through the Closing
Date, or (iv) adopt any new employee benefit plan (including any stock
option, stock benefit or stock purchase plan) or amend any existing
employee benefit plan in any material respect, except for changes which
are required by applicable law or less favorable to participants in such
plans;
(v) Shall not (i) declare, set aside or pay any dividend
or make any other distribution or payment with respect to any shares of
its capital stock, except regular quarterly dividends on the CV Common
Stock (which, with respect to the CV Common Stock, shall have record
dates to the extent occurring prior to the Effective Time of January 4,
2000 and March 16, 2000 and corresponding payment dates of January 13,
2000 and April 5, 2000), and (ii) except in connection with the use of
shares of capital stock to pay the exercise price or tax withholding in
connection with stock-based employee benefit plans of CV or the CV
Subsidiaries, directly or indirectly redeem, purchase or otherwise
acquire any shares of its capital stock or capital stock of any of the
CV Subsidiaries (other than CV OP Units of CV Partnership upon
redemption by the holder thereof), or make any commitment for any such
action;
(vi) Shall not, and shall not permit any of the CV
Subsidiaries to, sell, lease or otherwise dispose of (i) any CV
Properties or any of its capital stock of or other interests in the CV
Subsidiaries or (ii) any of its other assets which are material,
individually or in the aggregate except the sale of certain properties
listed in Schedule 8.2 to the CV Disclosure Letter;
(vii) Shall not, and shall not permit any of the CV
Subsidiaries to, make any loans, advances or capital contributions to,
or investments in, any other person other than loans, advances or
capital contributions to the CV Subsidiaries in existence on the date
hereof and advances to tenants;
(viii) Shall not, and shall not permit any of the CV
Subsidiaries to, pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, in the
ordinary course of business consistent with past practice or in
accordance with their terms, of liabilities reflected or reserved
against in, or contemplated by, the most recent consolidated financial
statements (or the notes thereto) of CV included in the CV Reports or
incurred in the ordinary course of business consistent with past
practice;
(ix) Shall not, and shall not permit any of the CV
Subsidiaries to, enter into any Commitment which may result in total
payments or liability by or to it in excess of $100,000 except (A)
tenant reimbursements and allowances and leases entered into in the
ordinary course of business consistent with past practice, (B) capital
expenditures incurred in the ordinary course of business consistent with
past practice, (C) pending Commitments listed in Schedule 8.2(c)(ix) of
the CV Disclosure Letter and (D) payment of fees and expenses in
connection with obtaining the consents necessary to cure the violations
or conflicts set forth in Schedule 7.6 of the CV Disclosure Letter;
(x) Shall not, and shall not permit any of the CV
Subsidiaries to, enter into any Commitment with any officer, director,
trustee, consultant or affiliate of CV or any of the CV Subsidiaries,
except as set forth in Schedule 8.2 of the CV Disclosure Letter;
(xi) Shall not make any changes in its accounting methods
or policies except as required by law, the SEC or generally accepted
accounting principles;
(xii) Shall maintain, and cause the CV Subsidiaries to
maintain, insurance in such amounts and against such risks as are
customary for companies like CV; or
(xiii) Shall take all actions necessary to cause CV
Partnership not to own, directly or indirectly, more than 10% of the
voting interests in any corporation at the Effective Time; or
(xiv) Shall not, and shall not permit any of the CV
Subsidiaries to, authorize, or commit or agree to take, any of the
foregoing actions.
8.3. Meetings of Shareholders. Each of Kranzco and CV will take all
action necessary in accordance with applicable law and its Declaration of
Trust, Certificate of Incorporation and By-laws to convene a meeting of its
shareholders as promptly as practicable to consider and vote upon the
approval of this Agreement and the transactions contemplated hereby. Kranzco
and CV will use their best efforts to convene their respective shareholder
meetings on the same day and to designate the same record date for such
meetings, which record dates shall be mutually agreed upon by Kranzco and CV.
The Board of Trustees of Kranzco and the Board of Directors of CV shall
recommend such approval, and Kranzco and CV shall use their reasonable best
efforts to obtain such approval, including, without limitation, timely
mailing the Joint Proxy Statement/Prospectus (as defined in Section 8.8);
provided, however, that such recommendation or use of reasonable best efforts
to obtain such approval is subject to any action taken by, or upon authority
of, (i) the Board of Trustees of Kranzco in the exercise of its good faith
judgment as to its duties to its shareholders imposed by law or (ii) the
Board of Directors of CV in the exercise of its good faith judgment as to its
fiduciary duties to its shareholders imposed by law. It shall be a condition
to the mailing of the Joint Proxy Statement/Prospectus that (i) CV shall have
received a "comfort" letter from Arthur Andersen LLP, independent public
accountants for Kranzco, dated as of a date within two business days before
the date on which the Form S-4 (as defined in Section 8.8) shall become
effective, with respect to the financial statements of Kranzco included in
the Joint Proxy Statement/Prospectus, in form and substance reasonably
satisfactory to CV, and customary in scope and substance for "comfort"
letters delivered by independent public accountants in connection with
registration statements and proxy statements similar to the Form S-4 and the
Joint Proxy Statement/Prospectus, and (ii) Kranzco shall have received a
"comfort" letter from BDO Seidman, LLP, independent public accountants for
CV, dated as of a date within two business days before the date on which the
Form S-4 shall become effective, with respect to the financial statements of
CV included in the Joint Proxy Statement/Prospectus, in form and substance
reasonably satisfactory to Kranzco, and customary in scope and substance for
"comfort" letters delivered by independent public accountants in connection
with registration statements and proxy statements similar to the Form S-4 and
the Joint Proxy Statement/Prospectus.
8.4. Filings; Other Action. Subject to the terms and conditions
herein provided, Kranzco, CV and Kramont shall: (a) use all reasonable best
efforts to cooperate with one another in (i) determining which filings,
declarations, registrations and notifications are required to be made prior
to the Effective Time with, and which consents, approvals, permits or
authorizations are required to be obtained prior to the Effective Time from,
Governmental Entities in connection with the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby and
(ii) timely making all such filings, declarations, registrations and
notifications and timely seeking all such consents, approvals, permits or
authorizations; (b) use all reasonable efforts to obtain in writing any
consents required from third parties in form reasonably satisfactory to
Kranzco, CV and Kramont necessary to effectuate the Conversion Transactions;
and (c) use all reasonable efforts to take, or cause to be taken, all other
action and do, or cause to be done, all other things necessary, proper or
appropriate to consummate and make effective the transactions contemplated by
this Agreement. If, at any time after the Effective Time, any further action
is necessary or desirable to carry out the purpose of this Agreement, the
proper officers and directors or trustees of Kranzco, CV and Kramont shall
take all such necessary action. If any "fair price" or "control share
acquisition" statute or similar statute or regulation shall become applicable
to the transactions contemplated hereby, the Kranzco Entities and the CV
Entities shall use their reasonable best efforts to, and shall use their
reasonable best efforts to cause their respective Boards of Trustees, Boards
of Directors, partners or managers, as the case may be, to grant such
approvals and to take such other actions as are necessary so that the
transactions contemplated hereby may be consummated as promptly as
practicable on the terms contemplated hereby and shall otherwise use their
reasonable best efforts to minimize or eliminate the effects of any such
statute or regulation on the transactions contemplated hereby. Kranzco and
CV shall promptly advise each other of and confer and consult with respect to
any communications from Governmental Entities with respect to the
transactions contemplated by this Agreement.
8.5. Notification of Certain Matters. Kranzco and CV shall keep each
other informed of all non-routine actions that each intends to take in
connection with any Environmental Laws and all actions shall be on terms and
conditions reasonably satisfactory to the other. Each shall give prompt
notice to the other party of any notice or other communication from any third
party alleging that the consent of such third party is or may be required in
connection with the Conversion Transactions or other transactions
contemplated hereby.
8.6. Inspection of Records. Until the earlier of the Effective Time
or the date on which this Agreement is terminated in accordance with its
terms, each of Kranzco and CV shall allow all designated officers, attorneys,
environmental and other consultants, accountants and other representatives of
the other access at all reasonable times to the records and files,
correspondence, audits and properties, as well as to all information relating
to commitments, contracts, titles and financial position, or otherwise
pertaining to the business and affairs of Kranzco and the Kranzco
Subsidiaries and CV and the CV Subsidiaries and will permit each other and
their authorized representatives to conduct Phase I environmental inspections
as they may reasonably require to the extent that no Phase I environmental
inspection has previously been conducted for the particular property at
issue, for purposes related to an evaluation of the transactions contemplated
hereby, subject to any restrictions arising under applicable law. All
information furnished under this Section 8.6 is subject to the
Confidentiality Agreement (as herein defined).
8.7. Publicity. The initial press release relating to this Agreement
shall be a joint press release in the form attached hereto as Exhibit O (or
as otherwise mutually agreed upon by CV and Kranzco) and thereafter Kranzco
and CV shall, subject to their respective legal obligations (including
requirements of stock exchanges and other similar regulatory bodies), consult
with each other, and use reasonable efforts to agree upon the text of any
press release, before issuing any such press release or otherwise making
public statements with respect to the transactions contemplated hereby and in
making any filings with any Governmental Entity or with any national
securities exchange with respect thereto.
8.8. Registration Statement. As promptly as practicable following the
date hereof, Kranzco, CV and Kramont shall prepare and file with the SEC
(with appropriate requests for confidential treatment, unless the parties
hereto otherwise agree) under the Exchange Act, a joint proxy
statement/prospectus and forms of proxies (such joint proxy
statement/prospectus and forms of proxy, together with any amendments or
supplements thereto, the "Joint Proxy Statement/Prospectus") relating to the
special meetings and the votes of the shareholders of Kranzco and CV with
respect to this Agreement and the transactions contemplated by this
Agreement. Promptly after clearance by the SEC of the Joint Proxy
Statement/Prospectus, Kramont and, to the extent required by law, KRT Trust
shall prepare and thereafter file with the SEC under the Securities Act a
registration statement on Form S-4 (such registration statement, together
with any amendments or supplements thereto, the "Form S-4"), in which the
Joint Proxy Statement/Prospectus will be included as a prospectus, in
connection with the registration under the Securities Act of (i) the KRT
Trust Common Shares and KRT Trust Preferred Shares to be issued to the
shareholders of Kranzco in the KRT Trust II Merger, to the extent required
under the Securities Act, and (ii) the Kramont Common Shares and Kramont
Preferred Shares to be issued to the holders of KRT Trust Common Shares, KRT
Trust Preferred Shares and CV Common Stock in the Reorganization (the KRT
Trust Common Shares, KRT Trust Preferred Shares, Kramont Common Shares and
Kramont Preferred Shares referred to in clauses (i) and (ii) are referred to
herein as the "Registered Securities"). Kranzco, Kramont and CV will cause
the Joint Proxy Statement/Prospectus and the Form S-4 to comply as to form in
all material respects with the applicable provisions of the Securities Act
and the Exchange Act and the rules and regulations thereunder. Each of the
Kranzco Entities, on the one hand, and the CV Entities, on the other hand,
shall furnish all information about itself and its business and operations
and all necessary financial information to the other as the other may
reasonably request in connection with the preparation of the Joint Proxy
Statement/Prospectus and the Form S-4. Kramont shall use its reasonable
best efforts, and CV, Kranzco and KRT Trust will cooperate with it, to have
the Form S-4 declared effective by the SEC as promptly as practicable
(including clearing the Joint Proxy Statement/Prospectus with the SEC). Each
of the Kranzco Entities and the CV Entities agrees promptly to correct any
information provided by it for use in the Joint Proxy Statement/Prospectus
and the Form S-4 if and to the extent that such information shall have become
false or misleading in any material respect, and each of the parties hereto
further agrees to take all steps necessary to amend or supplement the Joint
Proxy Statement/Prospectus and the Form S-4 and to cause the Joint Proxy
Statement/Prospectus and the Form S-4, as so amended or supplemented, to be
filed with the SEC and to be disseminated to the Kranzco shareholders and CV
shareholders, in each case as and to the extent required by applicable
federal and state securities laws, the Maryland REIT Law and the DGCL. Each
of the Kranzco Entities and the CV Entities agrees that the information
provided by it for inclusion in the Joint Proxy Statement/Prospectus and the
Form S-4 and each amendment or supplement thereto at the time of mailing of
the Joint Proxy Statement/Prospectus or effectiveness of the Form S-4 will
not include any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Each of the Kranzco Entities and the CV Entities will advise
the other parties, and deliver copies (if any) to them, promptly after
receipt thereof, of (i) any request by or correspondence or communication
from the SEC with respect to the Joint Proxy Statement/Prospectus and the
Form S-4, (ii) any responses thereto and (iii) notice of the time when the
Form S-4 has become effective or any supplement or amendment has been filed,
the issuance of any stop order, and the suspension of the qualification of
the Registered Securities for offering or sale in any jurisdiction.
Kranzco and CV shall each use their best efforts to timely mail
the Proxy Statement/Prospectus to its shareholders.
8.9. Listing Application. Kramont shall promptly prepare and submit
to the NYSE a listing application covering the Kramont Common Shares and
Kramont Series B-1 Preferred Shares and Kramont Series D Preferred Shares
issuable in the Reorganization and Kramont Common Shares issuable upon
exercise of the New Options being issued in connection with the
Reorganization and any other shares of Kramont issued in the Reorganization
as may be required by the NYSE, and shall use its reasonable efforts to
obtain, prior to the Effective Time, approval for the listing of such Shares,
subject to official notice of issuance.
8.10. Further Action. Each party hereto shall, subject to the
fulfillment at or before the Effective Time of each of the conditions of
performance set forth herein or the waiver thereof, perform, and shall cause
its subsidiary to perform, such further acts and execute such documents as
may reasonably be required to effect the Reorganization. At and after the
Effective Time, the officers and directors of Kramont will be authorized to
execute and deliver, in the name and on behalf of KRT Trust, KRT Partnership,
CV or CV Partnership, any deeds, bills of sale, assignments or assurances and
to take and do, in the name and on behalf of KRT Trust, KRT Partnership, CV
or CV Partnership, any other actions and things to vest, perfect or confirm
of record or otherwise in Kramont and its Subsidiaries any and all right,
title and interest in, to and under any of the rights, properties or assets
of KRT Trust, KRT Partnership, CV or CV Partnership or their respective
Subsidiaries acquired or to be acquired by Kramont as a result of, or in
connection with the Reorganization.
8.11. Affiliates of CV and Kranzco. (a) At least 30 days prior to the
Closing Date, CV shall deliver to Kranzco a list of names and addresses of
those persons who were, in CV's reasonable judgment, at the record date for
its shareholders' meeting to approve the CV Merger, "affiliates" (each such
person, an "Affiliate") of CV within the meaning of Rule 145 of the rules and
regulations promulgated under the Securities Act ("Rule 145"). CV shall
provide Kranzco such information and documents as Kranzco shall reasonably
request for purposes of reviewing such list. CV shall use all reasonable
efforts to deliver or cause to be delivered to Kranzco, prior to the Closing
Date, from each of the Affiliates of CV identified in the foregoing list, an
Affiliate Letter in substantially the form attached hereto as Exhibit K.
Kramont shall be entitled to place legends as specified in such Affiliate
Letters on the certificates evidencing any Kramont Common Shares to be
received by such Affiliates pursuant to the terms of this Agreement, and to
issue appropriate stop transfer instructions to the transfer agent for the
Kramont Common Shares, consistent with the terms of such Affiliate Letters.
(b) At least 30 days prior to the Closing Date, Kranzco shall
deliver to CV a list of names and addresses of those persons who were, in
Kranzco's reasonable judgment, at the record date for its shareholders'
meeting to approve the KRT Trust Merger, Affiliates of Kranzco within the
meaning of Rule 145 under the Securities Act. Kranzco shall provide CV such
information and documents as CV shall reasonably request for purposes of
reviewing such list. Kranzco shall use all reasonable efforts to deliver or
cause to be delivered to CV, prior to the Closing Date, from each of the
Affiliates of Kranzco identified in the foregoing list, an Affiliate Letter
in substantially the form attached hereto as Exhibit K. Kramont shall be
entitled to place legends as specified in such Affiliate Letters on the
certificates evidencing any Kramont Common Shares to be received by such
Affiliates pursuant to the terms of this Agreement, and to issue appropriate
stop transfer instructions to the transfer agent for the Kramont Common
Shares, consistent with the terms of such Affiliate Letters.
(c) Kramont shall file the reports required to be filed by it
under the Exchange Act and the rules and regulations adopted by the SEC
thereunder, and it will take such further action as any Affiliate of CV may
reasonably request, all to the extent required from time to time to enable
any Affiliate of CV or Kranzco to sell Kramont Common Shares received by such
Affiliate in the Reorganization without registration under the Securities Act
pursuant to (i) Rule 145(d)(1) under the Securities Act, as such Rule may be
amended from time to time, or (ii) any successor rule or regulation hereafter
adopted by the SEC.
8.12. Expenses. Subject to Section 10.5, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses, except that (a)
the filing fee in connection with the filing of the Form S-4 or Joint Proxy
Statement/Prospectus with the SEC and (b) the expenses incurred in connection
with printing and mailing the Form S-4 and the Joint Proxy
Statement/Prospectus, and the expenses of Kramont, shall be shared equally by
Kranzco and CV.
8.13. Indemnification. From and after the Effective Time, Kramont shall
exculpate and indemnify to the fullest extent permitted by the MGCL each
person who is now or has been at any time prior to the date hereof or who
becomes prior to the Effective Time, an officer or director of CV, or any CV
Subsidiary, Kranzco or any Kranzco Subsidiary. Such exculpation and
indemnification shall cover action on or prior to the Effective Time,
including, without limitation, all transactions contemplated by this
Agreement.
8.14. Governance. Kramont shall take all action necessary to cause the
board comprising the full Board of Trustees of Kramont at the Effective Time
to be those individuals listed on Exhibit C attached hereto.
8.15. Employees and Employee Benefit Plans. (a) As of the Effective
Time, the employment of all current employees of CV, CV Partnership and CV
Trust (collectively, solely for the purposes of this Section 8.15, the "CV
Employees") and of Kranzco, including those employees on disability, short-
term or long-term, or leave of absence, paid or unpaid, except those persons
agreed upon by Kranzco and CV, shall be terminated by their respective
employers and then shall be offered employment with KRT Partnership in the
same geographic area, in substantially the same positions on substantially
the same economic terms as they occupied immediately prior to the Closing
Date; provided, however, that employees of Kranzco and CV with rights or
claims under any severance plans of, agreements or arrangements with, or
obligations owed by, either Kranzco or CV will be required to waive such
rights and claims in writing simultaneously with or prior to accepting an
offer of employment with KRT Partnership; provided further, however, that
such waiver of rights and claims by an employee of Kranzco listed in Section
8.15 of the Kranzco Disclosure Letter shall be null and void retroactive to
the date of such waiver in the event that such employee's employment is
terminated for any reason (other than for cause) by KRT Partnership within
one year of the Closing. In the event any such former employee refuses to
execute the waiver described above, KRT Partnership shall be under no
obligation to employ such person. Kranzco and CV will agree as to the
benefits and the fringe benefits to be provided to KRT Partnership employees
after the Reorganization. Except for Louis P. Meshon, Sr., Norman M.
Kranzdorf and Robert H. Dennis, nothing herein shall be construed to require
KRT Partnership to retain any former Kranzco or CV employees for any specific
period of time after the Closing Date. All such former employees of Kranzco
or CV who are employed by KRT Partnership or Kramont shall receive credit for
the time that they were employed with CV or Kranzco, as the case may be, for
purposes of vacation eligibility.
(b) Subject to the third to last sentence of Section 8.15(a), as
of the Closing Date, all employees of CV and all employees of Kranzco who
shall be hired by KRT Partnership shall be eligible for coverage under a
group health plan provided by KRT Partnership, which group health plan shall
be the same plan presently covering the employees of Kranzco or such other
plan as the Board of Trustees of Kramont shall determine immediately after
the Effective Time. All former employees of CV and Kranzco shall receive
credit with respect to such group health plan for (i) service with CV or
Kranzco or any of their respective Subsidiaries for purposes of determining
eligibility to participate (including waiting periods of any time) and (ii)
deductibles, if any, required under such plan to the extent deductibles have
been paid by such former CV or Kranzco employees or their dependents under
their previous group health plans. Any and all exclusions or limitations
relative to pre-existing conditions shall be waived by the KRT Partnership
group health plan with respect to all such former CV or Kranzco employees.
(c) Prior to the Closing Date, Kranzco, CV and KRT Partnership
shall take all necessary action, including the adoption of necessary
corporate and trust resolutions and plan amendments, and shall make all
required governmental filings to permit and effect (i) the adoption of
Kranzco's defined contribution pension plan by KRT Partnership or such other
plan as the Board of Trustees of Kramont shall determine immediately after
the Effective Time, which plan shall then be renamed the KRT Partnership
401(k) Plan, and (ii) the merger of CV's defined contribution plan with and
into KRT Partnership 401(k) Plan such that as of the Closing Date, all
participants in both the Kranzco defined contribution plan and the CV defined
contribution plan shall be covered under the KRT Partnership 401(k) Plan.
All former Kranzco and CV employees who are hired by KRT Partnership or
Kramont shall receive credit for service with Kranzco and CV, respectively,
for purposes of determining eligibility to participate and vesting in the KRT
Partnership 401(k) Plan.
(d) KRT Partnership shall provide continuation coverage as
required under Section 4980B of the Code and Section 601 of ERISA ("COBRA
Coverage") to all employees of CV and Kranzco and their respective
beneficiaries who experience a "qualifying event" (as defined in the Code) at
any time on or prior to the Closing Date, and shall offer COBRA Coverage to
all persons who experience a qualifying event as a result of the transactions
contemplated by this Agreement.
(e) In connection with the transactions contemplated by this
Agreement, the Board of Trustees of Kranzco will take such action as is
reasonably necessary to accelerate the vesting of restricted stock awards set
forth in Section 6.3 of the Kranzco Disclosure Letter, such that all such
shares shall be vested at the Effective Time.
(f) Prior to the Effective Time, Kranzco shall cause a Lease
Amendment in the form attached hereto as Exhibit P to be executed by the
parties thereto.
8.16. Reorganization. From and after the date hereof and until the
earlier to occur of termination of this Agreement and the Effective Time,
neither Kranzco nor CV nor any of their respective Subsidiaries or other
affiliates shall (i) knowingly take any action, or knowingly fail to take any
action, that would jeopardize qualification of the CV Merger or the KRT Trust
Merger as a reorganization within the meaning of Section 368(a) of the Code;
or (ii) enter into any contract, agreement, commitment or arrangement with
respect to the foregoing. Following the Effective Time, Kramont shall use
its best efforts to conduct its business in a manner that would not
jeopardize the characterization of the CV Merger or the KRT Trust Merger as a
reorganization within the meaning of Section 368(a) of the Code.
8.17. REIT Status. Notwithstanding anything to the contrary set forth
in this Agreement, nothing in this Agreement shall prohibit Kranzco or CV
from taking, and Kranzco and CV hereby agree, respectively, to take any
action at any time or from time to time that in the reasonable judgment of
the Board of Trustees of Kranzco or Board of Directors of CV, as the case may
be, upon advice of counsel, is legally necessary for Kranzco or CV, as the
case may be, to maintain its qualification as a REIT or to eliminate or
reduce income or excise taxes under Sections 856-860 and 4981 of the Code
(and similar provisions of state or local tax law) for any period or portion
thereof ending on or prior to the Effective Time, including without
limitation, making dividend or distribution payments to shareholders of
Kranzco or shareholders of CV, as the case may be. In the event any such
distribution (other than regular quarterly dividends) is made by Kranzco or
CV, the other entity shall have the right to make an equivalent distribution
to maintain economic parity between them. Each of CV and Kranzco shall use
its best efforts to take any such actions as may be necessary to maintain
their status as a REIT for any period or portion thereof ending on or prior
to the Effective Time (including, without limitation, the mailing of
shareholder demand letters as required by Treasury Regulations Section 1.857-
8).
8.18. Other Agreements. Kramont shall enter into (i) an employment
agreement with Norman M. Kranzdorf to become effective on the first business
day following the Effective Time in substantially the form attached hereto as
Exhibit L (the "Norman M. Kranzdorf Employment Agreement") and (ii) an
employment agreement with Louis P. Meshon, Sr. to become effective on the
first business day following the Effective Time in substantially the form
attached hereto as Exhibit M (the "Louis P. Meshon, Sr. Employment
Agreement").
8.19. Dividends. The Kranzco Entities and the CV Entities agree that
it will be the policy of the Board of Trustees of Kramont effective as of the
Effective Time subject to the exercise of its duties to the Kramont
shareholders under applicable law that cash dividends on the Kramont Common
Shares for the first year following the Effective Time will be payable in an
amount equal to $1.30 per share.
8.20. The Kranzco Reorganization Transactions. Prior to the Effective
Time, the Kranzco Entities shall take the following actions in connection
with the Kranzco Reorganization (the "Kranzco Reorganization Transactions"):
(a) Kranzco shall consummate the Conversion Transactions;
(b) Following the Conversion Transactions, Kranzco and KRT Trust
II shall consummate the KRT Trust II Merger;
(c) Following the KRT Trust II Merger, KRT Trust II and KRT
Partnership shall consummate the KRT Partnership Merger;
(d) To the extent required under the Securities Act, KRT Trust
shall use its reasonable best efforts, pursuant to the Form S-4, to
register under the Securities Act the issuance of the KRT Trust Common
Shares to holders of Kranzco Common Shares and the issuance of preferred
shares of beneficial interest in KRT Trust to the holders of Kranzco
Preferred Shares, in each case in connection with the KRT Trust II
Merger; and
(e) Upon consummation of the KRT Trust II Merger, the Kramont
Options shall, by virtue of the KRT Trust II Merger and without any
further action on the part of Kranzco or the holder of any such Kramont
Options, be assumed by KRT Trust in such manner that KRT Trust (i) is a
corporation "assuming a stock option in a transaction to which Section
424(a) applies" within the meaning of Section 424 of the Code, or (ii)
to the extent that Section 424 of the Code does not apply to any such
Kramont Options, KRT Trust would be such a corporation were Section 424
of the Code applicable to such options. Each Kramont Option assumed by
KRT Trust shall be exercisable upon the same terms and conditions as
under the applicable Kranzco Stock Option Plan and the applicable Option
agreement issued thereunder (including that each KRT Trust Option shall
be exercisable for the same number of KRT Trust Common Shares as the
number of Kranzco Common Shares that were issuable upon exercise of the
Kramont Options immediately prior to the KRT Trust II Merger). At or
prior to the consummation of the KRT Trust II Merger, KRT Trust shall
take all corporate action necessary to reserve for issuance a sufficient
number of KRT Trust Common Shares for delivery in connection with the
assumed Kramont Options.
8.21. CV Limited Partner Contribution. Following the execution of this
Agreement, CV shall (i) use its reasonable best efforts to (A) facilitate
holders of units of limited partner interest in CV Partnership entering into
the Unit Contribution Agreement and (B) to obtain the First CV Partnership
Approval and (ii) cause CV Trust, in its capacity as general partner of CV
Partnership, to recommend that the holders of units of limited partner
interest in CV Partnership enter into the Unit Contribution Agreement and
approve the transactions subject to the First CV Partnership Approval. All
actions taken by CV pursuant to this Section 8.21 shall be in accordance with
federal and state securities laws and in a manner as would not prevent the
offering and issuance of units of limited partner interest in KRT Partnership
to holders of units of limited partner interest in CV Partnership from being
in compliance with Regulation D under the Securities Act of 1933, as amended.
8.22. Termination of CV Related Party Transactions; Termination of FFO
Agreements. (a) CV shall, prior to the Effective Time and without cost to
CV, cause the CV Management Agreements, the CV Employment Agreements and
related party arrangements set forth in Schedule 8.22 of the CV Disclosure
Letter to be terminated no later than the Effective Time. CV shall prior to
the Effective Time enter into a consulting agreement with Hilcoast Advisory
Services, Inc. ("Hilcoast") reasonably acceptable to Kranzco and CV expiring
no later than six months after the Effective Time, providing for maximum
payments to Hilcoast of $5,000 per month.
(b) CV shall take all necessary action in order for CV not to be
obligated to make any payments to employees of CV with respect to Funds from
Operations of CV for any period commencing after the Closing Date.
8.23. Drexel Agreement. CV Partnership and Louis P. Meshon, Sr. will
enter into a shareholders agreement with Drexel Realty, Inc. (the "Drexel
Shareholder Agreement") on terms reasonably satisfactory to Kranzco and CV.
8.24. Life Insurance. CV shall promptly obtain a $10,000,000 life
insurance policy on Louis P. Meshon, Sr. (the "Louis P. Meshon, Sr. Insurance
Policy") which it will keep in effect until after the Effective Time,
pursuant to which Kranzco and CV will each be a beneficiary and which will
provide that in the event of the death of Louis P. Meshon, Sr. prior to the
Effective Time or termination of this Agreement, Kranzco and CV shall each
receive proceeds of $5,000,000. Any payment under this Section 8.24 shall be
in lieu of any other payment under Section 10.5.
8.25. Consents. Kranzco and CV shall each use their reasonable best
efforts to obtain the consents set forth in Schedule 9.1 of the CV Disclosure
Letter and Section 9.1 of the Kranzco Disclosure Letter (collectively, the
"Necessary Consents") prior to the time the Joint Proxy Statement/Prospectus
described in Section 8.3 is mailed to holders of Kranzco Common Shares and CV
Common Stock. Kranzco, KRT Trust and CV agree that the Joint Proxy
Statement/Prospectus will not be mailed to holders of Kranzco Common Shares
and CV Common Stock until either (i) the Necessary Consents have been
obtained or (ii) Kranzco, KRT Trust and CV agree otherwise.
8.26. Performance by Kramont. Kranzco and CV shall each cause Kramont
to effectuate the transactions contemplated by this Agreement.
ARTICLE 9
9. Conditions.
9.1. Conditions to Each Party's Obligation to Effect the
Reorganization. The respective obligation of each party to effect the
Reorganization shall be subject to the fulfillment at or prior to the Closing
Date of the following conditions:
(a) The CV Shareholder Approval and the Kranzco Shareholder
Approval shall have been obtained in the manner required by applicable
law or regulations of any stock exchange or regulatory body and the
Kranzco Declaration of Trust or the CV Certificate of Incorporation, as
the case may be.
(b) Neither of the parties hereto shall be subject to any order
or injunction of a court of competent jurisdiction which prohibits the
consummation of the Reorganization or the other transactions
contemplated by this Agreement. In the event any such order or
injunction shall have been issued, each party agrees to use its
reasonable best efforts to have any such injunction lifted.
(c) The Form S-4 shall have become effective and all necessary
state securities law or "Blue Sky" permits or approvals required to
carry out the transactions contemplated by this Agreement shall have
been obtained and no stop order with respect to any of the foregoing
shall be in effect and no proceedings for that purpose shall have been
initiated or, to the knowledge of Kranzco and CV, threatened by the SEC.
(d) Kramont shall have obtained the approval for the listing on
the NYSE, subject to official notice of issuance, of the Kramont Common
Shares issuable in connection with the Reorganization , the Kramont
Series B-1 Preferred Shares and the Kramont Series D Preferred Shares
issuable in connection with the KRT Trust Merger and the Kramont Common
Shares issuable upon the exercise of the Kramont Options.
(e) All consents, authorizations, orders and approvals of (and
filings and registrations with and notifications to) any Governmental
Entity or third parties required in connection with the execution,
delivery and performance of this Agreement shall have been obtained or
made, except for filings in connection with the Reorganization and any
other documents required to be filed after the Effective Time and except
where the failure to have obtained or made any such consent,
authorization, order, approval, filing, registration or notification
would not have a material adverse effect on the business, results of
operations or financial condition of Kranzco (and the Kranzco
Subsidiaries) and CV (and the CV Subsidiaries), taken as a whole,
following the Effective Time. No event or state of facts shall have
occurred or exist which would cause the consummation of the transactions
contemplated in this Agreement, in the reasonable opinion of CV or
Kranzco, to cause a risk to the qualification of Kramont as a real
estate investment trust under the Code.
(f) Kranzco and CV shall have received the opinion of Ballard
Spahr Andrews & Ingersoll LLP to the effect that this Agreement and the
Articles of Merger are enforceable under Maryland law, that all
requisite approval of the Reorganization and this Agreement by the
shareholders of Kranzco has been obtained, and as to such other matters
as are customary in a transaction such as the Reorganization (including,
without limitation, that each transaction included in the Reorganization
will be and each transaction included in the Kranzco Reorganization
Transactions has been effected in compliance with Maryland law to the
extent that such transaction is governed by Maryland law).
(g) Kranzco and CV shall have received the opinion of Richards,
Layton & Finger, P.A. to the effect that this Agreement is enforceable
under Delaware law, that all requisite approval of the Reorganization
and this Agreement by the shareholders of CV has been obtained and as to
such other matters as are customary in a transaction such as the
Reorganization (including, without limitation, as to the effectiveness
under Delaware law of the CV Merger, the KRT Trust Merger and the KRT
Partnership Merger).
(h) The consents set forth in Section 9.1 to the Kranzco
Disclosure Letter and Schedule 9.1 to the CV Disclosure Letter shall
have been obtained or CV and Kranzco shall have otherwise agreed as set
forth in Section 8.25.
9.2. Conditions to Obligations of Kranzco to Effect the
Reorganization. The obligation of the Kranzco Entities to effect the
Reorganization shall be subject to the fulfillment at or prior to the Closing
Date of the following conditions, unless waived by Kranzco:
(a) CV shall have performed in all material respects its
covenants and agreements contained in this Agreement required to be
performed on or prior to the Effective Time and the representations and
warranties of CV contained in this Agreement that are qualified as to a
CV Material Adverse Effect shall be true and correct and any of such
representations and warranties that are not so qualified shall be true
and correct except where the failure to be so true and correct
individually or in the aggregate would not have a CV Material Adverse
Effect, in each case as of the Effective Time as if made on the
Effective Time (except to the extent that the representation or warranty
is expressly limited by its terms to another date), and Kranzco shall
have received a certificate of the President or a Vice President of CV,
dated the Closing Date, certifying to such effect;
(b) The Kranzco Entities shall have received the opinion of
Robinson Silverman Pearce Aronsohn & Berman LLP, dated the Closing Date,
to the effect that the KRT Trust Merger will be treated for Federal
income tax purposes as a reorganization within the meaning of Section
368(a) of the Code, and that KRT Trust and Kramont will each be a party
to that reorganization within the meaning of Section 368(b) of the Code.
In rendering its opinion such firm may rely on representations of
Kranzco, CV, Kramont and others.
(c) The Kranzco Entities shall have received the opinion of
Roberts & Holland LLP dated the Closing Date, to the effect that,
commencing with its taxable year ended December 31, 1991, (i) CV was
organized in conformity with the requirements for qualification and
taxation as a REIT under Section 856 of the Code, and at all times since
that taxable year, its method of operation has enabled it and will
enable it to continue to meet the requirements for qualification and
taxation as a REIT under the Code and (ii) CV Partnership has been
during and since its formation, and continues to be, treated for Federal
income tax purposes as a partnership and not as a corporation or
association taxable as a corporation (with customary exceptions,
assumptions and qualifications and based upon customary
representations). In rendering its opinion, Roberts & Holland LLP may
rely on representations of CV and others.
(d) The Kranzco Entities shall have received a "comfort" letter
from BDO Seidman, LLP, dated the Closing Date, with respect to the
financial statements of CV included in the Joint Proxy
Statement/Prospectus, substantially in the form described in Section
8.8.
(e) From the date of this Agreement through the Effective Time,
there shall not have occurred any change in the financial condition,
business or operations of CV and the CV Subsidiaries, taken as a whole,
that would have or would be reasonably likely to have a CV Material
Adverse Effect.
(f) Louis P. Meshon, Sr. shall have executed and delivered the
Louis P. Meshon, Sr. Employment Agreement in substantially the form
attached hereto as Exhibit M.
(g) Holders of at least 75% of the units of limited partner
interest in CV Partnership (excluding units of limited partner interest
held by CV Trust) shall have executed the Unit Contribution Agreement,
given notice of redemption of their CV OP Units or accepted the CV
Partnership Exchange Offer.
(h) Louis P. Meshon, Sr., H. Irwin Levy and any entities
controlled by either of them shall have executed and delivered the Unit
Contribution Agreement and the documents contemplated thereby.
(i) Louis P. Meshon, Sr. and CV Partnership shall have executed
and delivered the Drexel Shareholder Agreement.
(j) CV Trust shall have merged with and into CV.
(k) The FFO Agreements, the CV Management Agreements and the CV
Employment Agreements shall have been terminated.
(l) CV shall have taken all action necessary to ensure that any
CV Options granted or awarded pursuant to the CV Stock Option Plans
shall not result in the triggering of any payment or other material
obligations pursuant to, or accelerate vesting under any CV Options in
connection with the Reorganization and other transactions contemplated
by this Agreement.
9.3. Conditions to Obligation of CV to Effect the Reorganization. The
obligations of the CV Entities to effect the Reorganization shall be subject
to the fulfillment at or prior to the Closing Date of the following
conditions, unless waived by CV:
(a) Kranzco shall have performed in all material respects its
covenants and its agreements contained in this Agreement required to be
performed on or prior to the Effective Time and the representations and
warranties of Kranzco and KRT Trust contained in this Agreement that are
qualified as to a Kranzco Material Adverse Effect shall be true and
correct and any such representations and warranties that are not so
qualified shall be true and correct except where the failure to be so
true and correct individually or in the aggregate would not have a
Kranzco Material Adverse Effect, in each case as of the Effective Time
as if made on the Effective Time (except to the extent that the
representation or warranty is expressly limited by the terms of another
date), and CV shall have received a certificate of the President or a
Vice President of Kranzco and KRT Trust, dated the Closing Date,
certifying to such effect.
(b) The CV Entities shall have received the opinion of Roberts &
Holland LLP or another nationally recognized law firm selected by CV,
dated the Closing Date, to the effect that the CV Merger will be treated
for Federal income tax purposes as a reorganization within the meaning
of Section 368(a) of the Code, and that CV, and Kramont will each be a
party to that reorganization within the meaning of Section 368(b) of the
Code. In rendering its opinion such firm may rely on representations of
CV, Kranzco and others.
(c) The CV Entities shall have received the opinion of Robinson
Silverman Pearce Aronsohn & Berman LLP dated the Closing Date, to the
effect that, commencing with its taxable year ended December 31, 1992,
Kranzco was organized in conformity with the requirements for
qualification and taxation as a REIT under Section 856 of the Code, and
at all times since that initial taxable year, its method of operation
has enabled it and will enable it to continue to meet the requirements
for qualification and taxation as a REIT under the Code. In rendering
its opinion, Robinson Silverman Pearce Aronsohn & Berman LLP may rely on
representations of Kranzco and others.
(d) The CV Entities shall have received a "comfort" letter from
Arthur Andersen LLP, dated the Closing Date, with respect to the
financial statements of Kranzco included in the Proxy
Statement/Prospectus, substantially in the form described in Section
8.8.
(e) From the date of this Agreement through the Effective Time,
there shall not have occurred any change in the financial condition,
business or operations of Kranzco and the Kranzco Subsidiaries, taken as
a whole, that would have or would be reasonably likely to have a Kranzco
Material Adverse Effect.
(f) The Board of Trustees of Kramont shall be comprised of those
individuals listed on Exhibit C attached hereto.
(g) Kramont shall have executed and delivered the Louis P.
Meshon, Sr. Employment Agreement in substantially the form attached
hereto as Exhibit M.
(h) Norman M. Kranzdorf shall have executed and delivered the
Norman M. Kranzdorf Employment Agreement in substantially the form
attached hereto as Exhibit L.
(i) [Intentionally Omitted]
(j) The Kranzco Reorganization shall have been consummated.
(k) Kranzco shall have caused the Lease Amendment in the form
attached hereto as Exhibit P to be executed by the parties hereto.
(l) Kranzco shall have taken all action necessary to ensure that
any Kramont Options granted or awarded pursuant to the Kranzco Stock
Option Plans shall not result in the triggering of any payment or other
material obligations pursuant to, or accelerate vesting under any
Kramont Options in connection with the Reorganization and other
transactions contemplated by this Agreement.
ARTICLE 10
10. Termination.
10.1. Termination by Mutual Consent. This Agreement may be terminated
and the Reorganization may be abandoned at any time prior to the Effective
Time, before or after the approval of this Agreement by the shareholders of
Kranzco or CV, by the mutual written consent of Kranzco and CV.
10.2. Termination by Either Kranzco or CV. This Agreement may be
terminated and the Reorganization may be abandoned by action of the Board of
Trustees of Kranzco or the Board of Directors of CV if:
(a) the Reorganization shall not have been consummated by July
31, 2000; provided, however, that the right to terminate under this
clause (a) shall not be available to the party who shall have breached
in any material respect its obligations under this Agreement in a manner
that shall have proximately caused the Reorganization not to be
consummated by such date; or
(b) a meeting of Kranzco's shareholders shall have been duly
convened and held and the approval of Kranzco's shareholders required by
Section 9.1(a) shall not have been obtained at such meeting or at any
adjournment thereof; or
(c) a meeting of CV's shareholders shall have been duly convened
and held and the approval of CV's shareholders required by Section
9.1(a) shall not have been obtained at such meeting or at any
adjournment thereof;
(d) a United States federal or state court of competent
jurisdiction or other Governmental Entity shall have issued an order,
decree or ruling or taken any other action permanently restraining,
enjoining or otherwise prohibiting the transactions contemplated by this
Agreement and such order, decree, ruling or other action shall have
become final and non-appealable, provided, that the party seeking to
terminate this Agreement pursuant to this clause (d) shall have used all
reasonable efforts to remove such order, decree, ruling or injunction;
and provided, in the case of a termination pursuant to clause (a) above,
that the terminating party shall not have breached in any material
respect its obligations under this Agreement in any manner that shall
have proximately contributed to the occurrence of the failure referred
to in said clause;
(e) Louis P. Meshon, Sr. shall have died prior to the Effective
Time; or
(f) by reason of any change in applicable laws, rules or
regulations of any federal, state or local governmental entity, agency
or authority, the Kranzco Reorganization Transactions cannot be
consummated.
10.3. Termination by Kranzco. This Agreement may be terminated and the
Reorganization may be abandoned at any time prior to the Effective Time,
before or after the adoption and approval by the shareholders of Kranzco
referred to in Section 9.1(a), by action of the Board of Trustees of Kranzco,
if:
(a) the Board of Directors of CV withdraws, modifies or changes
in a manner adverse to Kranzco its recommendation to CV's shareholders
of this Agreement or the Reorganization , other than as a result of the
occurrence of an event that, in the good faith judgment of the Board of
Directors of CV has or is reasonably likely to have a Kranzco Material
Adverse Effect, or if the Board of Directors of CV approves or
recommends a Superior CV Acquisition Proposal; or
(b) in the exercise of its good faith judgment as to its duties
to its shareholders imposed by law the Board of Trustees of Kranzco
determines that such termination is required by reason of a Superior
Kranzco Acquisition Proposal being made, provided, however, that in
order for the termination of this Agreement pursuant to this Section
10.3(b) to be effective, Kranzco shall have complied with all provisions
of Section 10.5, including the payment of all amounts due under Section
10.5; or
(c) CV shall have breached its obligations under Section 8.1(a)
or CV or H. Irwin Levy, Louis P. Meshon, Sr., or Alan Shulman shall have
breached its or his obligations under the Kranzco Voting Agreements; or
(d) there has been a breach by CV of any representation or
warranty contained in this Agreement which would have or would be
reasonably likely to have a CV Material Adverse Effect, which breach is
not curable by July 31, 2000; or
(e) there has been a material breach of any of the covenants or
agreements set forth in this Agreement on the part of CV (including,
without limitation, performance by CV of its obligations pursuant to
Section 8.26), which breach is not curable or, if curable, is not cured
within 30 days after written notice of such breach is given by Kranzco
to CV.
10.4. Termination by CV. This Agreement may be terminated and the
Reorganization may be abandoned at any time prior to the Effective Time by
action of the Board of Directors of CV, if:
(a) the Board of Trustees of Kranzco withdraws, modifies or
changes in a manner adverse to CV its recommendation to Kranzco's
shareholders of this Agreement or the Reorganization , other than as a
result of the occurrence of an event that, in the good faith judgment of
the Board of Trustees of Kranzco has or is reasonably likely to have a
CV Material Adverse Effect, or if the Board of Trustees of Kranzco
approves or recommends a Superior Kranzco Acquisition Proposal; or
(b) in the exercise of its good faith judgment as to its
fiduciary duties to its shareholders imposed by law the Board of
Directors of CV determines that such termination is required by reason
of a Superior CV Acquisition Proposal being made; provided, however,
that in order for the termination of this Agreement pursuant to this
Section 10.4(b) to be effective, CV shall have complied with all
provisions of Section 10.5, including the payment of all amounts due
under Section 10.5; or
(c) Kranzco shall have breached its obligations under Section
8.1(c) or Kranzco or Norman M. Kranzdorf or Robert H. Dennis shall have
breached its, or his obligations under the CV Voting Agreements; or
(d) there has been a breach by Kranzco or any Kranzco Subsidiary
of any representation or warranty contained in this Agreement which
would have or would be reasonably likely to have a Kranzco Material
Adverse Effect, which breach is not curable by July 31, 2000; or
(e) there has been a material breach of any of the covenants or
agreements set forth in this Agreement on the part of Kranzco
(including, without limitation, performance by Kranzco of its
obligations pursuant to Section 8.26), taking action in such capacity
which would prevent Kramont from performing its covenants and agreements
hereunder), which breach is not curable or, if curable, is not cured
within 30 days after written notice of such breach is given by CV to
Kranzco.
10.5. Certain Fees and Expenses Upon Termination and Abandonment. (a)
If this Agreement shall be terminated (i) pursuant to Section 10.3(a),
10.4(b) or 10.3(c) CV will pay Kranzco (provided CV was not entitled to
terminate this Agreement pursuant to Section 10.4(d) or 10.4(e) at the time
of such termination) a fee equal to the CV Break-Up Fee (as defined below),
(ii) pursuant to Section 10.3(d) or 10.3(e), then CV will pay Kranzco
(provided CV was not entitled to terminate this Agreement pursuant to Section
10.4(d) or 10.4(e) at the time of such termination) an amount equal to the
Break-Up Expenses (as defined below). If this Agreement shall be terminated
(i) pursuant to Section 10.3(b), 10.4(a) or 10.4(c), Kranzco will pay CV
(provided Kranzco was not entitled to terminate this Agreement pursuant to
Section 10.3(d) or 10.3(e) at the time of such termination) a fee equal to
the Kranzco Break-Up Fee (as defined below), (ii) pursuant to Section 10.4(d)
or 10.4(e), then Kranzco will pay CV (provided Kranzco was not entitled to
terminate this Agreement pursuant to Section 10.3(d) or 10.3(e) at the time
of such termination) an amount equal to the Break-Up Expenses (as defined
below). If the Reorganization is not consummated (other than due to the
termination of this Agreement pursuant to Section 10.1, 10.2 or Kranzco's
failure to perform its obligations under this Agreement in such a manner so
as to entitle CV to terminate this Agreement pursuant to Section 10.4(d) or
10.4(e)) and at the time of the termination of this Agreement a CV
Acquisition Proposal has been received by CV, and either prior to the
termination of this Agreement or within twelve (12) months thereafter CV
enters into any written CV Acquisition Proposal which is subsequently
consummated (whether or not such CV Acquisition Proposal is the same CV
Acquisition Proposal which had been received at the time of the termination
of this Agreement), then CV shall pay the CV Break-Up Fee to Kranzco. If the
Reorganization is not consummated (other than due to the termination of this
Agreement pursuant to Section 10.1, 10.2 or CV's failure to perform its
obligations under this Agreement in such a manner so as to entitle Kranzco to
terminate this Agreement pursuant to Section 10.3(d) or 10.3(e)) and at the
time of the termination of this Agreement a Kranzco Acquisition Proposal has
been received by Kranzco, and either prior to the termination of this
Agreement or within twelve (12) months thereafter Kranzco enters into any
written Kranzco Acquisition Proposal which is subsequently consummated
(whether or not such Kranzco Acquisition Proposal is the same Kranzco
Acquisition Proposal which had been received at the time of the termination
of this Agreement), then Kranzco shall pay the Kranzco Break-Up Fee to CV.
The payment of the CV Break-Up Fee or the Kranzco Break-Up Fee, as the case
may be, shall be compensation and liquidated damages for the loss suffered by
Kranzco or CV (as applicable) as a result of the failure of the
Reorganization to be consummated and to avoid the difficulty of determining
damages under the circumstances and neither party shall have any other
liability to the other after the payment of the CV Break-Up Fee or the
Kranzco Break-Up Fee, as the case may be. The CV Break-Up Fee shall be paid
by CV to Kranzco, the Kranzco Break-Up Fee shall be paid by Kranzco to CV, or
the Break-Up Expenses shall be paid by CV to Kranzco or Kranzco to CV (as
applicable), in immediately available funds within fifteen (15) days after
the date the event giving rise to the obligation to make such payment
occurred. If this Agreement shall be terminated by either party pursuant to
Section 10.2(e), Kranzco and CV shall each be entitled to receive $5,000,000
under the Insurance Policy, and neither Kranzco nor CV shall be entitled to
receive the CV Break-Up Fee or the Kranzco Break-Up Fee, as the case may be,
or the Break-Up Expenses.
(b) As used in this Agreement, "CV Break-Up Fee" shall be an
amount equal to the lesser of (i) $5,000,000 plus Break-Up Expenses (the "CV
Base Amount") and (ii) the maximum amount that can be paid to Kranzco,
without causing it to fail to meet the requirements of Sections 856(c)(2) and
(3) of the Code (the "REIT Income Requirements") determined as if the payment
of such amount did not constitute income described in Sections 856(c)(2) and
856(c)(3) of the Code ("Qualifying Income"), as determined by independent
accountants to Kranzco. Notwithstanding the foregoing, in the event Kranzco
receives a letter from outside counsel (the "Kranzco Break-Up Fee Tax
Opinion") or ruling from the IRS (the "Kranzco IRS Fee Ruling") to the effect
that Kranzco's receipt of the CV Base Amount would either constitute
Qualifying Income or would otherwise not cause Kranzco to fail to meet REIT
Income Requirements, the CV Break-Up Fee shall be an amount equal to the CV
Base Amount and shall be payable in full within three business days after
receipt of such opinion or Kranzco IRS Fee Ruling. The obligation of CV to
pay the CV Break-Up Fee or to pay any unpaid portion of the CV Break-Up Fee
not payable by reason of clause (ii) above shall terminate three years from
the date of this Agreement. In the event that Kranzco is not able to receive
the full CV Base Amount by reason of clause (ii), CV shall place the unpaid
portion of the CV Base Amount in escrow by wire transfer within three days of
termination, and the escrow agent shall not release any portion thereof to
Kranzco, and such portion shall not be payable, except in accordance with,
and unless and until CV receives, either one or a combination of the
following: (x) a letter from Kranzco's independent accountants indicating
the maximum amount that can be paid at that time to Kranzco without causing
Kranzco to fail to meet the REIT Income Requirements or (y) a Kranzco Break-
Up Fee Tax Opinion or Kranzco IRS Fee Ruling, in either of which events the
escrow agent or CV shall pay to Kranzco the lesser of the unpaid portion of
the CV Base Amount or in the case of clause (x), the maximum amount stated in
the letter referred to in clause (x) above. Each of Kranzco and CV agrees to
amend this Section 10.5 at the request of Kranzco in order to (x) maximize
the portion of the CV Base Amount that may be paid to Kranzco hereunder
without causing Kranzco to fail to meet the REIT Income Requirements or (y)
improve Kranzco's chances of securing a Kranzco Break-Up Fee Tax Opinion or
Kranzco IRS Fee Ruling, provided that no such amendment may result in any
additional cost or expense to the other party other than reasonable
attorneys' fees. Amounts remaining in escrow after the obligation of CV to
pay the CV Break-Up Fee is satisfied or otherwise terminates shall be
released to CV.
(c) As used in this Agreement, "Kranzco Break-Up Fee" shall be
an amount equal to the lesser of (i) $6,000,000 plus Break-Up Expenses (the
"Kranzco Base Amount") and (ii) the maximum amount that can be paid to CV,
without causing it to fail to meet the REIT Income Requirements determined as
if the payment of such amount did not constitute Qualifying Income, as
determined by independent accountants to CV. Notwithstanding the foregoing,
in the event CV receives a letter from outside counsel (the "CV Break-Up Fee
Tax Opinion") or ruling from the IRS (the "CV IRS Fee Ruling") to the effect
that CV's receipt of the Kranzco Base Amount would either constitute
Qualifying Income or would otherwise not cause CV to fail to meet REIT Income
Requirements, the Kranzco Break-Up Fee shall be an amount equal to the
Kranzco Base Amount and shall be payable in full within three business days
after receipt of such opinion or CV IRS Fee Ruling. The obligation of
Kranzco to pay the Kranzco Break-Up Fee or to pay any unpaid portion of the
Kranzco Break-Up Fee not payable by reason of clause (ii) above shall
terminate three years from the date of this Agreement. In the event that CV
is not able to receive the full Kranzco Base Amount by reason of clause (ii),
Kranzco shall place the unpaid portion of the Kranzco Base Amount in escrow
by wire transfer within three days of termination, and the escrow agent shall
not release any portion thereof to CV, and such portion shall not be payable,
except in accordance with, and unless and until Kranzco receives, either one
or a combination of the following: (x) a letter from CV's independent
accountants indicating the maximum amount that can be paid at that time to CV
without causing CV to fail to meet the REIT Income Requirements or (y) a CV
Break-Up Fee Tax Opinion or CV IRS Fee Ruling, in either of which events the
escrow agent or Kranzco shall pay to CV the lesser of the unpaid portion of
the Kranzco Base Amount or in the case of clause (x), the maximum amount
stated in the letter referred to in clause (x) above. Kranzco agrees to
amend this Section 10.5 at the request of CV in order to (x) maximize the
portion of the Kranzco Base Amount that may be paid to CV hereunder without
causing CV to fail to meet the REIT Income Requirements or (y) improve CV's
chances of securing a CV Break-Up Fee Tax Opinion or CV IRS Fee Ruling,
provided that no such amendment may result in any additional cost or expense
to the other party other than reasonable attorneys' fees. Amounts remaining
in escrow after the obligation of Kranzco to pay the Kranzco Break-Up Fee is
satisfied or otherwise terminates shall be released to Kranzco.
(d) The "Break-Up Expenses" payable to Kranzco or CV, as the
case may be (the "Expenses Recipient"), shall be an amount equal to the
lesser of (i) $1,500,000 and (ii) the maximum amount that can be paid to the
Expenses Recipient without causing it to fail to meet the REIT Income
Requirements determined as if the payment of such amount did not constitute
Qualifying Income, as determined by independent accountants to the Expenses
Recipient. Notwithstanding the foregoing, in the event the Expenses
Recipient receives a letter from outside counsel (the "Break-Up Expenses Tax
Opinion") or a ruling from the IRS (the "IRS Expense Ruling") to the effect
that the Expenses Recipient's receipt of the Break-Up Expenses would either
constitute Qualifying Income or would otherwise not cause the Expenses
Recipient to fail to meet the REIT Income Requirements, the Break-Up Expenses
shall be determined without regard to clause (ii) above and shall be payable
in full within three business days after receipt of such opinion or IRS
ruling. The obligation of Kranzco or CV, as applicable ("Payor"), to pay any
unpaid portion of the Break-Up Expenses not applicable by reason of clause
(ii) above shall terminate three years from the date of this Agreement. In
the event that the Expenses Recipient is not able to receive the full Break-
Up Expenses by reason of clause (ii) above, the Payor shall place the unpaid
amount of the Break-Up Expenses in escrow, and the escrow agent shall not
release any portion thereof to the Expenses Recipient, and such portion shall
not be payable, except in accordance with, and unless and until the Payor
receives any one or a combination of the following: (x) a letter from the
Expenses Recipient's independent accountants indicating the maximum amount
that can be paid at that time to the Expenses Recipient without causing the
Expenses Receipt to fail to meet the REIT Income Requirements or (y) a Break-
Up Expenses Tax Opinion or IRS Expense Ruling, in either of which events the
escrow agent or the Payor shall pay to the Expenses Recipient the lesser of
the unpaid Break-Up Expenses or, in the case of clause (x), the maximum
amount stated in the letter referred to in clause (x) above. Amounts
remaining in escrow after the obligation of a party to pay the Break-Up
Expenses is satisfied or otherwise terminates shall be released to the party
making such escrow deposit.
(e) In the event of termination of this Agreement and the
abandonment of the Reorganization pursuant to this Article 10, all
obligations of the parties hereto shall terminate, except the obligations of
the parties pursuant to this Section 10.5 and Section 8.12 and except for the
provisions of Sections 11.3, 11.4, 11.5, 11.6, 11.7, 11.9, 11.10, 11.13,
11.14 and 11.15. In the event Kranzco or an escrow agent on behalf of
Kranzco has received the CV Break-Up Fee or Break-Up Expenses, Kranzco shall
not (i) assert or pursue in any manner, directly or indirectly, any claim or
cause of action based in whole or in part upon alleged tortious or other
interference with rights under this Agreement against any entity or person
submitting a CV Acquisition Proposal or (ii) assert or pursue in any manner,
directly or indirectly, any claim or cause of action against CV or any of its
officers, directors or trustees based in whole or part upon its or their
receipt, consideration, recommendation or approval of a CV Acquisition
Proposal or CV's exercise of its right of termination under Section 10.4(a).
In the event CV or an escrow agent on behalf of CV has received the Kranzco
Break-Up Fee or Break-Up Expenses, CV shall not (i) assert or pursue in any
manner, directly or indirectly, any claim or cause of action based in whole
or in part upon alleged tortious or other interference with rights under this
Agreement against any entity or person submitting a Kranzco Acquisition
Proposal or (ii) assert or pursue in any manner, directly or indirectly, any
claim or cause of action against Kranzco or any of its officers, directors or
trustees based in whole or part upon its or their receipt, consideration,
recommendation or approval of a Kranzco Acquisition Proposal or Kranzco's
exercise of its right of termination under Section 10.3(a). Notwithstanding
the foregoing, in the event Kranzco or CV, as the case may be, is required to
file suit to seek all or a portion of the CV Break-Up Fee or the Kranzco
Break-Up Fee and/or Break-Up Expenses, and it ultimately succeeds, it shall
be entitled to all expenses, including attorneys' fees and expenses, which it
has incurred in enforcing its rights hereunder.
10.6. Extension; Waiver. At any time prior to the Effective Time, any
party hereto, by action taken by its Board of Trustees or Board of Directors,
as the case may be, may, to the extent legally allowed, (a) extend the time
for the performance of any of the obligations or other acts of the other
parties hereto, (b) waive any inaccuracies in the representations and
warranties made to such party contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions for the benefit of such party contained herein. Any agreement on
the part of a party hereto to any such extension or waiver shall be valid
only if set forth in an instrument in writing signed on behalf of such party.
ARTICLE 11
11. General Provisions.
11.1. Nonsurvival of Representations, Warranties and Agreements. All
representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall not survive the
Reorganization , provided, however, that the agreements contained in Article
4, the last sentence of Section 8.4 and Sections 8.11, 8.13, 8.14, 8.15 and
8.16, and this Article 11 shall survive the Reorganization.
11.2. Notices. Any notice required to be given hereunder shall be in
writing and shall be sent by facsimile transmission (confirmed by any of the
methods that follow), courier service (with proof of service), hand delivery
or certified or registered mail (return receipt requested and first-class
postage prepaid) and addressed as follows:
If to Kramont, to the address set forth below for the Kranzco
entities and the CV entities.
If to any of the Kranzco Entities:
Norman M. Kranzdorf
Kranzco Realty Trust
128 Fayette Street
Conshohocken, PA 19428
Facsimile: (610) 941-9193
With a copy to:
Alan S. Pearce, Esq.
Robinson Silverman Pearce
Aronsohn & Berman LLP
1290 Avenue of the Americas
New York, NY 10104
Facsimile: (212) 541-4630
If to any of the CV Entities:
Louis P. Meshon, Sr.
CV Reit, Inc.
100 Century Road
West Palm Beach, FL 33417
Facsimile: (561) 640-3160
With copies to:
Louis P. Meshon, Sr.
Montgomery CV Realty L.P.
Plymouth Plaza
580 Germantown Pike
Plymouth Meeting, PA 19462
Facsimile: (610) 834-8110
and
Klaus Eppler, Esq.
Proskauer Rose LLP
1585 Broadway
New York, NY 10036-8299
Facsimile: (212) 969-2900
or to such other address as any party shall specify by written notice so
given, and such notice shall be deemed to have been delivered as of the date
so delivered.
11.3. Assignment; Binding Effect; Benefit. Neither this Agreement nor
any of the rights, interests or obligations hereunder shall be assigned by
any of the parties hereto (whether by operation of law or otherwise) without
the prior written consent of the other parties. Subject to the preceding
sentence, this Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective successors and assigns. Nothing
in this Agreement, expressed or implied, is intended to confer on any person
other than the parties hereto or their respective heirs, successors,
executors, administrators and assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
11.4. Entire Agreement. This Agreement, the Exhibits, the Kranzco
Disclosure Letter and the CV Disclosure Letter and any documents delivered by
the parties in connection herewith constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings among the parties with respect thereto. No
addition to or modification of any provision of this Agreement shall be
binding upon any party hereto unless made in writing and signed by all
parties hereto.
11.5. Confidentiality. Except to the extent that any of the provisions
of that certain confidentiality agreement dated July 7, 1998, between Kranzco
and CV, as amended by a letter agreement dated April 7, 1999, between Kranzco
and CV (the "Confidentiality Agreement") are inconsistent with this
Agreement, in which case the terms of this Agreement shall govern and
supersede such provisions, the parties hereto acknowledge and agree that the
Confidentiality Agreement remains in full force and effect and shall survive
any termination of this Agreement.
11.6. Definition of Knowledge. (a) As used in this Agreement, the
phrase "to the knowledge of Kranzco" (or words of similar import) means the
knowledge of Norman M. Kranzdorf, Robert H. Dennis and Edmund Barrett.
(b) As used in this Agreement, the phrase "to the knowledge of
CV" (or words of similar import) means the knowledge of Louis P. Meshon, Sr.,
Etta Strehle and Jack Jaiven.
11.7. Amendment. This Agreement may be amended by the parties hereto,
by action taken by their respective Board of Directors or Board of Trustees,
as the case may be, at any time before or after approval of matters presented
in connection with the Reorganization by the shareholders of Kranzco and CV,
but after any such shareholder approval, no amendment shall be made which by
law requires the further approval of shareholders without obtaining such
further approval. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto.
11.8. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Maryland without regard to its
rules of conflict of laws except that the validity of the Reorganization
shall be governed by the Maryland REIT Law and the DGCL, to the extent
applicable. To the fullest extent permitted by law, each of the Kranzco
Entities and the CV Entities hereby irrevocably and unconditionally consents
to submit to the exclusive jurisdiction of the courts of the State of New
York and of the United States of America located in the State of New York
(the "New York Courts") for any litigation arising out of or relating to this
Agreement and the transactions contemplated hereby (and agrees not to
commence any litigation relating thereto except in such courts), waives any
objection to the laying of venue of any such litigation in the New York
Courts and agrees not to plead or claim in any New York Court that such
litigation brought therein has been brought in an inconvenient forum.
11.9. Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute one
and the same instrument. Each counterpart may consist of a number of copies
hereof each signed by less than all, but together signed by all of the
parties hereto.
11.10. Headings. Headings of the Articles and Sections of this
Agreement are for the convenience of the parties only, and shall be given no
substantive or interpretive effect whatsoever.
11.11. Interpretation. In this Agreement, unless the context otherwise
requires, words describing the singular number shall include the plural and
vice versa, and words denoting any gender shall include all genders and words
denoting natural persons shall include corporations and partnerships and vice
versa.
11.12. Waivers. Except as provided in this Agreement, no action taken
pursuant to this Agreement, including, without limitation, any investigation
by or on behalf of any party, shall be deemed to constitute a waiver by the
party taking such action of compliance with any representations, warranties,
covenants or agreements contained in this Agreement. The waiver by any party
hereto of a breach of any provision hereunder shall not operate or be
construed as a waiver of any prior or subsequent breach of the same or any
other provision hereunder.
11.13. Incorporation. The Kranzco Disclosure Letter and the CV
Disclosure Letter and all Exhibits attached hereto and thereto and referred
to herein and therein are hereby incorporated herein and made a part hereof
for all purposes as if fully set forth herein.
11.14. Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
11.15. Enforcement of Agreement. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of
this Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions hereof in any
New York Court, this being in addition to any other remedy to which they are
entitled at law or in equity.
11.16. Non-Recourse. This Agreement and all documents, agreements,
understandings and arrangements relating to this transaction have been
negotiated, executed and delivered on behalf of Kranzco by the undersigned in
his capacity as a trustee or officer of Kranzco, under its Declaration of
Trust, bind only the trust estate of Kranzco, and no individual, and no
trustee, officer employee, agent or shareholder of Kranzco shall be bound or
have any personal liability hereunder. CV shall look solely to the assets of
Kranzco for satisfaction of any liability in connection with the obligations
of Kranzco hereunder, and any person or entity dealing with Kranzco in
connection herewith shall look solely to the trust estate for the payment of
any claim or for the performance of any obligation hereunder. CV will not
seek recourse or commence any action against any of the shareholders of
Kranzco or any of their personal assets, and will not commence any action for
money judgments against any of the trustees or officers of Kranzco or seek
recourse against any of their personal assets, for the performance or payment
of any obligation of Kranzco hereunder or thereunder. The foregoing shall
also apply to any future documents, agreements, understandings, and
arrangements which may relate to this transaction.
IN WITNESS WHEREOF, the parties have executed this Agreement and caused
the same to be duly delivered on their behalf on the day and year first
written above.
KRANZCO REALTY TRUST
ATTEST:
By: /s/ Hermina Kranzdorf By: /s/ Norman M. Kranzdorf
______________________ ________________________________
Hermina Kranzdorf Name: Norman M. Kranzdorf
Secretary Title: President and
Chief Executive Officer
KRT TRUST
ATTEST:
By: /s/ Hermina Kranzdorf By: /s/ Norman M. Kranzdorf
_______________________ ________________________________
Hermina Kranzdorf Name: Norman M. Kranzdorf
Secretary Title: President and
Chief Executive Officer
CV REIT, INC.
ATTEST:
By: /s/ Orilla Floyd By: /s/ Louis P. Meshon, Sr.
______________________ _______________________________
Orilla Floyd Name: Louis P. Meshon, Sr.
Secretary Title: President and
Chief Executive Officer
KRAMONT REALTY TRUST
ATTEST:
By: /s/ Hermina Kranzdorf By: /s/ Louis P. Meshon, Sr.
_______________________ _______________________________
Hermina Kranzdorf Name: Louis P. Meshon, Sr.
Secretary Title: President and Chief Executive
Officer
<PAGE>
Exhibit A
to the Merger Agreement
[See Appendix D to this Joint Proxy Statement/Prospectus]
<PAGE>
Exhibit B
to the Merger Agreement
KRAMONT REALTY TRUST
AMENDED AND RESTATED BYLAWS
ARTICLE I
OFFICES
Section 1. PRINCIPAL OFFICE. The principal office of the Trust shall
be located at such place or places as the Trustees may designate.
Section 2. ADDITIONAL OFFICES. The Trust may have additional offices
at such places as the Trustees may from time to time determine or the
business of the Trust may require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. PLACE. All meetings of shareholders shall be held at the
principal office of the Trust or at such other place as shall be determined
by the Board of Trustees and stated in the notice of the meeting. Unless
specifically invited to attend a meeting by any officer of the Trust, only
shareholders of record or persons holding a valid proxy of a shareholder of
record may attend any meeting of shareholders.
Section 2. ANNUAL MEETING. An annual meeting of the shareholders for
the election of Trustees and the transaction of any business within the
powers of the Trust shall be held each year on a date and at the time set by
the Trustees. Failure to hold an annual meeting does not invalidate the
Trust's existence or affect any otherwise valid acts of the Trust.
Section 3. SPECIAL MEETINGS.
(a) General. The president or the Board of Trustees may call a
special meeting of the shareholders. Subject to subsection (b) of this
Section 3, a special meeting of shareholders shall also be called by the
secretary of the Trust upon the written request of shareholders entitled to
cast not less than a majority of all the votes entitled to be cast at such
meeting.
(b) Shareholder Requested Special Meetings. (1) Any shareholder
of record seeking to have shareholders request a special meeting shall, by
sending written notice to the secretary (the "Record Date Request Notice") by
registered mail, return receipt requested, request the Board of Trustees to
set a record date to determine the shareholders entitled to request a special
meeting (the "Request Record Date"). The Record Date Request Notice shall
set forth the purpose of the requested special meeting and the matters
proposed to be acted on at it, shall be signed by one or more shareholders of
record as of the date of signature (or their duly authorized proxies or other
agents), shall bear the date of signature of each such shareholder (or proxy
or other agent) and shall set forth all information relating to each such
shareholder that must be disclosed in solicitations of proxies for election
of trustees in an election contest (even if an election contest at the
requested special meeting is not involved), or is otherwise required, in each
case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and Rule 14a-11 thereunder. Upon receiving the
Record Date Request Notice, the Board of Trustees may set a Request Record
Date. The Request Record Date shall not precede and shall not be more than
ten days after the close of business on the date on which the resolution
setting the Request Record Date is adopted by the Board of Trustees. If the
Board of Trustees, within ten days after the date on which a valid Record
Date Request Notice is received, fails to adopt a resolution fixing the
Request Record Date and make a public announcement of such Request Record
Date, the Request Record Date shall be the close of business on the tenth day
after the first date on which the Record Date Request Notice is actually
received by the secretary.
(2) In order for any shareholder to request a special
meeting, one or more written requests for a special meeting, signed by
shareholders of record (or their duly authorized proxies or other agents) as
of the Request Record Date entitled to cast not less than a majority (the
"Special Meeting Percentage") of all of the votes entitled to be cast at such
meeting (the "Special Meeting Request") shall be delivered to the secretary.
In addition, the Special Meeting Request shall set forth the purpose of the
meeting and the matters proposed to be acted on at the meeting (which shall
be limited to the matters set forth in the Record Date Request Notice
received by the secretary of the Trust), shall bear the date of signature of
each such shareholder (or proxy or other agent) signing the Special Meeting
Request, shall set forth the name and address, as they appear in the Trust's
books, and a current name and address, if different, of each shareholder
signing such request (or on whose behalf the Special Meeting Request is
signed) and the class and number of shares of beneficial interest of the
Trust which are owned of record and beneficially by each such shareholder,
shall be sent to the secretary by registered mail, return receipt requested,
and shall be received by the secretary within sixty days after the Request
Record Date. Any requesting shareholder may revoke his, her or its request
for a special meeting at any time by written revocation delivered to the
secretary.
(3) The secretary shall inform the requesting shareholders of
the reasonably estimated cost of preparing and mailing the notice of the
special meeting (including the Trust's proxy materials). The secretary shall
not be required to call a special meeting upon shareholder request and such
meeting shall not be held unless, in addition to the documents required by
paragraph (2) of this Section 3(b), the secretary receives payment of such
reasonably estimated cost prior to the mailing of any notice of the meeting.
(4) Except as provided in the next sentence, any special
meeting shall be held at such place, date and time as may be designated by
the president or the Board of Trustees, whichever has called the meeting. In
the case of any special meeting called by the secretary upon the request of
shareholders (a "Shareholder Requested Meeting"), such meeting shall be held
at such place, date and time as may be designated by the Board of Trustees;
provided, however, that the date of any Shareholder Requested Meeting shall
be not more than 90 days after the record date for such meeting (the "Meeting
Record Date"); and provided further that if the Board of Trustees fails to
designate, within ten days after the date that a valid Special Meeting
Request is actually received by the secretary (the "Delivery Date"), a date
and time for a Shareholder Requested Meeting, then such meeting shall be held
at 2:00 p.m. local time on the 90th day after the Meeting Record Date or, if
such 90th day is not a Business Day (as defined below), on the first
preceding Business Day; and provided further that in the event that the Board
of Trustees fails to designate a place for a Shareholder Requested Meeting
within ten days after the Delivery Date, then such meeting shall be held at
the principal executive offices of the Trust. In setting a date for any
special meeting, the president or the Board of Trustees may consider such
factors as he, she or it deems relevant within the good faith exercise of
business judgment, including, without limitation, the nature of the matters
to be considered, the facts and circumstances surrounding any request for a
meeting and any plan of the Board of Trustees to call an annual meeting or a
special meeting. In the case of any Shareholder Requested Meeting, if the
Board of Trustees fails to fix a Meeting Record Date that is a date within 30
days after the Delivery Date, then the close of business on the 30th day
after the Delivery Date shall be the Meeting Record Date.
(5) If at any time as a result of written revocations of
requests for a special meeting, shareholders of record (or their duly
authorized proxies or other agents) as of the Request Record Date for the
meeting entitled to cast less than the applicable Special Meeting Request
Percentage shall have delivered and not revoked requests for the special
meeting, the secretary may refrain from mailing the notice of the meeting or,
if the notice of the meeting has been mailed, the secretary may revoke the
notice of the meeting at any time before ten days prior to the meeting if the
secretary has first sent to all other requesting shareholders written notice
of such revocation and of the intention to revoke the notice of the meeting.
Any request for a special meeting received after a revocation by the
secretary of a notice of a meeting shall be considered a request for a new
special meeting.
(6) The president or the Board of Trustees may appoint
regionally or nationally recognized independent inspectors of elections to
act as the agent of the Trust for the purpose of promptly performing a
ministerial review of the validity of any purported Special Meeting Request
received by the secretary. For the purpose of permitting the inspectors to
perform such review, no such purported request shall be deemed to have been
received by the secretary until the earlier of (i) five Business Days after
actual receipt by the secretary of such purported request and (ii) such date
as the inspectors certify to the Trust that the valid requests received by
the secretary represent at least a majority of the issued and outstanding
shares of stock that would be entitled to vote at such meeting. Nothing
contained in this paragraph (6) shall in any way be construed to suggest or
imply that the Trust or any shareholder shall not be entitled to contest the
validity of any request, whether during or after such five Business Day
period, or to take any other action (including, without limitation, the
commencement, prosecution or defense of any litigation with respect thereto,
and the seeking of injunctive relief in such litigation).
(7) For purposes of these Bylaws, "Business Day" shall mean
any day other than a Saturday, a Sunday or a day on which banking
institutions in the State of New York are authorized or obligated by law or
executive order to close.
Section 4. NOTICE. Not less than ten nor more than 90 days before each
meeting of shareholders, the secretary shall give to each shareholder
entitled to vote at such meeting and to each shareholder not entitled to vote
who is entitled to notice of the meeting written or printed notice stating
the time and place of the meeting and, in the case of a special meeting or as
otherwise may be required by any statute, the purpose for which the meeting
is called, either by mail, by presenting it to such shareholder personally,
by leaving it at his residence or usual place of business or by any other
means authorized by Maryland law. If mailed, such notice shall be deemed to
be given when deposited in the United States mail addressed to the
shareholder at his post office address as it appears on the records of the
Trust, with postage thereon prepaid.
Section 5. SCOPE OF NOTICE. Any business of the Trust may be
transacted at an annual meeting of shareholders without being specifically
designated in the notice, except such business as is required by any statute
to be stated in such notice. No business shall be transacted at a special
meeting of shareholders except as specifically designated in the notice.
Section 6. ORGANIZATION. At every meeting of the shareholders, the
President shall conduct the meeting or, in the case of vacancy in office or
absence of the President, one of the following officers present shall conduct
the meeting in the order stated: the Chairman of the Board, if there be one,
the Vice Chairman of the Board, if there be one, the Vice Presidents in their
order of rank and seniority, or a Chairman chosen by the shareholders
entitled to cast a majority of the votes which all shareholders present in
person or by proxy are entitled to cast, shall act as Chairman, and the
Secretary, or, in his absence, an assistant secretary, or in the absence of
both the Secretary and assistant secretaries, a person appointed by the
Chairman shall act as Secretary. The order of business and all other matters
of procedure at any meeting of shareholders shall be determined by the
Chairman of the meeting. The Chairman of the meeting may prescribe such
rules, regulations and procedures and take such action as, in the discretion
of such Chairman, are appropriate for the proper conduct of the meeting,
including, without limitation, (a) restricting admission to the time set for
the commencement of the meeting; (b) limiting attendance at the meeting to
shareholders of record of the Trust, their duly authorized proxies or other
agents or other such persons as the Chairman of the meeting may determine;
(c) limiting participation at the meeting on any matter to shareholders of
record of the Trust entitled to vote on such matter, their duly authorized
proxies or other agents or other such persons as the Chairman of the meeting
may determine; (d) limiting the time allotted to questions or comments by
participants; (e) maintaining order and security at the meeting; and (f)
recessing or adjourning the meeting to a later date, time and place announced
at the meeting. Unless otherwise determined by the Chairman of the meeting,
meetings of shareholders shall not be required to be held in accordance with
the rules of parliamentary procedure.
Section 7. QUORUM. At any meeting of shareholders, the presence in
person or by proxy of shareholders entitled to cast a majority of all the
votes entitled to be cast at such meeting shall constitute a quorum; but this
section shall not affect any requirement under any statute or the Declaration
of Trust for the vote necessary for the adoption of any measure. If,
however, such quorum shall not be present at any meeting of the shareholders,
the shareholders entitled to vote at such meeting, present in person or by
proxy, shall have the power to adjourn the meeting from time to time to a
date not more than 120 days after the original record date without notice
other than announcement at the meeting. At such adjourned meeting at which a
quorum shall be present, any business may be transacted which might have been
transacted at the meeting as originally notified.
Section 8. VOTING. A plurality of all the votes cast at a meeting of
shareholders duly called and at which a quorum is present shall be sufficient
to elect a Trustee. Each share may be voted for as many individuals as there
are Trustees to be elected and for whose election the share is entitled to be
voted. A majority of the votes cast at a meeting of shareholders duly called
and at which a quorum is present shall be sufficient to approve any other
matter which may properly come before the meeting, unless more than a
majority of the votes cast is required herein or by statute or by the
Declaration of Trust. Unless otherwise provided in the Declaration of Trust,
each outstanding share, regardless of class, shall be entitled to one vote on
each matter submitted to a vote at a meeting of shareholders.
Section 9. PROXIES. A shareholder may cast the votes entitled to be
cast by the shares owned of record by him either in person or by proxy
executed in any manner authorized by Maryland law by the shareholder or by
his duly authorized agent. Such proxy shall be filed with the secretary of
the Trust before or at the time of the meeting. No proxy shall be valid
after eleven months from the date of its execution, unless otherwise provided
in the proxy.
Section 10. VOTING OF SHARES BY CERTAIN HOLDERS. Shares of the Trust
registered in the name of a corporation, partnership, trust or other entity,
if entitled to be voted, may be voted by the president or a vice president, a
general partner or trustee thereof, as the case may be, or a proxy appointed
by any of the foregoing individuals, unless some other person who has been
appointed to vote such shares pursuant to a bylaw or a resolution of the
governing board of such corporation or a comparable governing body of such
other entity or agreement of the partners of the partnership presents a
certified copy of such bylaw, resolution or agreement, in which case such
person may vote such shares. Any trustee or other fiduciary may vote shares
registered in his name as such fiduciary, either in person or by proxy.
Shares of the Trust directly or indirectly owned by it shall not be
voted at any meeting and shall not be counted in determining the total number
of outstanding shares entitled to be voted at any given time, unless they are
held by it in a fiduciary capacity, in which case they may be voted and shall
be counted in determining the total number of outstanding shares at any given
time.
The Trustees may adopt by resolution a procedure by which a shareholder
may certify in writing to the Trust that any shares registered in the name of
the shareholder are held for the account of a specified person other than the
shareholder. The resolution shall set forth the class of shareholders who
may make the certification, the purpose for which the certification may be
made, the form of certification and the information to be contained in it; if
the certification is with respect to a record date or closing of the share
transfer books, the time after the record date or closing of the share
transfer books within which the certification must be received by the Trust;
and any other provisions with respect to the procedure which the Trustees
consider necessary or desirable. On receipt of such certification, the
person specified in the certification shall be regarded as, for the purposes
set forth in the certification, the shareholder of record of the specified
shares in place of the shareholder who makes the certification.
Notwithstanding any other provision contained herein or in the
Declaration of Trust or these Bylaws, Title 3, Subtitle 7 of the Corporations
and Associations Article of the Annotated Code of Maryland (or any successor
statute) shall not apply to any acquisition by any person of shares of
beneficial interest of the Trust. This section may be repealed, in whole or
in part, at any time, whether before or after an acquisition of control
shares and, upon such repeal, may, to the extent provided by any successor
bylaw, apply to any prior or subsequent control share acquisition.
Section 11. INSPECTORS. At any meeting of shareholders, the chairman
of the meeting may appoint one or more persons as inspectors for such
meeting. Such inspectors shall ascertain and report the number of shares
represented at the meeting based upon their determination of the validity and
effect of proxies, count all votes, report the results and perform such other
acts as are proper to conduct the election and voting with impartiality and
fairness to all the shareholders.
Each report of an inspector shall be in writing and signed by him or by
a majority of them if there is more than one inspector acting at such
meeting. If there is more than one inspector, the report of a majority shall
be the report of the inspectors. The report of the inspector or inspectors
on the number of shares represented at the meeting and the results of the
voting shall be prima facie evidence thereof.
Section 12. REPORTS TO SHAREHOLDERS. The Trustees shall submit to the
shareholders at or before the annual meeting of shareholders a report of the
business and operations of the Trust during such fiscal year, containing a
balance sheet and a statement of income and surplus of the Trust, accompanied
by the certification of an independent certified public accountant, and such
further information as the Trustees may determine is required pursuant to any
law or regulation to which the Trust is subject. Within the earlier of 20
days after the annual meeting of shareholders or 120 days after the end of
the fiscal year of the Trust, the Trustees shall place the annual report on
file at the principal office of the Trust and with any governmental agencies
as may be required by law and as the Trustees may deem appropriate.
Section 13. NOMINATIONS AND SHAREHOLDER BUSINESS.
(a) Annual Meetings of Shareholders. (1) Nominations of persons for
election to the Board of Trustees and the proposal of business to be
considered by the shareholders may be made at an annual meeting of
shareholders (i) pursuant to the Trust's notice of meeting, (ii) by or at the
direction of the Trustees or (iii) by any shareholder of the Trust who is a
shareholder of record both at the time of giving of notice provided for in
this Section 13(a) and at the time of the annual meeting, who is entitled to
vote at the meeting and who complied with the notice procedures set forth in
this Section 13(a).
(2) For nominations or other business to be properly brought
before an annual meeting by a shareholder pursuant to clause (iii) of
paragraph (a) (1) of this Section 13, the shareholder must have given timely
notice thereof in writing to the secretary of the Trust and such other
business must otherwise be a proper matter for action by the shareholders.
To be timely, a shareholder's notice shall be delivered to the secretary at
the principal executive offices of the Trust not less than 90 days nor more
than 120 days prior to the first anniversary of the date of mailing of notice
for the preceding year's annual meeting; provided, however, that in the event
that the date of mailing of the notice for the annual meeting is advanced or
delayed by more than 30 days from the first anniversary of the date of
mailing of the notice for the preceding year's annual meeting, notice by the
shareholder to be timely must be so delivered not earlier than the 120th day
prior to the date of mailing of the notice for such annual meeting and not
later than the close of business on the later of the 90th day prior to the
date of mailing of the notice for such annual meeting or the tenth day
following the day on which disclosure of the date of mailing of the notice
for such meeting is first made. In no event shall the public announcement of
a postponement or adjournment of an annual meeting commence a new time period
for the giving of a shareholder's notice as described above. Such
shareholder's notice shall set forth (i) as to each person whom the
shareholder proposes to nominate for election or reelection as a Trustee, (A)
the name, age, business address and residence address of such person, (B) the
class and number of shares of beneficial interest of the Trust that are
beneficially owned by such person, and (C) all other information relating to
such person that is required to be disclosed in solicitations of proxies for
election of Trustees in an election contest (even if an election contest is
not involved), or is otherwise required, in each case pursuant to Regulation
14A (or any successor provision) under the Exchange Act (including such
person's written consent to being named in the proxy statement as a nominee
and to serving as a Trustee if elected); (ii) as to any other business that
the shareholder proposes to bring before the meeting, a description of the
business desired to be brought before the meeting, the reasons for conducting
such business at the meeting and any material interest in such business of
such shareholder and of the beneficial owner, if any, on whose behalf the
proposal is made; and (iii) as to the shareholder giving the notice and the
beneficial owner, if any, on whose behalf the nomination or proposal is made,
(x) the name and address of such shareholder, as they appear on the Trust's
books, and a current name and address, if different, and of such beneficial
owner and (y) the class and number of shares of each class of shares of the
Trust which are owned beneficially and of record by such shareholder and
owned beneficially by such beneficial owner.
(3) Notwithstanding anything in this subsection (a) of this
Section 13 to the contrary, in the event that the Board of Trustees increases
or decreases the maximum or minimum number of Trustees in accordance with
Article III, Section 2 of these Bylaws, and there is no public announcement
of such action at least 100 days prior to the first anniversary of the date
of mailing of the notice of the preceding year's annual meeting, a
shareholder's notice required by this Section 13(a) shall also be considered
timely, but only with respect to nominees for any new positions created by
such increase, if it shall be delivered to the secretary at the principal
executive offices of the Trust not later than the close of business on the
tenth day following the day on which such public announcement is first made
by the Trust.
(b) Special Meetings of Shareholders. Only such business shall be
conducted at a special meeting of shareholders as shall have been brought
before the meeting pursuant to the Trust's notice of meeting. Nominations of
persons for election to the Board of Trustees may be made at a special
meeting of shareholders at which Trustees are to be elected (i) pursuant to
the Trust's notice of meeting (ii) by or at the direction of the Board of
Trustees or (iii) provided that the Board of Trustees has determined that
Trustees shall be elected at such special meeting, by any shareholder of the
Trust who is a shareholder of record both at the time of giving of notice
provided for in this Section 13 and at the time of the special meeting, who
is entitled to vote at the meeting and who complied with the notice
procedures set forth in this Section 13. In the event the Trust calls a
special meeting of shareholders for the purpose of electing one or more
Trustees to the Board of Trustees, any such shareholder may nominate a person
or persons (as the case may be) for election to such position as specified in
the Trust's notice of meeting, if the shareholder's notice containing the
information required by paragraph (a) of this Section 13 shall be delivered
to the secretary at the principal executive offices of the Trust not earlier
than the 120th day prior to such special meeting and not later than the close
of business on the later of the 90th day prior to such special meeting or the
tenth day following the day on which public announcement is first made of the
date of the special meeting and of the nominees proposed by the Trustees to
be elected at such meeting. In no event shall the public announcement of a
postponement or adjournment of a special meeting commence a new time period
or extend the existing time period for the giving of a shareholder's notice
as described above.
(c) General. (1) Only such persons who are nominated in accordance
with the procedures set forth in this Section 13 shall be eligible to serve
as Trustees and only such business shall be conducted at a meeting of
shareholders as shall have been brought before the meeting in accordance with
the procedures set forth in this Section 13. The presiding officer of the
meeting shall have the power and duty to determine whether a nomination or
any business proposed to be brought before the meeting was made or proposed,
as the case may be, in accordance with the procedures set forth in this
Section 13 and, if any proposed nomination or business is not in compliance
with this Section 13, to declare that such defective nomination or proposal
be disregarded.
(2) For purposes of this Section 13, (a) the "date of mailing of
the notice" shall mean the date of the proxy statement for the solicitation
of proxies for election of Trustees and (b) "public announcement" shall mean
disclosure (i) in a press release reported by the Dow Jones News Service,
Associated Press or comparable news service or (ii) in a document publicly
filed by the Trust with the Securities and Exchange Commission pursuant to
Section 13, 14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this Section 13, a
shareholder shall also comply with all applicable requirements of state law
and of the Exchange Act and the rules and regulations thereunder with respect
to the matters set forth in this Section 13. Nothing in this Section 13
shall be deemed to affect any rights of shareholders to request inclusion of
proposals in, nor the right of the Trust to omit a proposal from, the Trust's
proxy statement pursuant to Rule 14a-8 (or any successor provision) under the
Exchange Act.
Section 14. INFORMAL ACTION BY SHAREHOLDERS. Any action required or
permitted to be taken at a meeting of shareholders may be taken without a
meeting if a consent in writing, setting forth such action, is signed by each
shareholder entitled to vote on the matter and any other shareholder entitled
to notice of a meeting of shareholders (but not to vote thereat) has waived
in writing any right to dissent from such action, and such consent and waiver
are filed with the minutes of proceedings of the shareholders.
Section 15. VOTING BY BALLOT. Voting on any question or in any
election may be viva voce unless the presiding officer shall order or any
shareholder shall demand that voting be by ballot.
ARTICLE III
TRUSTEES
Section 1. GENERAL POWERS; QUALIFICATIONS; TRUSTEES HOLDING OVER. The
business and affairs of the Trust shall be managed under the direction of its
Board of Trustees. A Trustee shall be an individual at least 21 years of age
who is not under legal disability. In case of failure to elect Trustees at
an annual meeting of the shareholders, the Trustees holding over shall
continue to direct the management of the business and affairs of the Trust
until their successors are elected and qualify.
Section 2. NUMBER. The number of Trustees shall be seven, which number
may be increased or decreased only by the affirmative vote of at least two-
thirds of the Whole Board of Trustees (as defined herein). Any amendment to
this section must be approved by the affirmative vote of two-thirds of the
Whole Board of Trustees.
As used in these Bylaws, "Whole Board of Trustees" shall mean the number
of Trustees set forth in this section, as such number may be increased or
decreased from time to time pursuant to these Bylaws.
Section 3. ANNUAL AND REGULAR MEETINGS. An annual meeting of the
Trustees shall be held immediately after and at the same place as the annual
meeting of shareholders, no notice other than this Bylaw being necessary.
The Trustees may provide, by resolution, the time and place, either within or
without the State of Maryland, for the holding of regular meetings of the
Trustees without other notice than such resolution.
Section 4. SPECIAL MEETINGS. Special meetings of the Trustees may be
called by or at the request of the president or by a majority of the Trustees
then in office. The person or persons authorized to call special meetings of
the Trustees may fix any place, either within or without the State of
Maryland, as the place for holding any special meeting of the Trustees called
by them.
Section 5. NOTICE. Notice of any special meeting shall be delivered
personally or by telephone, telegraph, electronic mail, facsimile-
transmission, United States mail or courier to each Trustee at his business,
electronic mail or residence address. Notice by personal delivery or
telegraph shall be given at least three days prior to the meeting. Notice
given by United States mail shall be given at least ten days prior to the
meeting. Notice by telephone, facsimile-transmission, electronic mail or
courier shall be given at least 72 hours prior to the meeting. Notice by
United States mail shall be deemed to be given when deposited in the United
States mail properly addressed, with postage thereon prepaid. If given by
telegram, such notice shall be deemed to be given when the telegram is
delivered to the telegraph company. Telephone notice shall be deemed given
when the Trustee is personally given such notice in a telephone call to which
he is a party. Facsimile-transmission notice shall be deemed given upon
completion of the transmission of the message to the number given to the
Trust by the Trustee and receipt of a completed answer-back indicating
receipt. Electronic mail notice shall be deemed given upon transmission of
the message to the electronic mail address given to the Trust by the Trustee.
Notice by courier shall be deemed to be given upon delivery to the address
given to the Trust by the Trustee and receipt by such courier of a signature
evidencing delivery thereat. Neither the business to be transacted at, nor
the purpose of, any annual, regular or special meeting of the Trustees need
be stated in the notice, unless specifically required by statute or these
Bylaws.
Section 6. QUORUM. A majority of the Whole Board of Trustees shall
constitute a quorum for the transaction of business at any meeting of the
Trustees, provided that, if less than a majority of the Whole Board of
Trustees are present at said meeting, a majority of the Trustees present may
adjourn the meeting from time to time without further notice, and provided
further that if, pursuant to the Declaration of Trust or these Bylaws, the
vote of a majority of a particular group of Trustees is required for action,
a quorum must also include a majority of such group.
The Trustees present at a meeting which has been duly called and
convened may continue to transact business until adjournment, notwithstanding
the withdrawal of enough Trustees to leave less than a quorum.
Section 7. VOTING. The action of the majority of the Trustees present
at a meeting at which a quorum is present shall be the action of the
Trustees, unless the concurrence of a greater proportion is required for such
action by applicable statute, the Declaration of Trust or these Bylaws.
Section 8. TELEPHONE MEETINGS. Trustees may participate in a meeting
by means of a conference telephone or similar communications equipment if all
persons participating in the meeting can hear each other at the same time.
Participation in a meeting by these means shall constitute presence in person
at the meeting.
Section 9. INFORMAL ACTION BY TRUSTEES. Any action required or
permitted to be taken at any meeting of the Trustees may be taken without a
meeting, if a consent in writing to such action is signed by each Trustee and
such written consent is filed with the minutes of proceedings of the
Trustees.
Section 10. VACANCIES. If for any reason any or all the Trustees cease
to be Trustees, such event shall not terminate the Trust or affect these
Bylaws or the powers of the remaining Trustees hereunder (even if fewer than
three Trustees remain). Any vacancy on the Board of Trustees for any cause
other than an increase in the number of Trustees shall be filled, at any
regular meeting or special meeting called for that purpose, by a majority of
the remaining Trustees, although such majority is less than a quorum. Any
vacancy in the number of Trustees created by an increase in the number of
Trustees shall be filled by a majority vote of the entire Board of Trustees.
Any individual so elected as Trustee shall hold office for the unexpired term
of the Trustee he is replacing.
Section 11. COMPENSATION. Trustees shall not receive any stated salary
for their services as Trustees but, by resolution of the Trustees, may
receive compensation per year and/or per meeting and/or per visit to real
property owned or to be acquired by the Trust and for any service or activity
they performed or engaged in as Trustees, which compensation shall be
approved by a majority of the Whole Board of Trustees. Trustees may be
reimbursed for expenses of attendance, if any, at each annual, regular or
special meeting of the Trustees or of any committee thereof; and for their
expenses, if any, in connection with each property visit and any other
service or activity performed or engaged in as Trustees; but nothing herein
contained shall be construed to preclude any Trustees from serving the Trust
in any other capacity and receiving compensation therefor.
Section 12. REMOVAL OF TRUSTEES. The shareholders may, at any time,
remove any Trustee in the manner provided in the Declaration of Trust.
Section 13. LOSS OF DEPOSITS. No Trustee shall be liable for any loss
which may occur by reason of the failure of the bank, trust company, savings
and loan association, or other institution with whom moneys or shares have
been deposited.
Section 14. SURETY BONDS. Unless required by law, no Trustee shall be
obligated to give any bond or surety or other security for the performance of
any of his duties.
Section 15. RELIANCE. Each Trustee, officer, employee and agent of the
Trust shall, in the performance of his duties with respect to the Trust, be
fully justified and protected with regard to any act or failure to act in
reliance in good faith upon the books of account or other records of the
Trust, upon an opinion of counsel or upon reports made to the Trust by any of
its officers or employees or by the adviser, accountants, appraisers or other
experts or consultants selected by the Trustees or officers of the Trust,
regardless of whether such counsel or expert may also be a Trustee.
Section 16. CERTAIN RIGHTS OF TRUSTEES, OFFICERS, EMPLOYEES AND AGENTS.
The Trustees shall have no responsibility to devote their full time to the
affairs of the Trust. Any Trustee or officer, employee or agent of the
Trust, in his personal capacity or in a capacity as an affiliate, employee,
or agent of any other person, or otherwise, may have business interests and
engage in business activities similar to or in addition to those of or
relating to the Trust.
Section 17. INTERESTED TRUSTEE TRANSACTIONS. Section 2-419 of the
Maryland General Corporation Law (the "MGCL") shall be available for and
apply to any contract or other transaction between the Trust and any of its
Trustees or between the Trust and any other trust, corporation, firm or other
entity in which any of its Trustees is a trustee or director or has a
material financial interest.
ARTICLE IV
COMMITTEES
Section 1. NUMBER, TENURE AND QUALIFICATIONS. The Trustees may appoint
from among its members an Executive Committee, an Audit Committee and other
committees, composed of one or more Trustees, to serve at the pleasure of the
Trustees.
Section 2. POWERS. The Trustees may delegate to committees appointed
under Section 1 of this Article any of the powers of the Trustees, except as
prohibited by law.
Section 3. MEETINGS. Notice of committee meetings shall be given in
the same manner as notice for special meetings of the Board of Trustees.
One-third, but not less than one, of the members of any committee shall
be present in person at any meeting of such committee in order to constitute
a quorum for the transaction of business at such meeting, and the act of a
majority present shall be the act of such committee. The Board of Trustees
may designate a chairman of any committee, and such chairman may fix the time
and place of its meetings unless the Board shall otherwise provide. In the
absence or disqualification of any member of any such committee, the members
thereof present at any meeting and not disqualified from voting, whether or
not they constitute a quorum, may unanimously appoint another Trustee to act
at the meeting in the place of such absent or disqualified members.
Each committee shall keep minutes of its proceedings and shall report
the same to the Board of Trustees at the next succeeding meeting of the Board
of Trustees, and any action by the committee shall be subject to revision and
alteration by the Board of Trustees, provided that no contract rights of
third persons shall be affected by any such revision or alteration.
Section 4. TELEPHONE MEETINGS. Members of a committee of the Trustees
may participate in a meeting by means of a conference telephone or similar
communications equipment if all persons participating in the meeting can hear
each other at the same time. Participation in a meeting by these means shall
constitute presence in person at the meeting.
Section 5. INFORMAL ACTION BY COMMITTEES. Any action required or
permitted to be taken at any meeting of a committee of the Trustees may be
taken without a meeting, if a consent in writing to such action is signed by
each member of the committee and such written consent is filed with the
minutes of proceedings of such committee.
Section 6. VACANCIES. Subject to the provisions hereof, the Board
of Trustees shall have the power at any time to change the membership of any
committee, to fill all committee vacancies, to designate alternate members to
replace any absent or disqualified member or to dissolve any such committee.
ARTICLE V
OFFICERS
Section 1. GENERAL PROVISIONS. The officers of the Trust shall consist
of a president, a secretary and a treasurer. In addition, the Trustees may
from time to time appoint such other officers, executives, employees and
agents with such powers and duties as they shall deem necessary or desirable.
The officers of the Trust shall be elected annually by the Trustees at the
first meeting of the Trustees held after each annual meeting of shareholders.
If the election of officers shall not be held at such meeting, such election
shall be held as soon thereafter as may be convenient. Each officer shall
hold office until his successor is elected and qualifies or until his death,
resignation or removal in the manner hereinafter provided. Any two or more
offices except president and vice president may be held by the same person.
In their discretion, the Trustees may leave unfilled any office except that
of president, treasurer and secretary. Election of an officer or appointment
of an executive, employee or agent shall not of itself create contract rights
between the Trust and such officer or agent.
Section 2. REMOVAL AND RESIGNATION. Any officer or agent of the Trust
may be removed by the Trustees if in their judgment the best interests of the
Trust would be served thereby, but such removal shall be without prejudice to
the contract rights, if any, of the person so removed. Any officer of the
Trust may resign at any time by giving written notice of his resignation to
the Trustees, the president or the secretary. Any resignation shall take
effect at the time specified therein or, if the time when it shall become
effective is not specified therein, immediately upon its receipt. The
acceptance of a resignation shall not be necessary to make it effective
unless otherwise stated in the resignation. Such resignation shall be
without prejudice to the contract rights, if any, of the Trust. The chief
executive officer shall have the power to hire and/or terminate all officers,
executives, employees and agents, all of whom shall report, either directly
or through superiors, to the chief executive officer.
Section 3. VACANCIES. A vacancy in any office may be filled by the
Trustees for the balance of the term.
Section 4. CHIEF EXECUTIVE OFFICER. The Trustees may designate a chief
executive officer from among the elected officers. The chief executive
officer shall have responsibility for implementation of the policies of the
Trust, as determined by the Trustees, and for the administration of the
business affairs of the Trust.
Section 5. CHIEF OPERATING OFFICER. The Trustees may designate a chief
operating officer from among the elected officers. Said officer will have
the responsibilities and duties as set forth by the Trustees or the chief
executive officer.
Section 6. CHIEF FINANCIAL OFFICER. The Trustees may designate a chief
financial officer from among the elected officers. Said officer will have
the responsibilities and duties as set forth by the Trustees or the chief
executive officer.
Section 7. CHAIRMAN AND VICE CHAIRMAN OF THE BOARD. The Trustees may
designate a chairman of the board and a vice chairman of the board from among
the elected Trustees. The chairman of the board and the vice chairman of the
board shall perform such duties as may be assigned to him or them by the
Trustees.
Section 8. PRESIDENT. The president shall preside over the meetings of
the Trustees and of the shareholders at which he shall be present and shall
in general supervise and control all of the business and affairs of the
Trust. In the absence of a designation of a chief executive officer by the
Trustees, the president shall be the chief executive officer and, except as
prohibited by law, any governmental entity or any exchange on which
securities of the Trust are listed, shall be ex officio a member of all
committees that may, from time to time, be constituted by the Trustees. The
president may execute any lease, deed, mortgage, bond, contract or other
instrument, except in cases where the execution thereof shall be expressly
delegated by the Trustees or by these Bylaws to some other officer or agent
of the Trust or shall be required by law to be otherwise executed; and in
general shall perform all duties incident to the office of president and such
other duties as may be prescribed by the Trustees from time to time.
Section 9. VICE PRESIDENTS. In the absence of the president or in the
event of a vacancy in such office, the vice president (or in the event there
be more than one vice president, the vice presidents in the order designated
at the time of their election or, in the absence of any designation, then in
the order of their election) shall perform the duties of the president and
when so acting shall have all the powers of and be subject to all the
restrictions upon the president; and shall perform such other duties as from
time to time may be assigned to him by the president or by the Trustees. The
Trustees may designate one or more vice presidents as executive vice
president or as vice president for particular areas of responsibility.
Section 10. SECRETARY. The secretary shall (a) keep the minutes of the
proceedings of the shareholders, the Trustees and committees of the Trustees
in one or more books provided for that purpose; (b) see that all notices are
duly given in accordance with the provisions of these Bylaws or as required
by law; (c) be custodian of the trust records and of the seal of the Trust;
(d) keep a register of the post office address of each shareholder which
shall be furnished to the secretary by such shareholder; (e) have general
charge of the share transfer books of the Trust; and (f) in general perform
such other duties as from time to time may be assigned to him by the
president or by the Trustees.
Section 11. TREASURER. The treasurer shall have the custody of the
funds and securities of the Trust and shall keep full and accurate accounts
of receipts and disbursements in books belonging to the Trust and shall
deposit all moneys and other valuable effects in the name and to the credit
of the Trust in such depositories as may be designated by the Trustees.
He shall disburse the funds of the Trust as may be ordered by the
Trustees, taking proper vouchers for such disbursements, and shall render to
the president and Trustees, at the regular meetings of the Trustees or
whenever they may require it, an account of all his transactions as treasurer
and of the financial condition of the Trust.
If required by the Trustees, he shall give the Trust a bond in such sum
and with such surety or sureties as shall be satisfactory to the Trustees for
the faithful performance of the duties of his office and for the restoration
to the Trust, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, moneys and other property of whatever
kind in his possession or under his control belonging to the Trust.
Section 12. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The
assistant secretaries and assistant treasurers, in general, shall perform
such duties as shall be assigned to them by the secretary or treasurer,
respectively, or by the president or the Trustees. The assistant treasurers
shall, if required by the Trustees, give bonds for the faithful performance
of their duties in such sums and with such surety or sureties as shall be
satisfactory to the Trustees.
Section 13. SALARIES. The salaries and other compensation of the
officers shall be fixed from time to time by the Trustees and no officer
shall be prevented from receiving such salary or other compensation by reason
of the fact that he is also a Trustee.
ARTICLE VI
CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 1. CONTRACTS. The Trustees may authorize any officer or agent
to enter into any contract or to execute and deliver any instrument in the
name of and on behalf of the Trust and such authority may be general or
confined to specific instances. Any agreement, deed, mortgage, lease or
other document executed by one or more of the Trustees or by an authorized
person shall be valid and binding upon the Trustees and upon the Trust when
authorized or ratified by action of the Trustees.
Section 2. CHECKS AND DRAFTS. All checks, drafts or other orders for
the payment of money, notes or other evidences of indebtedness issued in the
name of the Trust shall be signed by such officer or officers or agent or
agents of the Trust in such manner as shall from time to time be determined
by the Trustees.
Section 3. DEPOSITS. All funds of the Trust not otherwise employed
shall be deposited from time to time to the credit of the Trust in such
banks, trust companies or other depositories as the Trustees may designate.
ARTICLE VII
SHARES
Section 1. CERTIFICATES. Each shareholder shall be entitled to a
certificate or certificates which shall represent and certify the number of
shares of each class of beneficial interests held by him in the Trust. Each
certificate shall be signed by the president or a vice president and
countersigned by the secretary or an assistant secretary or the treasurer or
an assistant treasurer and may be sealed with the seal, if any, of the Trust.
The signatures may be either manual or facsimile. Certificates shall be
consecutively numbered; and if the Trust shall, from time to time, issue
several classes of shares, each class may have its own number series. A
certificate is valid and may be issued whether or not an officer who signed
it is still an officer when it is issued. Each certificate representing
shares which are restricted as to their transferability or voting powers,
which are preferred or limited as to their dividends or as to their allocable
portion of the assets upon liquidation or which are redeemable at the option
of the Trust, shall have a statement of such restriction, limitation,
preference or redemption provision, or a summary thereof, plainly stated on
the certificate. In lieu of such statement or summary, the Trust may set
forth upon the face or back of the certificate a statement that the Trust
will furnish to any shareholder, upon request and without charge, a full
statement of such information.
Section 2. TRANSFERS. Certificates shall be treated as negotiable
and title thereto and to the shares they represent shall be transferred by
delivery thereof to the same extent as those of a Maryland stock corporation.
Upon surrender to the Trust or the transfer agent of the Trust of a share
certificate duly endorsed or accompanied by proper evidence of succession,
assignment or authority to transfer, the Trust shall issue a new certificate
to the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
The Trust shall be entitled to treat the holder of record of any share
or shares as the holder in fact thereof and, accordingly, shall not be bound
to recognize any equitable or other claim to or interest in such share or
shares on the part of any other person, whether or not it shall have express
or other notice thereof, except as otherwise provided by the laws of the
State of Maryland.
Notwithstanding the foregoing, transfers of shares of beneficial
interest of the Trust will be subject in all respects to the Declaration of
Trust and all of the terms and conditions contained therein.
Section 3. REPLACEMENT CERTIFICATE. Any officer designated by the
Trustees may direct a new certificate to be issued in place of any
certificate previously issued by the Trust alleged to have been lost, stolen
or destroyed upon the making of an affidavit of that fact by the person
claiming the certificate to be lost, stolen or destroyed. When authorizing
the issuance of a new certificate, an officer designated by the Trustees may,
in his discretion and as a condition precedent to the issuance thereof,
require the owner of such lost, stolen or destroyed certificate or the
owner's legal representative to advertise the same in such manner as he shall
require and/or to give bond, with sufficient surety, to the Trust to
indemnify it against any loss or claim which may arise as a result of the
issuance of a new certificate.
Section 4. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. The
Trustees may set, in advance, a record date for the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders
or determining shareholders entitled to receive payment of any dividend or
the allotment of any other rights, or in order to make a determination of
shareholders for any other proper purpose. Such date, in any case, shall not
be prior to the close of business on the day the record date is fixed and
shall be not more than 90 days and, in the case of a meeting of shareholders
not less than ten days, before the date on which the meeting or particular
action requiring such determination of shareholders of record is to be held
or taken.
In lieu of fixing a record date, the Trustees may provide that the share
transfer books shall be closed for a stated period but not longer than 20
days. If the share transfer books are closed for the purpose of determining
shareholders entitled to notice of or to vote at a meeting of shareholders,
such books shall be closed for at least ten days before the date of such
meeting.
If no record date is fixed and the share transfer books are not closed
for the determination of shareholders, (a) the record date for the
determination of shareholders entitled to notice of or to vote at a meeting
of shareholders shall be at the close of business on the day on which the
notice of meeting is mailed or the 30th day before the meeting, whichever is
the closer date to the meeting; and (b) the record date for the determination
of shareholders entitled to receive payment of a dividend or an allotment of
any other rights shall be the close of business on the day on which the
resolution of the Trustees, declaring the dividend or allotment of rights, is
adopted.
When a determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided in this section, such determination
shall apply to any adjournment thereof, except when (i) the determination has
been made through the closing of the transfer books and the stated period of
closing has expired or (ii) the meeting is adjourned to a date more than 120
days after the record date fixed for the original meeting, in either of which
case a new record date shall be determined as set forth herein.
Section 5. STOCK LEDGER. The Trust shall maintain at its principal
office or at the office of its counsel, accountants or transfer agent, an
original or duplicate share ledger containing the name and address of each
shareholder and the number of shares of each class held by such shareholder.
Section 6. FRACTIONAL SHARES; ISSUANCE OF UNITS. The Trustees may
issue fractional shares or provide for the issuance of scrip, all on such
terms and under such conditions as they may determine. Notwithstanding any
other provision of the Declaration of Trust or these Bylaws, the Trustees may
issue units consisting of different securities of the Trust. Any security
issued in a unit shall have the same characteristics as any identical
securities issued by the Trust, except that the Trustees may provide that for
a specified period securities of the Trust issued in such unit may be
transferred on the books of the Trust only in such unit.
ARTICLE VIII
ACCOUNTING YEAR
The Trustees shall have the power, from time to time, to fix the fiscal
year of the Trust by a duly adopted resolution.
ARTICLE IX
DISTRIBUTIONS
Section 1. AUTHORIZATION. Dividends and other distributions upon the
shares of beneficial interest of the Trust may be authorized and declared by
the Trustees, subject to the provisions of law and the Declaration of Trust.
Dividends and other distributions may be paid in cash, property or shares of
the Trust, subject to the provisions of law and the Declaration of Trust.
Section 2. CONTINGENCIES. Before payment of any dividends or other
distributions, there may be set aside out of any funds of the Trust available
for dividends or other distributions such sum or sums as the Trustees may
from time to time, in their absolute discretion, think proper as a reserve
fund for contingencies, for equalizing dividends or other distributions, for
repairing or maintaining any property of the Trust or for such other purpose
as the Trustees shall determine to be in the best interest of the Trust, and
the Trustees may modify or abolish any such reserve in the manner in which it
was created.
ARTICLE X
SEAL
Section 1. SEAL. The Trustees may authorize the adoption of a seal by
the Trust. The seal shall have inscribed thereon the name of the Trust and
the year of its formation. The Trustees may authorize one or more duplicate
seals and provide for the custody thereof.
Section 2. AFFIXING SEAL. Whenever the Trust is permitted or required
to affix its seal to a document, it shall be sufficient to meet the
requirements of any law, rule or regulation relating to a seal to place the
word "(SEAL)" adjacent to the signature of the person authorized to execute
the document on behalf of the Trust.
ARTICLE XI
INDEMNIFICATION AND ADVANCE OF EXPENSES
To the maximum extent permitted by Maryland law in effect from time to
time, the Trust shall indemnify (a) any Trustee, officer or shareholder or
any former Trustee, officer or shareholder (including among the foregoing,
for all purposes of this Article XI and without limitation, any individual
who, while a Trustee, officer or shareholder and at the express request of
the Trust, serves or has served another real estate investment trust,
corporation, partnership, limited liability company, joint venture, trust,
employee benefit plan or any other enterprise as a director, officer,
shareholder, partner, manager or trustee of such real estate investment
trust, corporation, partnership, limited liability company, joint venture,
trust, employee benefit plan or other enterprise) who has been successful, on
the merits or otherwise, in the defense of a proceeding to which he was made
a party by reason of service in such capacity, against reasonable expenses
incurred by him in connection with the proceeding, (b) any Trustee or officer
or any former Trustee or officer against any claim or liability to which he
may become subject by reason of such status unless it is established that (i)
his act or omission was material to the matter giving rise to the proceeding
and was committed in bad faith or was the result of active and deliberate
dishonesty, (ii) he actually received an improper personal benefit in money,
property or services or (iii) in the case of a criminal proceeding, he had
reasonable cause to believe that his act or omission was unlawful and (c)
each shareholder or former shareholder against any claim or liability to
which he may become subject by reason of such status. In addition, the Trust
shall, without requiring a preliminary determination of the ultimate
entitlement to indemnification, pay or reimburse, in advance of final
disposition of a proceeding, reasonable expenses incurred by a Trustee,
officer or shareholder or former Trustee, officer or shareholder made a party
to a proceeding by reason of such status, provided that, in the case of a
Trustee or officer, the Trust shall have received (i) a written affirmation
by the Trustee or officer of his good faith belief that he has met the
applicable standard of conduct necessary for indemnification by the Trust as
authorized by these Bylaws and (ii) a written undertaking by or on his behalf
to repay the amount paid or reimbursed by the Trust if it shall ultimately be
determined that the applicable standard of conduct was not met. The Trust
may, with the approval of its Trustees, provide such indemnification or
payment or reimbursement of expenses to any Trustee, officer or shareholder
or any former Trustee, officer or shareholder who served a predecessor of the
Trust and to any employee or agent of the Trust or a predecessor of the
Trust. Neither the amendment nor repeal of this Article, nor the adoption or
amendment of any other provision of the Declaration of Trust or these Bylaws
inconsistent with this Article, shall apply to or affect in any respect the
applicability of this Article with respect to any act or failure to act which
occurred prior to such amendment, repeal or adoption.
Any indemnification or payment or reimbursement of the expenses
permitted by these Bylaws shall be furnished in accordance with the
procedures provided for indemnification or payment or reimbursement of
expenses, as the case may be, under Section 2-418 of the MGCL for directors
of Maryland corporations. The Trust may provide to Trustees, officers and
shareholders such other and further indemnification or payment or
reimbursement of expenses, as the case may be, to the fullest extent
permitted by the MGCL, as in effect from time to time, for directors of
Maryland corporations.
ARTICLE XII
WAIVER OF NOTICE
Whenever any notice is required to be given pursuant to the Declaration
of Trust or Bylaws or pursuant to applicable law, a waiver thereof in
writing, signed by the person or persons entitled to such notice, whether
before or after the time stated therein, shall be deemed equivalent to the
giving of such notice. Neither the business to be transacted at nor the
purpose of any meeting need be set forth in the waiver of notice, unless
specifically required by statute. The attendance of any person at any
meeting shall constitute a waiver of notice of such meeting, except where
such person attends a meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
ARTICLE XIII
AMENDMENT OF BYLAWS
The Trustees shall have the exclusive power to adopt, alter or repeal
any provision of these Bylaws and to make new Bylaws by the affirmative vote
of a majority of the Whole Board of Trustees, except where such alteration or
repeal of these Bylaws or addition of new Bylaws would affect Article III,
Section 2 hereof, in which case the affirmative vote of two-thirds of the
Whole Board of Trustees shall be required.
ARTICLE XIV
MISCELLANEOUS
All references to the Declaration of Trust shall include any amendments
thereto.
Exhibit C
to the Merger Agreement
Trustees of the Surviving Trust
1. Donald Shapiro*
2. Bernard J. Korman*
3. Norman M. Kranzdorf*
4. H. Irwin Levy**
5. Louis P. Meshon, Sr.**
6. Alan Shulman**
7. Milton S. Schneider**
* Designated by Kranzco.
** Designated by CV.
Exhibit D
to the Merger Agreement
Officers of the Surviving Trust
Name Title
1. Louis Meshon, Sr. President and CEO
2. Norman M. Kranzdorf Chairman of the Board
3. George Demuth Executive Vice President
4. Mary Gannon Secretary
5. Etta Strehle Treasurer
All other officers to be presented to the Board by the CEO for approval
<PAGE>
Exhibit E
to the Merger Agreement
CERTIFICATE OF MERGER
OF
KRANZCO REALTY TRUST
INTO
KRT TRUST II LLC
Dated: ___________ __, 2000
The undersigned limited liability company formed and existing under and
by virtue of the Delaware Limited Liability Company Act, 6 Del. C. Section
18-101, et seq. (the "Act"),
DOES HEREBY CERTIFY:
FIRST: The name and state of domicile and jurisdiction of formation or
organization of each of the constituent entities which is to merge are as
follows:
State of Domicile
and Jurisdiction of
Name Formation or Organization
---- -------------------------
Kranzco Realty Trust Maryland
KRT Trust II LLC Delaware
SECOND: An agreement and plan of merger (the "Merger Agreement") has
been approved, adopted, certified, executed and acknowledged by each of the
constituent entities in accordance with applicable law, including, in the
case of KRT Trust II LLC, Section 18-209 of the Act and, in the case of
Kranzco Realty Trust, Section 8-501.1 of the Maryland REIT Law and Section 1-
301 of the Maryland General Corporation Law.
THIRD: The name of the surviving Delaware limited liability company is
KRT Trust II LLC.
FOURTH: The merger of Kranzco Realty Trust into KRT Trust II LLC shall
be effective upon the filing of this Certificate of Merger with the Secretary
of State of the State of Delaware.
FIFTH: The executed Merger Agreement is on file at a place of business
of the surviving Delaware limited liability company. The address of such
place of business of the surviving Delaware limited liability company is 128
Fayette Street, Conshohocken, PA 19428.
SIXTH: A copy of the Merger Agreement will be furnished by the
surviving Delaware limited liability company, on request and without cost, to
any member of KRT Trust II LLC and to any holder of a beneficial interest in
Kranzco Realty Trust.
KRT TRUST II LLC
By: KRT Trust
authorized person
By:__________________________
Name:
Title:
<PAGE>
Exhibit F
to the Merger Agreement
[See Exhibit F to Amendment No. 1 to the
Agreement and Plan of Reorganization and Merger]
<PAGE>
Exhibit G
to the Merger Agreement
CERTIFICATE OF MERGER
OF
KRT TRUST II LLC
INTO
KRAMONT OPERATING PARTNERSHIP, L.P.
dated: __________ __, 2000
The undersigned limited partnership formed and existing under and
by virtue of the Delaware Revised Uniform Limited Partnership Act, 6 Del.C.
Section 17-101, et seq. (the "Act"),
DOES HEREBY CERTIFY:
FIRST: The name and jurisdiction of formation or organization of
each of the constituent entities which are to merge are as follows:
Jurisdiction of
Name Formation or Organization
---- -------------------------
KRT Trust II LLC Delaware
Kramont Operating Partnership, L.P. Delaware
SECOND: An Agreement and Plan of Merger has been approved and
executed in accordance with Section 17-211 of the Act and Section 18-209 of
the Delaware Limited Liability Company Act by (i) Kramont Operating
Partnership, L.P. and (ii) KRT Trust II LLC.
THIRD: The name of the surviving Delaware limited partnership
shall be Kramont Operating Partnership, L.P.
FOURTH: The merger of KRT Trust II LLC into Kramont Operating
Partnership, L.P. shall be effective upon the filing of this Certificate of
Merger with the Secretary of State of the State of Delaware.
FIFTH: The executed Agreement and Plan of Merger is on file at a
place of business of the surviving Delaware limited partnership. The address
of such place of business of the surviving Delaware limited partnership is
128 Fayette Street, Conshohocken, PA 19428.
SIXTH: A copy of the Agreement and Plan of Merger will be
furnished by the surviving Delaware limited partnership, on request and
without cost, to any partner of Kramont Operating Partnership, L.P. and to
any member of KRT Trust II LLC.
IN WITNESS WHEREOF, the undersigned has executed this Certificate
of Merger as of the day and year first above written.
KRAMONT OPERATING PARTNERSHIP, L.P.
By: KRT Trust,
as General Partner
By:______________________________
Name:
Title:
<PAGE>
Exhibit H
to the Merger Agreement
CERTIFICATE OF MERGER
OF
MONTGOMERY CV REALTY TRUST
INTO
CV REIT, INC.
dated: __________ ___, 2000
(Under Section 254 of the General Corporation Law of the State of Delaware
and Section 3815 of the Delaware Business Trust Act)
The undersigned corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, 8 Del. C.
Section 101, et seq. (the "GCL"),
DOES HEREBY CERTIFY:
FIRST: The name and state of domicile of each of the constituent
entities which is to merge are as follows:
Name State of Domicile
---- -----------------
Montgomery CV Realty Trust Delaware
CV REIT, Inc. Delaware
SECOND: An Agreement and Plan of Merger has been approved,
adopted, certified, executed and acknowledged by each of the constituent
entities in accordance with Section 254(d) of the GCL and Section 3815(a) of
the Delaware Business Trust Act, 12 Del.C. Section 3801, et seq.
THIRD: The name of the surviving Delaware corporation is CV REIT,
Inc.
FOURTH: The certificate of incorporation of the surviving Delaware
corporation shall be its certificate of incorporation.
FIFTH: The merger of Montgomery CV Realty Trust into CV REIT, Inc.
shall be effective upon the filing of this Certificate of Merger with the
Secretary of State of the State of Delaware.
SIXTH: The executed Agreement and Plan of Merger is on file at an
office of the surviving Delaware corporation. The address of such office of
the surviving Delaware corporation is 100 Century Road, West Palm Beach,
Florida 33417.
SEVENTH: A copy of the Agreement and Plan of Merger will be
furnished by the surviving Delaware corporation, on request and without cost,
to any stockholder of CV REIT, Inc., and to any beneficial owner of
Montgomery CV Realty Trust.
CV REIT, INC.
By:_________________________
Name:
Title:
Exhibit I
to the Merger Agreement
[See Exhibit I to Amendment No. 1 to the
Agreement and Plan of Reorganization and Merger]
<PAGE>
Exhibit J
to the Merger Agreement
[See Exhibit J to Amendment No. 1 to the
Agreement and Plan of Reorganization and Merger]
Exhibit K
to the Merger Agreement
FORM OF AFFILIATE LETTER
Kramont
[Address]
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed
to be an "affiliate" of [KRT Trust, a Maryland real estate investment trust
("KRT Trust")] [CV Reit, Inc., a Delaware corporation ("CV")], as the term
"affiliate" is (i) defined for purposes of paragraphs (c) and (d) of Rule 145
of the rules and regulations (the "Rules and Regulations") of the Securities
and Exchange Commission (the "Commission") under the Securities Act of 1933,
as amended (the "Act"), or (ii) used in and for purposes of Accounting
Series, Releases 130 and 135, as amended, of the Commission. Pursuant to the
terms of the Agreement and Plan of Reorganization and Merger dated as of
December __, 1999 (the "Agreement"), among Kranzco Realty Trust, a Maryland
real estate investment trust ("Kranzco"), KRT Trust, [a Maryland real estate
investment trust and a wholly owned subsidiary of Kranzco ("KRT Trust")],
CV[, a Delaware corporation,] and Kramont Realty Trust, a Maryland real
estate investment trust ("Kramont"). Each of KRT Trust and CV will be merged
with and into Kramont (the "Reorganization").
As a result of the Reorganization , I may receive shares of Common
Shares of Beneficial Interest, par value $.01 per share, of Kramont in
exchange for [shares of Common Stock, par value $.01 per share, of CV]
[common shares of beneficial interest, par value $.01 per share, of KRT
Trust] owned by me (such shares of Kramont Common Shares, collectively, the
"Kramont Securities").
I represent, warrant and covenant to Kramont that in the event I receive
any Kramont Securities as a result of the Reorganization :
A. I shall not make any sale, transfer or other disposition of
the Kramont Securities in violation of the Act or the Rules and
Regulations.
B. I have carefully read this letter and the Agreement and
discussed the requirements of such documents and other applicable
limitations upon my ability to sell, transfer or otherwise dispose of
the Kramont Securities to the extent I felt necessary, with my counsel
or counsel for [CV] [KRT Trust].
C. I have been advised that the issuance of Kramont Securities to
me pursuant to the Reorganization has been registered with the
Commission under the Act on a Registration Statement on Form S-4.
However, I have also been advised that, since at the time the
Reorganization was submitted for a vote of the shareholders of [CV] [KRT
Trust], I may be deemed to have been an affiliate of [CV] [KRT Trust]
and the distribution by me of the Kramont Securities has not been
registered under the Act, I may not sell, transfer or otherwise dispose
of the Kramont Securities issued to me in the Reorganization unless (i)
such sale, transfer or other disposition has been registered under the
Act, (ii) such sale, transfer or other disposition is made in conformity
with Rule 145 promulgated by the Commission under the Act, or (iii) in
the opinion of counsel reasonably acceptable to [KRT Trust] [CV], or a
"no action" letter obtained by the undersigned from the staff of the
Commission, such sale, transfer or other disposition is otherwise exempt
from registration under the Act.
D. I understand that Kramont is under no obligation to register
the sale, transfer or other disposition of the Kramont Securities by me
or on my behalf under the Act or, except as expressly set forth in the
Agreement, to take any other action necessary in order to make
compliance with an exemption from such registration available.
E. I also understand that stop transfer instructions will be
given to Kramont's transfer agents with respect to the Kramont
Securities and that there will be placed on the certificates for the
Kramont Securities issued to me, or any substitutions therefor, a legend
stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT
OF 1933 APPLIES. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY
ONLY BE TRANSFERRED IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT
DATED , 1999 BETWEEN THE REGISTERED HOLDER HEREOF
AND KRAMONT, A COPY OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL
OFFICES OF KRAMONT."
F. I also understand that unless the transfer by me of my
[Kranzco] [CV] Securities has been registered under the Act or is a sale
made in conformity with the provisions of Rule 145, Kramont reserves the
right to put the following legend on the certificates issued to my
transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM
A PERSON WHO RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH RULE
145 PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES. THE
SHARES HAVE BEEN ACQUIRED BY THE HOLDER NOT WITH A VIEW TO, OR FOR
RESALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN THE
MEANING OF THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD, PLEDGED
OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933."
It is understood and agreed that the legends set forth in paragraphs E
and F above shall be removed by delivery of substitute certificates without
such legend if such legend is not required for purposes of the Act or this
Agreement. It is understood and agreed that such legends and the stop orders
referred to above will be removed if (i) one year shall have elapsed from the
date the undersigned acquired the Kramont Securities received in the
Reorganization and the provisions of Rule 145(d)(2) are then available to the
undersigned, (ii) two years shall have elapsed from the date the undersigned
acquired the Kramont Securities received in the Reorganization and the
provisions of Rule 145(d)(3) are then applicable to the undersigned, or (iii)
Kramont has received either an opinion of counsel, which opinion and counsel
shall be reasonably satisfactory to Kramont , or a "no action" letter
obtained by the undersigned from the staff of the Commission, to the effect
that the restrictions imposed by Rule 145 under the Act no longer apply to
the undersigned.
Execution of this letter should not be considered an admission on my
part that I am an "affiliate" of [CV] [KRT Trust] as described in the first
paragraph of this letter or as a waiver of any rights I may have to object to
any claim that I am such an affiliate on or after the date of this letter.
Very truly yours,
________________________________
Name:
Accepted this __ day of
____________________, 2000 by
Kramont
By:_______________________
Name:_________________
Title:________________
<PAGE>
Exhibit L
to the Merger Agreement
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of ___________, 1999, between KRAMONT REALTY
TRUST, a Maryland real estate investment trust with offices at Plymouth
Plaza, Suite 200, 580 West Germantown Pike, Plymouth, PA 19462 (the
"Company"), and Norman M. Kranzdorf, an individual residing at
_________________________________ ("NMK").
NMK has been the President and Chief Executive Officer of Kranzco Realty
Trust and its controlled affiliates for many years. CV Reit, Inc. and
Kranzco Realty Trust have entered into an Agreement dated ______________,
1999 (the "Reorganization Agreement") pursuant to which, as a result of
various transactions, the business and properties of CV Reit, Inc. and
Kranzco Realty Trust will be merged and combined in an "Upreit Structure" in
which the Company will be the surviving company. The Company desires to
assure itself of the continued availability of the knowledge, advice and
board of trustee services of NMK following the merger. Effective upon the
Effective Time (as defined in the Reorganization Agreement) the Company
desires to employ NMK and NMK desires to accept such employment on the terms
and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and
covenants herein contained and intending to be legally bound hereby, the
parties agree as follows:
1. Employment.
The Company hereby offers and NMK hereby accepts employment with
the Company on the terms and conditions contained herein. It is understood
that NMK shall serve as a trustee of the Company for no additional
compensation. It is also understood that NMK will serve as the Chairman of
the Board although his compensation hereunder shall continue and shall not be
reduced if his title is changed to such other title as may be agreed upon by
the Company and NMK.
2. Duties.
(a) NMK shall have only such duties, not inconsistent with
his status as the Chairman of the Board, as may from time to time be assigned
to him by the Board of Trustees of the Company. NMK has agreed to serve as a
trustee of such controlled affiliates of the Company as the Company may
request, and represent the Company on committees of NAREIT and ICSC and such
other trade association groups as the Company may deem appropriate. NMK
shall fulfill his duties hereunder faithfully and responsibly and to further
the best interests of the Company.
(b) NMK shall devote such time, attention and energies during
business hours to the performance of his duties hereunder as is necessary to
properly carry out his responsibilities under this Agreement.
(c) NMK shall not be required to relocate outside the
metropolitan Philadelphia, Pennsylvania area. If NMK agrees to undertake any
business travel, he shall be reimbursed pursuant to Paragraph 6 of this
Agreement for reasonable costs and expenses incurred in connection therewith.
(d) Under the Merger Agreement NMK is designated as a trustee
of the Company following the Effective Time. If NMK's term of employment has
not been terminated pursuant to Paragraph 7 of this Agreement, the Company
will, upon the expiration of NMK's term as a trustee, include NMK in its
slate of nominees for reelection upon the expiration of each term as trustee
so that he shall be a trustee for the remainder of NMK's term of employment.
NMK agrees, if requested, to resign as a trustee effective at the
termination of his term of employment, except if his term of employment is
terminated by the Company without proper cause.
3. Employment Term.
Subject to the provisions of Paragraph 7 of this Agreement, NMK's
term of employment shall be for a five year period commencing on the
Effective Time.
4. Compensation.
For all services rendered by NMK pursuant to this Agreement, the
Company shall pay NMK salary at the rate of $350,000 per annum for the period
from the Effective Time until the third anniversary of the Effective Time,
and at the rate of $175,000 per annum from such date until the fifth
anniversary of the Effective Time. NMK's salary shall be payable bi-weekly
or at such other regular intervals, not less frequently than monthly, as the
Company may establish from time to time for executive employees of the
Company.
Nothing herein contained shall preclude the Board of Trustees of
the Company in its sole discretion from increasing NMK's salary hereunder or
from awarding NMK any bonus, any options to purchase shares, share
appreciation rights, grants of shares or other forms of compensation.
5. Definition of a "Change of Control".
(a) 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, 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) NMK is the other party to the transaction (a "Control
Event") that would otherwise result in a "change in control of the
Company" or (b) NMK is an executive officer, trustee, director or
more than 5% equity holder of the other party to the Control 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, fifty percent (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.
Neither the definition of a Control Event or any other provision hereof is
intended to limit NMK's fiduciary obligation to refrain from taking personal
advantage of any corporate opportunity of the Company.
6. Benefits.
(a) During the term of employment NMK shall be entitled to
participate in all of the Company's employee benefit plans (including
pension, retirement, savings benefit, health and dental insurance programs,
group and life insurance plans and programs) maintained by the Company from
time to time in accordance with the terms of such employee benefit plans as
in effect from time to time. Notwithstanding the foregoing, nothing herein
shall obligate the Company to continue, maintain or establish any such
employee benefit plans. The Company shall reimburse NMK, upon proper
accounting, for reasonable expenses and disbursements incurred by him in the
course of his performance of his duties hereunder. NMK shall be entitled to
take such vacation time as he deems appropriate without any reduction in
compensation. NMK shall be provided with such other benefits and perquisites
as may be determined by the Board of Trustees of the Company. NMK shall have
the right to continued use of his current automobile and/or a similar
automobile and the Company shall pay all costs related to the operation,
insurance and maintenance of such automobile.
(b) During the term of this Agreement, NMK shall be permitted
to attend, at the Company's expense, ISCS, NAREIT, New America International,
Wharton Realty Advisory Board and other real estate industry conferences and
the Company shall pay for all membership fees, and expenses (including
travel) related to membership, in trade and industry organizations, the Penn
Club and other similar organizations.
7. Termination and Severance Benefits.
(a) If NMK shall die during the term of employment under this
Agreement, the compensation provided in Paragraph 4 of this Agreement shall
be paid in such installments as would be required under Paragraph 4 of this
Agreement to the person designated from time to time in writing by NMK and,
if not so designated, to NMK's estate, until the fifth anniversary of the
Effective Time. The person designated by NMK and, if not so designated,
NMK's estate, shall also receive any accrued but unpaid bonus, award or other
benefit and, to the extent not inconsistent with any plan under which shares
of stock of the Company or options therefor have been granted to NMK, all
options and restricted stock awards shall vest and be immediately exercisable
and no longer subject to restrictions.
(b) NMK may terminate this Agreement for "Good Reason" if any
of the following events occurs:
(i) the assignment to NMK of any duties materially
inconsistent with his status;
(ii) the Company's material breach of any of its agreements or
obligations under this Agreement including the failure by the
Company to pay NMK any installment of his salary or a previous
award under any bonus or incentive compensation arrangement;
(iii)the failure of the Company to obtain a satisfactory
agreement from any successor to assume and agree to perform this
Agreement, as contemplated in Paragraph 15 hereof;
(iv) any purported termination of NMK's employment which is
not effected pursuant to a Notice of Termination satisfying the
requirements of Paragraph 8 below;
(v) any purported termination of NMK's employment for proper
cause which is not effected pursuant to the procedures of Paragraph
7(c) below (and for purposes of this Agreement, no such purported
termination shall be effective); or
(vi) any change in control of the Company.
Upon termination of NMK's employment under this Paragraph 7(b)
(except as a result of a change in control of the Company), the Company shall
pay NMK a lump sum severance payment equal to his salary during the remainder
of the term of employment plus accrued and unpaid bonuses, if any, such
severance payment to be paid within fifteen (15) days of such termination.
Upon termination of NMK's employment under this Paragraph 7(b) following any
change in control of the Company, the Company shall pay NMK a lump sum
severance payment of $1,040,000 if the termination is prior to the third
anniversary of the Effective Time or of $520,000 if the termination is on or
after the third anniversary of the Effective Time. Upon termination of NMK's
employment under this Paragraph 7(b) following any change in control of the
Company, the Company shall, in addition, pay NMK an amount (the "Additional
Amount"), if any, equal to taxes actually payable by NMK under Section 4999
of the Internal Revenue Code of 1986, as amended (the "Code") with respect
to any "excess parachute payment" within the meaning of the Code and the
Treasury regulations thereunder, plus all federal, state and local income
taxes payable by him with respect to such Additional Amount, such payment or
payments to be made at least five (5) days prior to the due date of such
taxes pursuant to NMK's certification by notice to the Company to the effect
that the tax payment is payable by him on such due date. NMK shall promptly
after such due date, certify to the Company that such tax payment has been
made by him. Upon termination of NMK's employment under this Paragraph 7(b),
NMK shall also be entitled to receive any accrued but unpaid bonus, award or
other benefit and, to the extent not inconsistent with any plan under which
shares of stock of the Company or options therefor have been granted to NMK,
all options and restricted stock awards shall vest and be immediately
exercisable or no longer subject to restrictions.
(c) The Company, by notice to NMK, may terminate NMK's term
of employment under this Agreement for proper cause. As used herein, "proper
cause" shall mean (i) the willful and continued failure by NMK to
substantially perform his duties with the Company (other than any such
failure resulting from the NMK's incapacity due to physical or mental illness
or any such actual or anticipated failure resulting from termination by NMK
for Good Reason) after a written demand for substantial performance is
delivered to NMK by the trustees of the Company, which demand specifically
identifies the manner in which the trustees believe that NMK has not
substantially performed his duties, or (ii) the willful engaging by NMK in
conduct which is demonstrably and materially injurious to the Company,
monetarily or otherwise. For purposes of this subsection 7(c), no act, or
failure to act, on NMK's part shall be deemed "willful" unless done, or
omitted to be done, by NMK otherwise than in good faith and in a manner that
NMK reasonably believed was in or not opposed to the best interests of the
Company and its shareholders. Notwithstanding the foregoing, NMK shall not
be deemed to have been terminated for proper cause unless and until there
shall have been delivered to NMK a copy of a resolution duly adopted by the
affirmative vote of not less than two-thirds of all of the trustees of the
Company at a meeting of the trustees called and held for such purpose (after
reasonable notice to NMK and an opportunity for him, together with counsel of
his choosing, to be heard before the trustees not less than ten (10) business
days after the giving of such notice), finding that in the good faith opinion
of the trustees, NMK conducted himself as set forth above in clause (i) or
(ii) of the first sentence of this Paragraph 7(c) and specifying the
particulars of such conduct in detail.
Upon termination of NMK's term of employment under this Agreement
for proper cause, the Company shall pay NMK's salary through the Date of
Termination and shall have no further obligations to NMK under this
Agreement.
(d) In the event that a reputable medical doctor ("Consulting
Physician") selected by the Board of Trustees of the Company and engaged at
the expense of the Company determines that NMK, by reason of physical or
mental disability, is and has been unable to perform substantially his usual
and customary duties under this Agreement for a period of ninety (90)
consecutive days or one hundred twenty (120) days in the aggregate in any
twelve (12) month period ("Disability"), NMK's term of employment under this
Agreement shall be terminated but the Company shall continue to pay NMK's
salary in such installments as would be required under Paragraph 4 of this
Agreement and continue NMK in such health and dental insurance programs and
life insurance plans and programs, until the fifth anniversary of the
Effective Time, except that the Company may reduce payments made thereafter
to NMK by the amount of any disability insurance benefits received by NMK
under any employee benefit plan of the Company.
(e) The Company agrees that the terms of any restricted stock
awards granted to NMK shall provide that such awards shall immediately vest
and no longer be subject to forfeiture in the event of the death of NMK or
the termination of his employment for "Good Reason". The Company further
agrees that the terms of any options granted to NMK shall provide that such
options shall, in the event of the death of NMK or the termination of his
employment for "Good Reason", not terminate but immediately vest in full and
be exercisable by NMK at any time during the one year period commencing on
the date NMK so terminates this Agreement or dies. Nothing herein shall
obligate the Company to make any restricted stock awards or grant any options
to NMK.
8. Notice of Termination. Any purported termination of the
NMK's employment by the Company or by NMK shall be communicated by a written
Notice of Termination to the other party hereto in accordance with Paragraph
16 hereof. For purposes of this Agreement, a "Notice of Termination" shall
mean a notice which shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of NMK's employment
under the provision so indicated.
9. Date of Termination, Etc.
(a) "Date of Termination" shall mean if NMK's employment is
terminated pursuant to Paragraph 7(b), 7(c) or 7(d) above, the date specified
in the Notice of Termination (which shall not be less than thirty (30) days
from the date such Notice of Termination is given); provided, however, if
within thirty (30) days after any Notice of Termination is given the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be the date
on which the dispute is finally resolved, either by mutual written agreement
of the parties, or by a binding arbitration award rendered pursuant to the
provision of Paragraph 12 hereof (which is not appealable or the time for
appeal therefrom having expired and no appeal having been perfected), except
that with respect to a termination of this Agreement by reason of expiration
of its term as provided in Paragraph 3, the Date of Termination shall be the
date the term hereof expires pursuant to Paragraph 3, regardless of whether a
dispute exists with respect thereof; provided, further, that the Date of
Termination shall be extended by a notice of dispute only if such notice is
given in good faith and the party giving such notice pursues the dispute, the
Company will continue to pay NMK his full compensation in effect when the
notice giving rise to the dispute was given (including, but not limited to,
salary and installments under any bonus plan) and continue NMK as a
participant in all compensation, benefit and insurance plans in which he was
participating when the notice giving rise to the dispute was given, until the
dispute is finally resolved in accordance with this Paragraph. Amounts paid
under this Paragraph 9 are in addition to all other amounts due under this
Agreement and shall not be offset against or reduce any other amounts due
under this Agreement. If it is finally determined by a binding arbitration
award (which is not appealable or the time for appeal therefrom having
expired and no appeal having been perfected), that NMK was terminated for
proper cause, NMK shall promptly remit to the Company the amount of any cash
payments and the value of any non-cash benefits paid pursuant to this
Paragraph 9 to which NMK would not otherwise have been entitled.
(b) In addition to all other amounts payable to NMK under
Paragraph 7 of this Agreement, NMK shall be entitled to receive all benefits
payable to him under the Company's Pension Plans applicable to him in
accordance with the terms of such plans as in effect from time to time and
any other plan or agreement relating to retirement benefits as in effect upon
the occurrence of a change in control.
(c) NMK shall not be required to mitigate the amount of any
payment provided for in Paragraph 7 of this Agreement by seeking other
employment or otherwise, nor shall the amount of any payment or benefit
provided for in this Agreement 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 Agreement.
10. Indemnification. The Company shall defend and hold NMK
harmless to the fullest extent permitted by law in connection with any claim,
action, suit, investigation or proceeding arising out of or relating to
performance by NMK of service for, or action of NMK as a director or employee
of the Company or any affiliate of the Company, or of any other person or
enterprise at the Company's request.
11. Noncompetition.
NMK agrees that during the term of employment and for a period of
one (1) year following the termination of this Agreement ("Covenant Period"):
(a) Not to hire, directly or indirectly, or entice or
participate in any efforts to entice to leave the Company's employ, any
person who was an employee of the Company, any controlled affiliates of the
Company, or the predecessors of any of them.
(b) Not to directly or indirectly solicit, induce or
influence any person, including without limitation any tenant or prospective
tenant of any retail shopping center or other commercial real estate owned,
directly or indirectly, in whole or in part, by the Company or its affiliates
or with whom the Company or any of its affiliates has a direct or indirect
business relationship (each a "Restricted Party") anywhere within a
geographical area in which the Company and NMK, any affiliate of NMK, any
entity which employs NMK or any entity in which NMK owns a beneficial
interest (an "NMK Affiliate") are then in competition ("Restricted
Territory") to discontinue or reduce the extent of such Restricted Party's
relationship with the Company or any of its affiliates in the Restricted
Territory (including, without limitation, to terminate a lease before the
stated expiration date, to reduce the amount of space demised pursuant to a
lease, to fail to enter into a proposed lease or to fail to exercise any
renewal or expansion in any then existing lease).
(c) To hold in a fiduciary capacity for the benefit of the
Company and its affiliates, and not directly or indirectly use or disclose
any Trade Secret (as hereinafter defined), that NMK may have acquired during
the term of his employment by the Company for so long as such information
remains a Trade Secret. In addition to the foregoing and not in limitation
thereof, NMK agrees that during the period of his employment by the Company
and the Covenant Period, he will hold in a fiduciary capacity for the benefit
of the Company and its affiliates and shall not directly or indirectly use or
disclose, any Confidential or Proprietary Information that NMK may have
acquired (whether or not developed or compiled by NMK and whether or not NMK
was authorized to have access to such information) during the term of, in the
course of or as a result of his employment by the Company or any predecessor.
"Trade Secret" means information including, but not limited to, technical or
nontechnical data, a formula, a pattern, a program, a device, a method, a
technique, a drawing, a process, financial data, financial plans, product
plans, or a list of actual or potential customers or suppliers which derives
economic value, actual or potential from not being generally known to, and
not being readily ascertainable by proper means by, other persons who can
obtain economic value from its disclosure or use; and is the subject of
reasonable efforts by the Company or any affiliate to maintain its secrecy.
"Confidential or Proprietary Information" means any secret, Confidential or
Proprietary Information of the Company or any affiliate not otherwise
included in the definition of Trade Secret. The term does not include
information that has become generally available to the public by the act of
one who has the right to disclose such information without violating any
right of the Company or any affiliate.
(d) NMK acknowledges that the restrictions, prohibitions and
other provisions hereof, including without limitation the definition of
Restricted Territory, are reasonable, fair and equitable in scope, terms and
duration, are necessary to protect the legitimate business interests of the
Company and its affiliates, and are a material inducement to the Company and
its affiliates to enter into the Merger Agreement. In the event of a breach
or attempted breach of this Paragraph, the Company shall be entitled to
preliminary and permanent injunctive relief without proof of actual damages
or posting of any bond or other security. NMK hereby waives, and covenants
not to assert in any action or proceeding relating to this Agreement, any
claim or defense that there exists an adequate remedy at law for breach of
this Agreement.
12. Arbitration. The parties hereto will endeavor to resolve in
good faith any controversy, disagreement or claim arising between them,
whether as to the interpretation, performance or operation of this Agreement
or any rights or obligations hereunder. If they are unable to do so, any
such controversy, disagreement or claim will be submitted to binding
arbitration, for final resolution without appeal, by either party giving
written notice to the other of the existence of a dispute which it desires to
have arbitrated. The arbitration will be concluded in Philadelphia,
Pennsylvania by a panel of three (3) arbitrators and will beheld in
accordance with the rule of the American Arbitration Association. Of these
three arbitrators, one will be selected by the Company, one will be selected
by NMK and the third will be selected by the two arbitrators so selected.
Each party will notify the other party of the arbitrator selected by him or
it within fifteen (15) days after the giving of the written notice referred
to in this Paragraph 12. The decision and award of the arbitrators must be
in writing and will be final and binding upon the parties hereto. Judgment
upon the award may be entered in any court having jurisdiction thereof, or
application may be made to such court for a judicial acceptance of the award
and an order of enforcement, as the case may be. The expenses of arbitration
will be borne in accordance with the determination of the arbitrators with
respect to the dispute or difference undergoing arbitration, all other
obligations of the parties will continue as stipulated herein, and all monies
not directly involved in such dispute or difference will be paid when due.
13. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of Pennsylvania,
without regard to conflicts of law principles.
14. Entire Agreement. This Agreement sets forth the entire
agreement of the parties and is intended to supersede all prior employment
negotiations, understandings and agreements including, without limitation,
the Severance Agreement between Klein Realty Trust and NMK dated March 28,
1997. 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.
15. Successors; Binding Agreement.
(a) This Agreement shall inure to the benefit of and be
enforceable by NMK's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If
NMK should die while any amount would still be payable to him hereunder if he
had continued to live, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement to the NMK's
devisee, legatee or other designee or, if there is no such designee, to the
NMK's estate.
(b) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree in writing to perform this Agreement in the same manner and
to the same extent that the Company would be required to perform it if no
such succession had taken place. Failure of the Company to obtain and
deliver to NMK such assumption and agreement prior to (but effective only
upon) such succession shall be a breach of this Agreement, except that for
purposes of implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the Date of Termination. As used in this
Agreement, "Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid which assumes and agrees
to perform this Agreement, expressly, by operation of law, or otherwise.
16. 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 Paragraph 16. All notices shall be deemed to
have been given as of the date of personal delivery, transmittal or mailing
thereof.
17. 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 provisions hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
KRAMONT REALTY TRUST
By:___________________________
Name:
Title:
_______________________________
NMK
<PAGE>
Exhibit M
to the Merger Agreement
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is entered into _______________, 2000, by and
between KRAMONT REALTY TRUST a Maryland real estate investment trust with
offices at Plymouth Plaza, Suite 200, 580 West Germantown Pike, Plymouth, PA
19462 (the "Company"), and LOUIS P. MESHON, SR. ("Executive").
BACKGROUND:
Executive is employed as the President of C V Reit, Inc. and of its
controlled affiliates pursuant to an employment agreement dated December
31, 1997 between Montgomery CV Trust and Executive. C V Reit, Inc. and
Kranzco Realty Trust have entered into an agreement dated ______________,
1999 (the "Reorganization Agreement") pursuant to which, as a result of
various transactions, the business and properties of C V Reit, Inc. and
Kranzco Realty Trust will be merged and combined in an "Upreit Structure" in
which Kramont Realty Trust will be the surviving company. Effective upon the
Effective Time (as defined in the Reorganization Agreement) the Company
desires to employ Executive as its President and Chief Executive Officer and
Executive desires to accept such employment, on the terms and conditions of
this Agreement. Effective upon the Effective Time, this Agreement shall
supersede the aforementioned employment agreement dated December 31, 1997.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained and intending to be legally bound hereby, the parties agree
as follows:
1. Employment.
The Company hereby on the terms and conditions contained herein. It is
understood that Executive shall simultaneously serve as Chief Executive
Officer of all controlled affiliates of the Company and as a director or
trustee (as applicable) of the Company and of any controlled affiliates, for
no additional compensation.
2. Duties.
As President and Chief Executive Officer the Executive shall be
responsible for the operations and the management of the Company and its
controlled affiliates under the supervision of the Board of Trustees of the
Company. Executive shall have the power to hire and/or terminate all
officers, executives and employees of the Company. All officers, executives
and employees of the Company shall, either directly or through subordinates,
report to Executive. Executive shall report directly to the Board of
Trustees of the Company and shall have such duties and authority as are
consistent with his position of President and Chief Executive Officer.
Executive will devote his entire business time and efforts to his duties
hereunder, subject to his health and his community and charitable interests,
and shall fulfill those duties faithfully and responsibly and to further the
best interests of the Company.
3. Term.
Subject to the provisions of Paragraph 7 of this Agreement, the initial
term of Executive's employment shall commence at the Effective Time and shall
end on the fifth anniversary of the Effective Time (the "Initial Term of
Employment") . At the expiration of the Initial Term of Employment, the term
of employment under this Agreement shall continue for successive one (1) year
periods unless Executive's employment is terminated as provided in Paragraph
7 of this Agreement or unless either the Company or Executive shall have
given the other at least ninety (90) days' written notice prior to the
termination of the then current term of Executive's employment of his or its
desire to terminate this Agreement at the termination of the then current
period.
4. Base Salary and Bonuses.
During the term of employment, the Company shall compensate the
Executive in the following manner:
(a) Base Salary. The Company shall compensate Executive at the
base salary of $325,000 per annum ("Base Salary"), payable in by-weekly or
such other installments, not less frequently than monthly, as the Company may
establish from time to time for executive employees of the Company.
(b) Discretionary Salary Review. The Board of Trustees of the
Company may in their sole discretion at any time increase the Base Salary or
other compensation of Executive.
(c) Performance Bonus. In addition to the Base Salary and any
other compensation provided under this Agreement, the Company will pay to
Executive a Performance Bonus for each calendar year (or portion thereof).
During the term of this Agreement the Performance Bonus shall be determined
by the Company's independent auditor and shall be paid to the Executive not
later than 100 days after the calendar year. The Performance Bonus shall be
in an amount calculated as follows: if the FFO Per Share (as hereinafter
defined) shall be no less than $1.50 and no more than $1.60, the Performance
Bonus shall be $200,000. If the FFO Per Share shall be more than $1.60, the
Performance Bonus shall be $200,000 plus $10,000 for each one cent the FFO
Per Share exceeds $1.60 up to $1.80 and $5,000 for each one cent the FFO Per
Share exceeds $1.80. If the FFO Per Share shall be less than $1.50, the
Performance Bonus shall be reduced from $200,000 by $10,000 for each one cent
that the FFO Per Share is less than $1.50, so that at an FFO Per Share of
$1.30 or less, the Executive shall not be entitled to any Performance Bonus.
In determining the Performance Bonus for any portion of a calendar year, the
FFO Per Share during the portion of the calendar which is included in the
Executive's term of employment shall be annualized and the amount of the
Performance Bonus shall be that fraction of the amount determined pursuant to
the immediately preceding sentences as the number of days during the term of
employment is over 365.
"FFO Per Share" for any calendar year (or portion thereof)
means the "Funds From Operations" (as hereinafter defined) of the Company for
such calendar year (or such portion), as shown in the financial statements
prepared in the ordinary course of business in accordance with the guidelines
of the National Association of Real Estate Investment Trusts ("NAREIT"),
divided by a number equal to the weighted average number of fully diluted
shares during such year as shown on such financial statements without giving
effect to any stock splits, stock dividends or similar events.
"Funds From Operations" means net income as reflected on the
Company's year end financial statements prepared in the ordinary course of
business, as adjusted in accordance with the guidelines of NAREIT for
purposes of determining Funds From Operations, computed in connection with
preparation of the Company's public filings.
(d) Restricted Stock Award. (A) At the Effective Time the
Company shall sell to Executive 75,000 restricted shares of Common Stock of
the Company (the "Restricted Stock"). The agreement pursuant to which the
Restricted Stock is awarded shall provide that the Restricted Stock shall
become nonforfeitable ("vest") with respect to one fifth of such shares on
each of the anniversaries of the Effective Time; provided that Executive is
employed by the Company on each such vesting date. Furthermore, the
agreement shall provide that the Restricted Stock shall fully vest (i) on a
termination of Executive's employment for any reason following a Change in
Control (as defined herein); (ii) upon Executive's death or termination of
employment by the Company due to Disability (as defined herein), (iii) if
Executive terminates his employment for Good Reason (as defined herein), or
(iv) if Executive's employment is terminated by the Company without Cause (as
defined herein). The agreement shall also provide that upon a termination of
employment by the Company for Cause or a voluntary termination of employment
by the Executive without Good Reason, the Company shall be obligated to
purchase from the Executive and Executive shall be obligated to sell to the
Company any unvested shares of Restricted Stock for the lesser of: (i) the
Purchase Price and (ii) the fair market value of the Common Stock on the date
the Executive's employment terminates.
(B) The total purchase price for the Restricted Stock is [$
__________] (the "Purchase Price"). The Purchase Price shall be evidenced by
the Executive's full recourse promissory note (the "Note") maturing on the
fifth anniversary of its issue date, bearing interest at the rate specified
in the Note (the "Note Obligations"). The Note shall provide that upon the
earliest to occur of: (i) the full satisfaction of any and all Note
Obligations, (ii) the fifth anniversary of the issue date, if the Executive
is employed by the Company on such date or (iii) the termination of the
Executive's employment with the Company: (w) for any reason following a
Change in Control (as defined herein); (x) by the Company without Cause (as
defined herein); (y) by the Executive for Good Reason (as defined herein) or
(z) due to the Executive's death or Disability (as defined herein), the Note
and any security interest created thereby shall terminate and the Executive
shall have no obligations under the Note. The Company shall pay the
Executive the additional amount necessary to provide the Executive with a
full gross up (the "Gross Up Payment") for any federal, state or local income
taxes or employment taxes (including any of the foregoing taxes imposed on or
attributable to the Gross Up Payment) due at the time his obligations under
the Note terminate.
5. Employee Benefit Plans.
During the term of employment Executive shall be entitled to participate
in all of the Company's employee benefit plans (including pension,
retirement, savings benefit, health and dental insurance programs, group and
life insurance plans and programs) maintained by the Company from time to
time in accordance with the terms of such employee benefit plans as in effect
from time to time. Notwithstanding the foregoing, nothing herein shall
obligate the Company to continue, maintain or establish any such employee
benefit plans. The Company will maintain at its expense throughout the
Executive's term of employment term life insurance or split dollar insurance
arrangements in the face amount of at least $5 million for the benefit of the
Executive's estate or designated beneficiaries. The Executive agrees that
the Company may also maintain life insurance policies on the life of the
Executive as to which the Company is the beneficiary. The Executive agrees
to cooperate by performing all of the requirements of the life insurer(s)
which may be conditions to the requirements of the life insurer(s).
6. Other Benefits.
The Company shall reimburse Executive, upon proper accounting, for
reasonable expenses and disbursements incurred by him in the course of his
performance of his duties hereunder. The Executive shall be entitled to four
(4) weeks of vacation without reduction in salary. Executive shall be
provided with such other benefits and perquisites which are generally made
available from time to time to senior management employees of the Company.
Executive shall have the right to continued use of an automobile and the
Company shall pay all costs related to the operation, insurance and
maintenance of such automobile.
7. Termination and Severance Benefits.
(a) Executive's employment under this Employment Agreement shall
immediately terminate and all rights, benefits and obligations hereunder
shall cease in the event of Executive's death except for benefits accrued but
unpaid for any period prior to his death, including, but not limited to, any
Performance Bonus or other benefit provided for under Paragraph 4 of this
Agreement, and except as provided in Paragraphs 4(d) and 7(c).
(b) In the event that a reputable medical doctor ("Consulting
Physician") selected by the Board of Trustees of the Company and engaged at
the expense of the Company determines that Executive, by reason of physical
or mental disability, is and has been unable to perform substantially his
usual and customary duties under this Agreement for a period of ninety (90)
consecutive days or on hundred twenty (120) days in the aggregate in any
twelve (12) month period ("Disability"), Executive's employment under this
Employment Agreement shall be terminated and all benefits and obligations
hereunder shall cease except for benefits accrued but unpaid for any period
prior to the beginning of such Disability, including, but not limited to, any
Performance Bonus or other benefit provided for under Paragraph 4 of this
Agreement, and except as provided in Paragraphs 4(d) and 7(c).
(c) Upon termination of Executive's employment under this
Agreement resulting from his death or Disability, the Company shall continue
to pay the Executive's salary to the estate of the Executive (in the event of
death) or to the Executive (in the event of Disability) for a period of
twelve (12) months from the date of termination (the "Severance Period"). In
the event of the Executive's Disability, Executive shall also receive, during
the Severance Period, those fringe benefits, perquisites and coverages
described in Paragraphs 5 and 6. The amount of any payments to be paid to
Executive as a result of Disability shall be reduced by any payments received
by the Executive from any disability or other policies paid for by the
Company.
(d) The Company shall have the right to terminate Executive's
employment under this Agreement for Cause. "Cause" means an act or omission:
(i) causing material injury to the Company or any affiliates of the Company
and involving financial gain or benefit to the Executive, his family or his
affiliates; (ii) involving repeated material breach of the Executive's
obligations; (iii) which is a material failure of the Executive to perform
his duties or failure to adhere to instructions from the Board of Trustees
after written notice from the Board; (iv) constituting a felony, or involving
any material financial defalcation; (v) involving public intoxication or use
of controlled substances without a prescription therefor; or (vi) causing
material damage to the reputation of the Company or any affiliate of the
Company;
(e) Executive shall have the right to terminate his employment
under this Agreement for Good Reason. "Good Reason" means (i) the assignment
to Executive of any duties materially inconsistent with his status as
President and Chief Executive Officer of the Company; (ii) a material breach
by the Company of any material provision of this Agreement which breach is
not remedied within thirty (30) days after receipt by the Company of notice
thereof from Executive or, notwithstanding such cure, repeated or systematic
and material breaches by the Company of any material provision of this
Agreement; (iii) any Change in Control of the Company. "Change in Control"
means the closing of a transaction or a series of related transactions which
has not been approved in advance by the Board of Trustees of the Company
which involves (i) a transfer of all or substantially all of the Company's
assets and business (whether structured as an acquisition, sale of assets,
merger, consolidation or otherwise, and whether or not the Company is the
surviving entity of the transaction) or (ii) an exchange of equity securities
of the Company or a controlled affiliate for assets or stock of another
entity or person, after which transaction less than 50% of the equity
(regardless of the form of the equity interests) of the Company or controlled
affiliate (or the surviving entity, as the case may be) is owned by the
persons and entities who were the shareholders of the Company or partners in
any affiliate immediately prior to the closing of the transaction.
(f) Upon termination of Executive's employment under Paragraph
7(d) of this Agreement, the Company shall pay the Executive's salary through
the date of termination and, except as provided in Paragraph 4(d), shall have
no further obligations to the Executive under this Agreement. Upon
termination of Executive's employment under Paragraph 7(e) of this Agreement,
the Company shall, in addition to the benefits provided under Paragraph 4(d),
pay to Executive a severance benefit, in four (4) equal quarterly payments
beginning at the end of the calendar quarter in which termination occurs, in
an amount equal to the greater of (A) the aggregate sum of all compensation
due to the Executive hereunder during the balance of the term of employment,
assuming that the annual bonuses payable to the Executive during such period
equal the average of the annual bonuses paid to the Executive under this
Agreement prior to the termination of employment, or (B) 199% of Executive's
annual salary and bonus for the year immediately prior to such termination;
and shall continue the medical, dental and life insurance coverages (or
coverage similar thereto) being provided Executive immediately prior to the
date of termination of employment which shall be continued in effect, at the
Company's expense (provided that coverage can be obtained at commercially
reasonable rates), for a period ending on the sooner of three years from the
date of termination of employment or the date on which Executive obtains new
employment which provides him with such coverage; provided, however, that in
no event shall any payment be made under this Section 7(f) to the extent such
payment would constitute an "excess parachute payment" within the meaning of
Section 280G of the Internal Revenue Code, of 1986, as amended (the "Code")
determined without regard to Section 280G(b)(4) of the Code.
8. Indemnification.
The Company shall defend and hold Executive harmless to the fullest
extent permitted by law in connection with any claim, action, suit,
investigation or proceeding arising out of or relating to performance by
Executive of services for, or action of Executive as a director, officer or
employee of the Company or any affiliate of the Company, or of any other
person or enterprise at the Company's request. To the extent required, the
Company shall amend its by-laws and articles to reflect the foregoing.
9. Noncompetition.
Executive agrees that during the Term of Employment and for a period of
one (1) year following the termination of this Agreement ("Covenant Period"):
(a) Not to hire, directly or indirectly, or entice or participate
in any efforts to entice to leave the Company's employ, any person who was an
employee of the Company.
(b) Not to directly or indirectly solicit, induce or influence any
person, including without limitation any tenant or prospective tenant of any
retail shopping center or other commercial real estate owned, directly or
indirectly, in whole or in part, by the Company or its affiliates or with
whom the Company or any of its affiliates has a direct or indirect business
relationship (each, a "Restricted Party") anywhere within a geographical area
in which the Company and the Executive, any affiliate of Executive, any
entity which employs Executive or any entity in which Executive owns a
beneficial interest (an "Executive Affiliate") are then in competition
("Restricted Territory") to discontinue or reduce the extent of such
Restricted Party's relationship with the Company or any of its affiliates in
the Restricted Territory (including, without limitation, to terminate a lease
before the stated expiration date, to reduce the amount of space demised
pursuant to a lease, to fail to enter into a proposed lease or to fail to
exercise any renewal or expansion in any then existing lease).
(c) To hold in a fiduciary capacity for the benefit of the Company
and its affiliates, and not directly or indirectly use or disclose any Trade
Secret (as hereinafter defined), that the Executive may have acquired during
the term of his employment by the Company for so long as such information
remains a Trade Secret. In addition to the foregoing and not in limitation
thereof, the Executive agrees that during the period of his employment by the
Company and the Covenant Period, he will hold in a fiduciary capacity for the
benefit of the Company and its affiliates and shall not directly or
indirectly use or disclose, any Confidential or Proprietary Information that
the Executive may have acquired (whether or not developed or compiled by the
Executive and whether or not the Executive was authorized to have access to
such information) during the term of, in the course of or as a result of his
employment by the Company. "Trade Secret" means information including, but
not limited to, technical or nontechnical data, a formula, a pattern, a
program, a device, a method, a technique, a drawing, a process, financial
data, financial plans, product plans, or a list of actual or potential
customers or suppliers which derives economic value, actual or potential from
not being generally known to, and not being readily ascertainable by proper
means by, other persons who can obtain economic value from its disclosure or
use; and is the subject of reasonable efforts by the Company or any affiliate
to maintain its secrecy. "Confidential or Proprietary Information" means any
secret, Confidential or Proprietary Information of the Company or any
affiliate not otherwise included in the definition of Trade Secret. The term
does not include information that has become generally available to the
public by the act of one who has the right to disclose such information
without violating any right of the Company or any affiliate.
(d) The Executive acknowledges that the restrictions, prohibitions
and other provisions hereof, including without limitation the definition of
Restricted Territory, are reasonable, fair and equitable in scope, terms and
duration, are necessary to protect the legitimate business interests of the
Company and its affiliates, and are a material inducement to the Company and
its affiliates to enter into the Reorganization Agreement. In the event of a
breach or attempted breach of this Paragraph 9, the Company shall be entitled
to preliminary and permanent injunctive relief without proof of actual
damages or posting of any bond or other security. The Executive hereby
waives, and covenants not to assert in any action or proceeding relating to
this Agreement, any claim or defense that there exists an adequate remedy at
law for breach of this Agreement.
(e) Notwithstanding the foregoing, the Executive's ownership
interests in, and participation in the management and operation of, Laurel
Mall Associates, Renaissance Plaza Associates and Lane Plaza Associates shall
not be deemed to violate the provisions of this Paragraph 9.
10. Arbitration.
The parties hereto will endeavor to resolve in good faith any
controversy, disagreement or claim arising between them, whether as to the
interpretation, performance or operation of this Agreement or any rights or
obligations hereunder. If they are unable to do so, any such controversy,
disagreement or claim will be submitted to binding arbitration, for final
resolution without appeal, by either party giving written notice to the other
of the existence of a dispute which it desires to have arbitrated. The
arbitration will be concluded in Philadelphia, Pennsylvania by a panel of
three (3) arbitrators and will be held in accordance with the rules of the
American Arbitration Association. Of the three arbitrators, one will be
selected by the Company, one will be selected by the Executive and the third
will be selected by the two arbitrators so selected. Each party will notify
the other party of the arbitrator selected by him or it within fifteen (15)
days after the giving of the written notice referred by him or it within
fifteen (15) days after the giving of the written notice referred to in this
Paragraph 10. The decision and award of the arbitrators must be in writing
and will be final and binding upon the parties hereto. Judgment upon the
award may be entered in any court having jurisdiction thereof, or application
may be made to such court for a judicial acceptance of the award and an order
of enforcement, as the case may be. The expenses of arbitration will be
borne in accordance with the determination of the arbitrators with respect to
the dispute or difference undergoing arbitration, all other obligations of
the parties will continue as stipulated herein, and all monies not directly
involved in such dispute or difference will be paid when due.
11. Conflicting Agreements.
Each party hereto hereby represents and warrants to the other party
that the entering into this Agreement, and the obligations and duties
undertaken by such party hereunder, will not conflict with, constitute a
breach of, or otherwise violate the terms of, any other employment or other
agreement to which he or it is a party.
12. Successors and Assigns.
(a) This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors, assigns, heirs and
personal representatives but may not be assigned by the Executive.
(b) The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation, or otherwise) to all or
substantially all of the business and/or assets of the Company to properly
assume and agree in writing to perform this Agreement in the same manner and
to the same extent that the Company would be required to perform it if no
such succession had taken place. Failure of the Company to obtain and
deliver to Executive such assumption and agreement prior to (but effective
only upon) such succession shall be a material breach of this Agreement.
13. Notices.
All notices, requests, demands and other communications hereunder
must be in writing and shall be deemed to have been duly given when delivered
by hand or 5 days after being mailed within the continental United States by
first class certified mail, return receipt requested, postage prepaid, to the
other party, addressed as follows:
If to The Company:
Plymouth Plaza
580 W. Germantown Pike, Suite 200
Plymouth Meeting, PA 19462
Attention: Managing Trustees
(with copies to all the Board of the Company
at their addresses as reflected on the records of the Company)
If to Executive:
1120 Ivymont Road
Rosemont, PA 19010
With a copy to:
Stanley S. Cohen, Esquire
2000 Market Street - 10th Floor
Philadelphia, PA 19103
Addresses may be changed by written notice sent to the other party at the
last recorded address of that party. The Company's right to terminate the
Executives's employment under this Agreement pursuant to Paragraph 7(d) may
only be exercised following at least 30 days notice to the Executive
hereunder, such notice to specify the basis for such termination and be
accompanied by a copy of a resolution duly adopted by the affirmative vote by
a majority of all of the Trustees of the Company at a meeting of the Trustees
held pursuant to notice thereof given to the Executive.
14. Governing Law. This Agreement shall be governed by, and construed
in accordance with, the internal laws of the State of Pennsylvania, without
regard to conflicts of law.
15. Severability.
If any provision of this Agreement is deemed, by a court of
competent jurisdiction, to be unenforceable as written it shall be construed
more narrowly to be as broad as is enforceable. If any provision of this
Agreement shall be adjudged by any court of competent jurisdiction to be
invalid or unenforceable for any reason, such judgment shall not affect,
impair or invalidate the remainder of this Agreement.
16. Prior Understandings.
This Agreement embodies the entire understanding of the parties
hereof, and, except as hereinafter provided, supersedes all other oral or
written agreements or understandings between them regarding the subject
matter hereof. Without limiting the generality of the foregoing, the
provisions of the employment agreement dated December 31, 1997 with respect
to the reduction in base salary, the restriction on OP Units, as well as the
provision with respect to management and leasing termination bonuses shall
have no further effect. Notwithstanding the foregoing, the stock options
heretofore granted to Executive by CV Reit, Inc. shall remain in effect and
shall, on at the Effective Time, be assumed by the Company. Simultaneously
with the execution of this Agreement, the Company is granting Executive stock
options with respect to ________ shares. No change, alteration or
modification hereof may be made except in a writing, signed by the parties
hereto. The headings in this Agreement are for convenience and reference
only and shall not be construed as part of this Agreement or to limit or
otherwise affect the meaning hereof.
<PAGE>
17. Execution in Counterparts.
This Agreement may be executed by the parties hereto in
counterparts, each of which shall be deemed to be original, but all such
counterparts shall constitute one and the same instrument, and all signatures
need not appear on any one counterpart.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
KRAMONT REALTY TRUST
Attest: _______________________ By: ______________________________
Secretary Name:
Title:
_________________________________
Louis P. Meshon, Sr.
<PAGE>
Exhibit N
to the Merger Agreement
[See Appendix E to this Joint Proxy Statement/Prospectus]
<PAGE>
Exhibit O
to the Merger Agreement
Contact:
Louis P. Meshon, Sr. Norman M. Kranzdorf Michael Cimini
CV Reit, Inc. Kranzco Realty Trust Stern & Co.
(610) 825-7100 (610) 941-9292 (212) 888-0044
For Immediate Release:
CV REIT AND KRANZCO REALTY TRUST SIGN MERGER AGREEMENT
TO FORM NEW UPREIT, KRAMONT REALTY TRUST
New Community Shopping Center REIT Will Have $800 Million Asset Base;
Projected Kramont Distribution Policy Announced
WEST PALM BEACH, FL/CONSHOHOCKEN, PA, December 13, 1999 - CV Reit, Inc.
(NYSE:CVI), a shopping center real estate investment trust (REIT), and
Kranzco Realty Trust (NYSE:KRT), a shopping center REIT, jointly announced
that they signed a definitive merger agreement and reorganization plan to
merge their operations to create a new community shopping center umbrella
partnership real estate investment trust (UPREIT) to be called Kramont Realty
Trust.
Terms of the merger call for shareholders of CV Reit and Kranzco to
receive one share of Kramont Realty Trust common stock for each outstanding
share of CV Reit and Kranzco on a tax-free basis. The merger agreement is
subject to approval by shareholders of both companies and other customary
conditions.
Louis P. Meshon, Sr., president and chief executive officer of CV Reit,
will assume the same titles and responsibilities at the newly created Kramont
Realty Trust with CV Reit to hold a majority of board seats. Norman M.
Kranzdorf, president and chief executive officer of Kranzco, will assume the
title of chairman of the board at Kramont, whose shares will trade on the New
York Stock Exchange. Corporate headquarters will be located at the existing
facilities of Montgomery CV Realty, L.P., in Plymouth Meeting, Pennsylvania.
Kramont Realty Trust will consist of 84 properties encompassing
approximately 11 million square feet in 16 states with an asset base of
approximately $800 million. Major anchor tenants include supermarkets,
discount stores and drug stores such as Albertson's, Wal-Mart, Kmart, Home
Depot, CVS and Eckerd's.
Noting CV Reit's occupancy rate of more than 98 percent, Meshon said,
"We are excited about the tremendous potential for internal growth of this
merger given CV Reit's expertise in successfully acquiring, retenanting and
redeveloping properties combined with Kranzco's larger geographic market
diversification and property base. Through aggressive leasing, renovation,
upgrading and maintenance of properties, we expect to sharply increase
Kranzco's 92 percent occupancy rate, while increasing the value and revenue
stream from fully leased properties over the long term."
Commenting on the merger agreement, Kranzdorf said, " Kramont shall seek
to enhance shareholder value in a consolidating industry. Kramont will enable
shareholders to participate in an excellent growth opportunity. The addition
of CV Reit's management team and its existing properties, coupled with a
diverse portfolio, creates an exceptional entity that will better serve the
shareholders."
The merger agreement anticipates that the initial distribution policy of
Kramont will be paid at the annual rate of $1.30 per common share. As a
result, the annual distributions to Kranzco shareholders will be equal to the
current annual payout rate and CV Reit shareholders will receive
distributions about 12 percent greater than the $1.16 per share current
annual payout.
Salomon Smith Barney acted as financial advisor to CV Reit and ING
Barings was financial advisor to Kranzco.
CV Reit and Kranzco are, and the newly created Kramont will be,
self-administered, self-managed equity REITs, specializing in shopping center
acquisition, leasing, development and management. CV Reit owns 22 income
producing properties, aggregating approximately 2 million square feet,
principally neighborhood shopping canters located in the Mid-Atlantic region
and Florida. Kranzco owns 62 properties encompassing approximately 9 million
square feet. Kramont will have 84 properties totaling approximately 11
million square feet in 16 states.
Safe Harbor Statement: This press release 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 and Exchange Act of
1934, as amended. Future events and actual results, financial and otherwise,
may differ materially from the results discussed in the forward-looking
statements. Certain forward-looking statements contained in this press
release reflect management's current views as well as 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; cost
overruns and delays on expansion and development projects; financing risks,
such as the inability to obtain debt or equity financings 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 from time to time in the Company's reports filed with
the Securities and Exchange Commission or otherwise publicly disseminated by
the Company. All forward-looking statements included in the press release are
based on information available to the Company on the date hereof, and the
Company assumes no obligation to update such forward-looking statements.
Although the Company believes that the assumptions and expectations reflected
in such forward-looking statements are reasonable, it can give no assurance
that such expectations will prove to have been correct or that the Company
will take any actions that may presently be planned.
####
<PAGE>
Exhibit P
to the Merger Agreement
THIRD LEASE AMENDMENT
THIS THIRD LEASE AMENDMENT is made this ____ day of _______, 2000 (the
"Effective Date"), by and between Norman M. Kranzdorf ("Lessor") and Kranzco
Realty Trust, a Maryland real estate investment trust ("Lessee").
WITNESSETH:
WHEREAS, Lessor and Lessee, or their predecessors in interest, are
parties to that certain Lease dated January 13, 1989, which lease was amended
by that certain Lease Amendment dated October 11, 1993, and which was further
amended by that certain Second Lease Amendment dated April 9, 1998
(collectively, the "Lease"), wherein Lessor leased to Lessee those premises
located at hereinafter referred to as the "Demised Premises"; and
WHEREAS, Lessor and Lessee now desire to amend the Lease as hereinafter
set forth.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally
bound hereby, the parties hereto agree as follows:
Defined Terms. All capitalized terms used herein and not otherwise defined
shall have the meaning given to such terms in the Lease.
Right of Termination. A new Section 2.18 shall be added to the Lease, as
follows:
"Section 2.18. Lessor and Lessee agree that, in the event that Lessor
enters into an agreement to sell its interest in the Demised Premises, Lessor
shall, within two days of entering into such agreement, deliver notice
("Lessor's Notice") of Lessor's entering into such agreement to Lessee.
Lessor and Lessee shall have the right to terminate this Lease by delivering
written notice (the "Termination Notice") to the other within sixty days
after Lessee's receipt of Lessor's Notice. If Lessor or Lessee so elects to
terminate this Lease, the term of this Lease shall end on the date the
purchase and sale of Lessor's interest in the Demised Premises closes, as
fully and completely as if such date were the date originally set forth in
the Lease for the end of the term. In the event said sale and purchase is
not consummated, this Lease shall continue in full force and effect until the
termination date set forth in this Lease. Any proposed future sale by Lessor
of the Demised Premises shall also be subject to this Section 2.18."
Right to Assign / Sublease. Section 3.13 of the Lease shall be deleted in
its entirety, and shall be replaced with the following:
"Section 3.13. Lessee shall have the right, with the consent of Lessor,
not to be unreasonably withheld or delayed, to assign its interest in this
Lease or sublease all or a portion of the Demised Premises, provided that (i)
Lessor is given at least ten (10) days to review the document of assignment
or sublease, (ii) Lessee agrees to remain liable to Lessor for the
obligations of Lessee under the Lease after such assignment or sublease, and
(iii) that the sublessee or assignee in question agrees to use the Demised
Premises (or portion thereof sublet) in a manner substantially similar to
that of Lessee. In the event Lessor unreasonably withholds its consent to
such proposed assignment or sublease by Lessee, and Lessee has so agreed to
remain liable to Lessor under the terms of the Lease, and the sublessee or
assignee in question agrees to use the Demised Premises (or portion thereof
sublet) in a manner substantially similar to that of Lessee, then (a) in the
event of a proposed assignment or sublease of substantially all of the
Demised Premises, Lessee shall have the right to terminate this Lease by
delivering a Termination Notice to Lessor within ten days after Lessor
refuses to so consent, or (b) in the event of a proposed sublease of less
than substantially all of the Demised Premises, Lessee shall have the right
to terminate this Lease only as to that portion of the Demised Premises that
Lessee intended to sublet by delivering a Termination Notice to Lessor within
ten days after Lessor refuses to so consent. If Lessee elects to terminate
this Lease pursuant to either (a) or (b) above, the term of this Lease shall
end (as to either all or the portion of the Demised Premises Lessee intended
to sublet, as the case may be) as of a date set forth in the Termination
Notice delivered to Lessor, which date shall not be less than 90 days from
the date Lessor receives Lessee's Termination Notice, as fully and completely
as if such date were the date originally set forth in this Lease for the end
of the term."
Miscellaneous.
In the event that there are any inconsistencies between the terms and
conditions of this Amendment and the terms and conditions of the Lease, the
terms and conditions of this Amendment shall control.
Except as specifically amended hereby, all of the other terms, conditions and
covenants contained in the Lease shall continue in full force and effect and
are hereby ratified, approved and republished.
This Amendment shall be binding upon and inure to the benefit of parties
hereto and their respective heirs, executors, administrators, successors and
assigns.
This Amendment may be executed in counterparts.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first above written.
LESSOR: LESSEE:
Kranzco Realty Trust
__________________________ By:__________________________
Norman M. Kranzdorf Name:
Title:
=============================================================================
AMENDMENT NO. 1 TO
AGREEMENT AND PLAN OF REORGANIZATION AND MERGER
among
KRANZCO REALTY TRUST,
KRT TRUST,
CV REIT, INC.
and
KRAMONT REALTY TRUST
Dated as of March 30, 2000
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<PAGE>
AMENDMENT NO. 1 TO
AGREEMENT AND PLAN OF REORGANIZATION AND MERGER
THIS AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF REORGANIZATION AND MERGER
(this "Amendment"), dated as of March 30, 2000, among Kranzco Realty Trust, a
Maryland real estate investment trust ("Kranzco"), KRT Trust, a Maryland real
estate investment trust and a wholly owned subsidiary of Kranzco ("KRT
Trust"), CV Reit, Inc., a Delaware corporation ("CV"), and Kramont Realty
Trust, a Maryland real estate investment trust ("Kramont").
RECITALS
WHEREAS, Kranzco, KRT Trust, CV and Kramont are parties to the Agreement
and Plan of Reorganization and Merger, dated as of December 10, 1999 (the
"Merger Agreement"). Capitalized terms not otherwise defined herein shall
have their respective meanings set forth in the Merger Agreement.
WHEREAS, the parties hereto desire to amend certain exhibits of the
Merger Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and intending
to be legally bound thereby, the parties hereto hereby agree as follows:
1. Amendments to Merger Agreement. The Merger Agreement is hereby
amended as follows:
(a) Exhibit A. Exhibit A of the Merger Agreement is hereby
deleted and replaced in its entirety by Exhibit A attached hereto.
(b) Exhibit F. Exhibit F of the Merger Agreement is hereby
deleted and replaced in its entirety by Exhibit F attached hereto.
(c) Exhibit I. Exhibit I of the Merger Agreement is hereby
deleted and replaced in its entirety by Exhibit I attached hereto.
(d) Exhibit J. Exhibit J of the Merger Agreement is hereby
deleted and replaced in its entirety by Exhibit J attached hereto.
2. Survival of Merger Agreement as Amended. Except as specifically
amended hereby, the Merger Agreement shall remain in full force and effect in
accordance with the terms thereof. All references to the "Agreement" in the
Merger Agreement shall be deemed to refer to the Merger Agreement, as amended
by this Amendment.
3. Entire Agreement. This Amendment, the Merger Agreement, the
Exhibits, the Kranzco Disclosure Letter and the CV Disclosure Letter and any
documents delivered by the parties in connection herewith or therewith
constitute the entire agreement among the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings among the
parties with respect thereto.
4. Counterparts. This Agreement may be executed by the parties hereto
in separate counterparts, each of which when so executed and delivered shall
be an original, but all such counterparts shall together constitute one and
the same instrument. Each counterpart may consist of a number of copies
hereof each signed by less than all, but together signed by all of the
parties hereto.
5. Governing Law. This Amendment shall be governed by and construed
in accordance with the laws of the State of Maryland without regard to its
rules of conflict of laws.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment and caused
the same to be duly delivered on their behalf on the day and year first
written above.
KRANZCO REALTY TRUST
ATTEST:
By: /s/ Hermina Kranzdorf By: /s/ Norman M. Kranzdorf
----------------------- -------------------------------
Hermina Kranzdorf Name: Norman M. Kranzdorf
Secretary Title: President and
Chief Executive Officer
KRT TRUST
ATTEST:
By: /s/ Hermina Kranzdorf By: /s/ Norman M. Kranzdorf
----------------------- -------------------------------
Hermina Kranzdorf Name: Norman M. Kranzdorf
Secretary Title:President and
Chief Executive Officer
CV REIT, INC.
ATTEST:
By: /s/ Orilla Floyd By: /s/ Louis P. Meshon, Sr.
----------------------- -------------------------------
Orilla Floyd Name: Louis P. Meshon, Sr.
Secretary Title:President and
Chief Executive Officer
KRAMONT REALTY TRUST
ATTEST:
By: /s/ Hermina Kranzdorf By: /s/ Louis P. Meshon, Sr.
----------------------- -------------------------------
Hermina Kranzdorf Name:Louis P. Meshon, Sr.
Secretary Title: President and
Chief Executive Officer
<PAGE>
EXHIBIT A Amended and Restated Declaration of Trust of Kramont
EXHIBIT F Articles of Merger regarding Merger of Kranzco into KRT Trust II
(Maryland)
EXHIBIT I Unit Contribution Agreement
EXHIBIT J Second Amended and Restated Agreement of Limited Partnership of CV
Partnership
<PAGE>
Exhibit A
to Amendment No. 1
to the Merger Agreement
[See Appendix D to this Joint Proxy Statement/Prospectus]
<PAGE>
Exhibit F
to Amendment No. 1
to the Merger Agreement
ARTICLES OF MERGER
OF
KRANZCO REALTY TRUST
INTO
KRT TRUST II LLC
THIS IS TO CERTIFY THAT:
FIRST: Kranzco Realty Trust, a Maryland real estate investment trust
(the "Merging Entity" or "Kranzco"), and KRT Trust II LLC, a Delaware limited
liability company, agree to merge in the manner hereinafter set forth (the
"Merger").
SECOND: KRT Trust II LLC is the entity to survive the merger (the
"Surviving Entity").
THIRD: The Surviving Entity was formed on November 5, 1999 under the
laws of the State of Delaware. The Merging Entity was formed as a real
estate investment trust under the laws of the State of Maryland on June 17,
1992.
FOURTH: The Surviving Entity is not registered or qualified to do
business in the State of Maryland. The Surviving Entity does not have a
principal office in the State of Maryland. The Merging Entity does not have
a principal office in the State of Maryland.
FIFTH: The Merging Entity owns no interest in land in the State of
Maryland.
SIXTH: The principal office of the Surviving Entity in its jurisdiction
of organization is c/o Corporation Service Company, 1013 Centre Road,
Wilmington, New Castle County, Delaware 19805. The name and address of the
Surviving Entity's resident agent in the State of Maryland are James J.
Hanks, Jr., c/o Ballard Spahr Andrews & Ingersoll, LLP, 19th Floor, 300 East
Lombard Street, Baltimore, Maryland 21202.
SEVENTH: (a) The total number of shares of all classes of beneficial
interest which the Merging Entity has the authority to issue and the number
of shares of each class are as follows:
100,000,000 shares of beneficial interest, $.01 par value per
share, of which 96,543,845 shares are classified as Common Shares of
Beneficial Interest ("Common Shares"), 11,155 shares are classified as Series
A-1 Increasing Rate Cumulative Convertible Preferred Shares of Beneficial
Interest (the "Series A-1 Preferred Shares"), 1,235,000 shares are classified
as 9.75% Series B-1 Cumulative Convertible Preferred Shares of Beneficial
Interest (the "Series B-1 Preferred Shares"), 2,070,000 shares are classified
as Series D Cumulative Redeemable Preferred Shares of Beneficial Interest
(the "Series D Preferred Shares") and 140,000 are classified as Series E
Junior Participating Preferred Shares of beneficial interest (the "Series E
Preferred Shares"). The aggregate par value of all shares of all classes
having a par value is $1,000,000.
(b) Upon the Effective Time (as defined below), the percentage
interest in the Surviving Entity of each class of limited liability company
interests of the Surviving Entity and the class of limited liability company
interests and the respective number of units representing the limited
liability company interests in each class of limited liability company
interests will be as follows:
membership common units (10,566,746) - 77.9191% of all outstanding
membership units;
Class A-1 membership preferred units (11,155) -- .0823% of all
outstanding membership units;
Class B-1 membership preferred units (1,183,277) -- 8.7254% of all
outstanding membership units; and
Class D membership preferred units (1,800,000) - 13.2732% of all
outstanding membership units
EIGHTH: Upon the Effective Time, the Merging Entity shall be
merged into the Surviving Entity; and, thereupon, the Surviving Entity shall
possess any and all purposes and powers of the Merging Entity; and all
leases, licenses, property, rights, privileges, and powers of whatever nature
and description of the Merging Entity shall be transferred to, vested in, and
devolved upon the Surviving Entity, without further act or deed, subject to
all of the debts and obligations of the Merging Entity.
Upon the Effective Time, each Common Share of the Merging Entity
shall be converted into one Common Share of Beneficial Interest, $.01 par
value per share (each a "KRT Trust Common Share"), of KRT Trust, a Maryland
real estate investment trust ("KRT Trust"), without the necessity of any
action on the part of the holder thereof.
Upon the Effective Time, each Series A-1 Preferred Share of the
Merging Entity shall be converted into one Series A-1 Increasing Rate
Cumulative Convertible Preferred Share of Beneficial Interest, $.01 par value
per share, of KRT Trust, without the necessity of any action on the part of
the holder thereof.
Upon the Effective Time, each Series B-1 Preferred Share of the
Merging Entity shall be converted into one 9.75% Series B-1 Cumulative
Convertible Preferred Share of Beneficial Interest, $.01 par value per share,
of KRT Trust, without the necessity of any action on the part of the holder
thereof.
Upon the Effective Time, each Series D Preferred Share of the
Merging Entity shall be converted into one Series D Cumulative Redeemable
Preferred Share of Beneficial Interest, $.01 par value per share, of KRT
Trust, without the necessity of any action on the part of the holder thereof.
No Series E Preferred Shares will be issued or outstanding at the
Effective Time.
Upon the Effective Time, each certificate representing a share of
beneficial interest of Kranzco issued and outstanding prior to the Merger
shall be deemed to be the certificate representing the share of beneficial
interest of KRT Trust into which such share of beneficial interest of Kranzco
was converted pursuant to the Merger, and neither KRT Trust nor the Surviving
Entity shall issue any new certificates representing any common or preferred
shares of beneficial interest or units of limited liability company interest
at the Effective Time.
Each KRT Trust Common Share held by the Merging Entity shall be
canceled upon the Effective Time, without any action on the part of or
receipt of any consideration by the holder thereof.
Upon the Effective Time, all of the outstanding membership interest
of the Surviving Entity shall be converted into 10,566,746 membership common
units of the Surviving Entity, 11,155 Class A-1 membership preferred units of
the Surviving Entity, 1,183,277 Class B-1 membership preferred units of the
Surviving Entity, and 1,800,000 Class D membership preferred units of the
Surviving Entity.
NINTH: The terms and conditions of the transaction
described in these Articles were duly advised, authorized and approved by the
Merging Entity in the manner and by the vote required by Maryland law and its
declaration of trust, as follows:
The Board of Trustees of the Merging Entity, at a meeting duly
called and held on December 10, 1999, adopted a resolution approving the
terms and conditions of the transaction described herein. No shareholder
vote on the transaction is required pursuant to Section 8-501.1(c)(4) of the
Maryland REIT Law since the Surviving Entity is a wholly-owned subsidiary of
the Merging Entity.
TENTH: The terms and conditions of the transaction described in
these Articles were duly authorized and approved by the Surviving Entity in
the manner and by the vote required by the laws of the State of Delaware and
the certificate of formation of the Surviving Entity, as follows:
The sole member approved the terms and conditions of the
transaction described in these Articles by executing that certain Agreement
and Plan of Merger and Reorganization by and between the Merging Entity and
the Surviving Entity, dated as of December 10, 1999.
ELEVENTH: The Merger shall become effective upon the later of (i)
acceptance of these Articles for record by the State Department of
Assessments and Taxation of Maryland or (ii) the filing of the certificate of
merger merging Kranzco into KRT Trust II LLC with the Secretary of State of
the State of Delaware (the "Effective Time").
TWELFTH: Each undersigned President or Member acknowledges these
Articles of Merger to be the act and deed of the entity on whose behalf he
has signed, and further, as to all matters or facts required to be verified
under oath, each President or Member acknowledges that to the best of his
knowledge, information and belief, these matters and facts relating to the
party on whose behalf he has signed are true in all material respects and
that this statement is made under the penalties for perjury.
IN WITNESS WHEREOF, these Articles of Merger have been duly executed by
the parties hereto this ____ day of ___________, 2000.
MERGING ENTITY:
ATTEST: KRANZCO REALTY TRUST
_______________________ By:_______________________(SEAL)
__________, Secretary _______________, President
SURVIVING ENTITY:
WITNESS: KRT TRUST II LLC
By: KRT Trust, its sole Member
_______________________ By:____________________(SEAL)
______________, [Title]
<PAGE>
Exhibit I
to Amendment No. 1
to the Merger Agreement
UNIT CONTRIBUTION AGREEMENT
THIS AGREEMENT is made as of __________, 2000 among KRAMONT REALTY
TRUST ("Kramont"), a Maryland real estate investment trust, the limited
partners of Montgomery CV Realty L.P., a Delaware limited partnership, that
are signatories to this Agreement (individually, a "Limited Partner" and
collectively, the "Limited Partners"), KRT OPERATING PARTNERSHIP, L.P.
("Kramont OP"), a Delaware limited partnership (which will change its name
to Kramont Operating Partnership, L.P. in connection with the Mergers
(defined below)) CV PARTNER HOLDINGS, L.P. ("Holdings"), a Delaware limited
partnership, and CV GP L.P. ("CV GP"), a Delaware limited partnership.
R E C I T A L S:
A. WHEREAS, Kranzco Realty Trust, a Maryland real estate investment
trust ("Kranzco"), KRT Trust, a Maryland real estate investment trust and a
wholly-owned subsidiary of Kranzco, CV Reit, Inc., a Delaware corporation
("CV"), and Kramont have entered into an Agreement and Plan of Reorganization
and Merger, dated as of December 10, 1999 (the "Reorganization Agreement"),
pursuant to which, among other things, CV and KRT Trust will merge with and
into Kramont (the "Mergers"), with Kramont as the surviving entity, and as a
result of the Mergers, Kramont will become the sole general partner and a
limited partner of Montgomery CV Realty L.P., a Delaware limited partnership
("CV Partnership").
B. WHEREAS, prior to the Mergers, KRT Trust is the sole member of KRT
Trust II LLC, a Delaware limited liability company, and is the sole general
partner of Kramont OP.
C. WHEREAS, in connection with and prior to the transactions
contemplated by the Reorganization Agreement, it is contemplated that
Kranzco will merge with and into KRT Trust II LLC (the "KRT Trust II
Merger"), with KRT Trust II LLC being the surviving entity, and KRT Trust II
LLC will then merge with and into Kramont OP (the "KRT Partnership Merger"),
with Kramont OP being the sole surviving entity, and as a result of such
transactions, (i) Kramont OP will own all of the assets formerly owned by
Kranzco other than Kranzco's interest in KRT Trust and (ii) KRT Trust and KRT
Trust I LLC, a Delaware limited liability company wholly-owned by KRT Trust,
will own all of the common units of partnership interest of Kramont OP (the
"Kramont Common OP Units") and all of the preferred units of partnership
interest of Kramont OP (the "Kramont OP Preferred Units").
D. WHEREAS, following consummation of the Mergers pursuant to the
Reorganization Agreement, Kramont and KRT Trust I LLC, a limited liability
company then wholly-owned by Kramont, will own all of the Kramont Common OP
Units and Kramont OP Preferred Units, as well as general partner and limited
partner interests in CV Partnership.
E. WHEREAS, Kramont desires to contribute to Kramont OP immediately
following the consummation of the Mergers all of the units of general partner
interest and units of limited partner interest in CV Partnership held by
Kramont in exchange for additional Kramont Common OP Units representing
limited partner interests in Kramont OP, pursuant to the terms and conditions
of this Agreement.
F. WHEREAS, in connection with the Mergers, each Limited Partner
desires simultaneously with the contribution described in Recital E above to
either (i) contribute to Kramont OP all of the units of limited partner
interest in CV Partnership then held by such Limited Partner in exchange for
Kramont Common OP Units representing limited partner interests in Kramont OP
or (ii) (A) first contribute to Holdings all of the units of limited partner
interest in CV Partnership then held by such Limited Partner in exchange for
units of limited partner interest in Holdings and (B) then contribute to
Kramont OP all of the units of limited partner interest in Holdings then held
by such Limited Partner (except that Louis P. Meshon, Sr. may retain units of
limited partner interest in Holdings equal to 0.1% of the total units of
limited partner interest in Holdings (the "Meshon Retained Interest") and
contribute to Kramont OP all of his remaining units of limited partner
interest in Holdings) in exchange for Kramont Common OP Units representing
limited partner interests in Kramont OP, in each case, pursuant to the terms
and conditions of this Agreement.
G. WHEREAS, following the contribution to Kramont OP of units of
general partner interest and units of limited partner interest in CV
Partnership, all of the units of limited partner interest in Holdings (other
than the Meshon Retained Interest) issued to the Limited Partners in exchange
for their contribution to Holdings of units of limited partner interest in CV
Partnership and 100% of the interests in CV OP Holdings LLC, the general
partner of Holdings, pursuant to this Agreement (such contributed units,
collectively, the "Interests"), Kramont OP desires to contribute the
Interests to CV GP.
H. WHEREAS, prior to the date hereof, the Limited Partners have each
executed a Confidentiality Agreement with respect to the Mergers and the
transactions contemplated hereby.
I. All capitalized terms used herein but not otherwise defined herein
shall have the meanings as set forth in the Reorganization Agreement.
A G R E E M E N T S:
In consideration of the foregoing premises and the respective
agreements, covenants and obligations herein contained and other good and
valuable consideration, the parties agree as follows:
1. Contributions. (a) Subject to the terms and conditions contained
herein, Kramont hereby agrees to contribute to Kramont OP all of its units of
general partner and limited partner interests in CV Partnership to be
acquired by Kramont in connection with the Mergers (the "Kramont Contributed
Interests"), free and clear of all liens, security interests, pledges,
mortgages, rights of first refusal, options, proxies, voting trusts or other
encumbrances ("Liens") in exchange for the number of Kramont Common OP Units
representing limited partner interests in Kramont OP set forth in Section 2
hereof.
(b) Subject to the terms and conditions contained herein,
immediately after the Effective Time, Louis P. Meshon, Sr., holder of 100% of
the interests in CV OP Holdings LLC, the general partner of Holdings ("GP of
Holdings"), hereby agrees to contribute to Kramont OP his entire interest in
the GP of Holdings, free and clear of all Liens, without further
consideration.
(c) Subject to the terms and conditions contained herein, each
Limited Partner hereby agrees by checking (or failing to check) the
appropriate box on the signature page hereof to either (i) contribute to
Kramont OP all of its units of limited partner interest in CV Partnership
(the "Limited Partner Contributed Interests" and together with the Kramont
Contributed Interests, the "Contributed Interests"), free and clear of all
Liens, in exchange for the number of Kramont Common OP Units representing
limited partner interests in Kramont OP set forth in Section 2 hereof, and be
admitted as a limited partner of Kramont OP or (ii) (A) first contribute to
Holdings all of its Limited Partner Contributed Interests, free and clear of
all Liens, in exchange for the number of units of limited partner interest in
Holdings set forth in Section 2 hereof and (B) then contribute to Kramont OP
all of its units of limited partner interest in Holdings (other than the
Meshon Retained Interest), free and clear of all Liens, in exchange for the
number of Kramont Common OP Units representing limited partner interests in
Kramont OP set forth in Section 2 hereof, and be admitted as a limited
partner of Kramont OP. Alternatively, by checking the box indicated on the
signature page hereto, a Limited Partner may elect pursuant to
section 8.6A(i) of the Partnership Agreement to have the Redemption Right (as
defined in the Partnership Agreement) effective immediately. Holdings may
decline to accept a contribution of Limited Partner Contributed Interests
from any Limited Partner if Holdings determines in its reasonable discretion
that such Limited Partner's adjusted basis for Federal tax purposes in such
Limited Partner Contributed Interests is equal to or greater than such
Limited Partner's share of the liabilities of CV Partnership. After the
admission of the Limited Partners as limited partners of Kramont OP as
contemplated by this Section 1(c), KRT Trust I LLC shall cease to be a
limited partner of Kramont OP and its limited partner interest in Kramont OP
will be canceled without any consideration.
(d) Subject to the terms and conditions contained herein,
following contribution of the Interests to Kramont OP in accordance with
Sections 1(a), (b) and (c) hereof, Kramont OP hereby agrees to contribute to
CV GP all of the Interests, free and clear of all Liens.
2. Consideration for Contributed Interests. (a) Solely in exchange
for the contribution to Kramont OP by Kramont of its units of general partner
and limited partner interests in CV Partnership, Kramont OP shall issue to
Kramont such number of Kramont Common OP Units representing limited partner
interests in Kramont OP as is set forth on Schedule 1 of this Agreement
opposite Kramont's name, which shall equal the number of OP Units (as defined
in the CV Partnership Agreement) in CV Partnership owned by CV immediately
prior to the Mergers.
(b) Solely in exchange for the contribution to Kramont OP of the
Limited Partner Contributed Interests by each Limited Partner pursuant to
Section 1(c)(i) above, Kramont OP shall issue to such Limited Partner such
number of Kramont Common OP Units representing limited partner interests in
Kramont OP as is set forth on Schedule 2 to this Agreement opposite such
Limited Partner's name, which shall equal the number of OP Units contributed
by such Limited Partner pursuant hereto as set forth on the signature page to
this Agreement executed by such Limited Partner. Promptly following the
Closing, Kramont OP will issue to each Limited Partner who so requests a
certificate representing such Limited Partner's Kramont Common OP Units
representing limited partner interests in Kramont OP.
(c) Solely in exchange for the contribution to Holdings of the
Limited Partner Contributed Interests by each Limited Partner pursuant to
Section 1(c)(ii) above, Holdings shall issue to such Limited Partner such
number of units of limited partner interest in Holdings as is equal the
number of OP Units contributed by such Limited Partner pursuant hereto as set
forth on the signature page to this Agreement executed by such Limited
Partner. Such units of limited partner interest in Holdings (other than the
Meshon Retained Interest) shall be contributed to Kramont OP, and solely in
exchange therefor Kramont OP shall issue to such Limited Partner such number
of Kramont Common OP Units representing units of limited partner interest in
Kramont OP as is set forth on Schedule 2 to this Agreement opposite such
Limited Partner's name, which shall equal the number of units of limited
partner interest in Holdings acquired by such Limited Partner pursuant to
Section 1(c)(ii)(A) above and contributed to Kramont OP. Promptly following
the Closing, Kramont OP will issue to each Limited Partner who so requests a
certificate representing such Limited Partner's Kramont Common OP Units
representing limited partner interests in Kramont OP.
3. Delivery of Certificates; Execution of Documents. (a)
Concurrently with the execution of this Agreement, each Limited Partner is
irrevocably depositing with Louis P. Meshon, Sr. ("Meshon") solely for
purposes of his making the deliveries contemplated hereunder (i) the
certificates representing the Limited Partner Contributed Interests
contributed by such Limited Partner to Kramont OP or to Holdings, as the case
may be, with OP Unit powers duly endorsed in blank, and (ii) in the case of
Limited Partners who will make contributions pursuant to Section 1(c)(ii)
hereof, an Assignment of Partnership Interest in the form of Exhibit A
hereto. Each Limited Partner hereby appoints Meshon as his, her or its
attorney-in-fact, with full power and authority in his, her or its name,
place and stead, upon the closing of the transactions contemplated by the
Reorganization Agreement, (A) in the case of contributions made pursuant to
Section 1(c)(i) hereof, to deliver to Kramont OP the certificates
representing the Limited Partner Contributed Interests contributed by such
Limited Partner, together with the related OP Unit powers, in exchange for
the Kramont Common OP Units representing limited partner interests in Kramont
OP described in Section 2 hereof and (B) in the case of contributions made
pursuant to Section 1(c)(ii) hereof, to (x) deliver to Holdings the
certificates representing the Limited Partner Contributed Interests
contributed by such Limited Partner, together with the related OP Unit
powers, in exchange for uncertificated units of limited partner interest in
Holdings described in Section 2 hereof and then (y) deliver to Kramont OP the
Assignment of Partnership Interest executed by such Limited Partner in order
to effect the contribution of the units of limited partner interest in
Holdings held by such Limited Partner in exchange for the Kramont OP Common
Units described in Section 2(b) above. By executing this Agreement, each
Limited Partner acknowledges that he, she or it is irrevocably bound by the
terms hereof, subject only to the consummation of the Reorganization, and
that (i) the certificates representing the Limited Partner Contributed
Interests contributed by such Limited Partner shall be released by Meshon
(A) to Kramont OP, in the case of contributions made pursuant to Section
1(c)(i) hereof, and (B) to Holdings, in the case of contributions made
pursuant to Section 1(c)(ii) hereof and (ii) the Assignments of Partnership
Interests shall be released by Meshon to Kramont OP upon consummation of the
Mergers without any further action on the part of such Limited Partner.
(b) Until consummation of the transactions contemplated hereby,
the Limited Partners shall continue to be the owners of their OP Units
represented by the certificates which are being deposited with Meshon
hereunder and they shall be entitled to receive all distributions with
respect thereto prior to such contribution.
4. Admission of Kramont OP and Withdrawal of Contributing Partners.
(a) As required by the CV Partnership Agreement (as defined
below), Kramont, in its capacity as the sole general partner of CV
Partnership, hereby consents, effective immediately following the Effective
Time, to the transfer of the Limited Partner Contributed Interests by the
Limited Partners to Kramont OP or Holdings pursuant to this Agreement and to
the admission of Holdings and Kramont OP as substitute limited partners of CV
Partnership.
(b) The Limited Partners, in their capacity as limited partners of
CV Partnership, hereby consent, effective immediately following the Effective
Time, to (i) the transfer by Kramont of the units of general partner interest
in CV Partnership to Kramont OP, to the withdrawal of Kramont as the
successor general partner of CV Partnership, and to the admission of Kramont
OP as the successor general partner of CV Partnership, (ii) all transfers of
interests in CV Partnership and interests in Holdings as set forth in
Section 1 above and (iii) the adoption by CV GP of the amended and restated
CV Partnership Agreement.
(c) Kramont OP, in its capacity as the sole general partner and a
limited partner of CV Partnership, and Holdings, in its capacity as a limited
partner of CV Partnership, hereby consent, effective immediately following
the contribution of all of the Contributed Interests to Kramont OP, to the
transfer of the Contributed Interests to CV GP pursuant to this Agreement, as
required by the CV Partnership Agreement, and to the admission of CV GP as
the successor general partner of CV Partnership, to the withdrawal of Kramont
OP as the general partner and a limited partner of CV Partnership, and to the
admission of CV GP as a limited partner of CV Partnership.
(d) CV GP, in its capacity as the sole general partner and a
limited partner of CV Partnership, effective immediately following the
contribution of the Interests to CV GP, hereby consents to the amendment and
restatement of the Amended and Restated Agreement of Limited Partnership,
dated as of December 31, 1997, by and among Montgomery CV Trust and the other
parties set forth therein on Exhibit A thereto (the "CV Partnership
Agreement") in substantially the form set forth on Exhibit B hereto.
(e) Immediately following the Effective Time and simultaneously
with the consummation of the contributions described in Sections 1(a), (b)
and (c) of this Agreement, Kramont OP shall be admitted to CV Partnership as
a successor general partner of CV Partnership, and Kramont OP and Holdings
shall be admitted to CV Partnership as substitute limited partners of CV
Partnership. Immediately following the admission of Kramont OP as a
successor general partner of CV Partnership, Kramont shall cease to be
general partner of CV Partnership, and shall thereupon cease to have or
exercise any right or power as a general partner of CV Partnership.
Immediately following the admission of Kramont OP and Holdings as substitute
limited partners of CV Partnership, Kramont and the Limited Partners shall
cease to be limited partners of CV Partnership, and shall thereupon cease to
have any right or power as limited partners of CV Partnership. By their
execution of this Agreement, Kramont OP and Holdings hereby agree to accept
all the terms and conditions of the CV Partnership Agreement.
(f) Simultaneously with the contribution of the Interests to CV GP
in accordance with Section 1(d) hereof, CV GP shall be admitted to CV
Partnership as a successor general partner and substitute limited partner of
CV Partnership. Immediately following the admission of CV GP as a successor
general partner of CV Partnership, Kramont OP shall cease to be general
partner of CV Partnership, and shall thereupon cease to have or exercise any
right or power as a general partner of CV Partnership. Immediately following
the admission of CV GP as a substitute limited partner of CV Partnership,
Kramont OP shall cease to be a limited partner of CV Partnership, and shall
thereupon cease to have any right or power as a limited partner of CV
Partnership. By its execution of this Agreement, CV GP hereby agrees to
accept all the terms and conditions of the CV Partnership Agreement (as
defined below).
5. Representation and Warranties of Kramont. Kramont represents and
warrants to the Limited Partners and Kramont OP that Kramont is a real estate
investment trust duly organized, validly existing and in good standing under
the laws of the State of Maryland with the requisite trust power and
authority to enter into and to consummate the transactions contemplated by
this Agreement and otherwise to carry out its obligations hereunder. The
contribution by Kramont of the Kramont Contributed Interests hereunder has
been duly authorized by all necessary action on the part of Kramont. This
Agreement has been duly executed and delivered by Kramont and constitutes the
valid and legally binding obligation of Kramont, enforceable against Kramont
in accordance with its terms.
6. Representation and Warranties of the Limited Partners. Each of the
Limited Partners represents and warrants to Kramont and Kramont OP with
respect to itself as follows:
(a) Organization; Authority. Such Limited Partner is (i) an
individual or an estate with the legal capacity or power to enter into and to
consummate the transactions contemplated by this Agreement and the
Partnership Agreement and otherwise to carry out his, her or its obligations
hereunder and thereunder or (ii) a corporation duly incorporated, or a
limited partnership, or a limited liability company or a trust duly formed or
created, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, formation or creation, with the requisite
power and authority to enter into and to consummate the transactions
contemplated by this Agreement and the Partnership Agreement and otherwise to
carry out its obligations hereunder and thereunder. To the extent such
Limited Partner is a corporation, limited partnership, limited liability
company or a trust or other entity, the contribution by such Limited Partner
of the Limited Partner Contributed Interests hereunder and the execution of,
and the consummation of the transactions contemplated by, this Agreement have
duly authorized by all necessary action on the part of such Limited Partner
and the person signing on behalf of such entity is duly authorized to sign
such agreement. This Agreement and the Partnership Agreement have been duly
executed and delivered by such Limited Partner and constitute the valid and
legally binding obligations of such Limited Partner, enforceable against such
Limited Partner, in accordance with their respective terms. The consummation
of the transactions contemplated hereby and by the Partnership Agreement to
be performed by such Limited Partner will not result in a breach or violation
of, or a default under, (i) if such Limited Partner is not an individual, its
partnership or operating agreement, trust agreement, charter or bylaws, as
the case may be, (ii) any material agreement by which such Limited Partner or
any of such Limited Partner's properties are bound, (iii) if such Limited
Partner is not an individual, any material agreement by which any of its
partners, members, beneficiaries, trustees, or shareholders, as the case may
be, is or are bound, or (iv) any statute, regulation, order or other law to
which such Limited Partner is subject or (if such Limited Partner is not an
individual) any of its partners, members, beneficiaries, trustees, executors,
administrators or shareholders as the case may be, is or are subject.
(b) Ownership of Limited Partner Contributed Interests. Each
Limited Partner is contributing to Kramont OP (in the case of contributions
made pursuant to Section 1(c)(i) hereof) or to Holdings (in the case of
contributions made pursuant to Section 1(c)(ii) hereof) all of the units of
limited partner interest in CV Partnership legally and/or beneficially owned
by such Limited Partner. Each Limited Partner making a contribution pursuant
to Section 1(c)(ii) hereof will contribute to Kramont OP all of the units of
limited partner interest in Holdings legally and/or beneficially owned by
such Limited Partner, provided, however, that Meshon shall retain the Meshon
Retained Interest. Such Limited Partner is the record and beneficial owner
of the Limited Partner Contributed Interests set forth on the signature page
to this Agreement executed by such Limited Partner, and Kramont OP (in the
case of contributions made pursuant to Section 1(c)(i) hereof) or Holdings
(in the case of contributions made pursuant to Section 1(c)(ii) hereof), as
the case may be, shall acquire complete and sole record and beneficial
ownership of all such Limited Partner Contributed Interests, free and clear
of all Liens, to be contributed by it hereunder, together with all rights,
powers and privileges incident thereto and all duties and obligations and
responsibilities incident thereto. Such Limited Partner that is making a
contribution pursuant to Section 1(c)(ii) hereof will be the record and
beneficial owner of the units of limited partner interest in Holdings
acquired pursuant to this Agreement, and Kramont OP shall acquire complete
and sole record and beneficial ownership of all such units of limited
partner interest in Holdings acquired pursuant to this Agreement, free and
clear of all Liens, to be contributed by it hereunder, together with all
rights, powers and privileges incident thereto and all duties and obligations
and responsibilities incident thereto. There is and on the Closing Date there
will be no basis for any claim against such Limited Partner under any
provision of the Master Agreement (as defined in the CV Partnership
Agreement) or any other agreement with or relating to CV.
(c) Consents. No consent, authorization, order or approval of any
third party is required in connection with the execution, delivery and
performance of this Agreement by such Limited Partner.
(d) Investment Intent. Such Limited Partner is acquiring the
Kramont Common OP Units acquired by it for its own account for investment
purposes only and not with a view to or for distributing or reselling such
Kramont Common OP Units or any part thereof or interest therein.
(e) Limited Partner Status. If the appropriate box on the
signature page to this Agreement executed by such Limited Partner is checked,
at the time such Limited Partner was offered to exchange its Limited Partner
Contributed Interests or its interests in Holdings for Kramont Common OP
Units, it was, and, at the date hereof it is, and at the Closing Date it will
be, an "accredited investor" as defined in Rule 501(a) under the Securities
Act of 1933, as amended (the "Securities Act").
(f) Experience of Limited Partners. Such Limited Partner either
alone or together with its representatives, has such knowledge,
sophistication and experience in business and financial matters so as to be
capable of evaluating the merits and risks of the prospective investment in
the Kramont Common OP Units, and has so evaluated the merits and risks of
such investment. Such Limited Partner has been or has had an adequate
opportunity to be represented by legal counsel in connection with this
Agreement and the transactions contemplated hereby.
(g) Ability of the Limited Partners to Bear Risk of Investment.
Such Limited Partner is able to bear the economic risk of an investment in
the Kramont Common OP Units, and, at the present time, is able to afford a
complete loss of such investment.
(h) Access to Information. Each Limited Partner acknowledges
receipt of the private placement memorandum dated _________, 2000, which
includes the Reorganization Agreement and a draft of the Joint Proxy
Statement/Prospectus of Kranzco and CV (the "PPM") and further acknowledges
that it has been afforded (i) the opportunity to ask such questions as it has
deemed necessary of, and to receive answers from, representatives of Kramont
OP concerning the Reorganization and the terms and conditions of the
contribution of the Limited Partner Contributed Interests and the merits and
risks of investing in the Kramont Common OP Units and CV Partnership; (ii)
access to information about Kramont OP and Kramont OP's financial condition,
results of operations, business, properties, management and prospects
sufficient to enable it to evaluate its investment; and (iii) the opportunity
to obtain such additional information which Kramont OP possesses or can
acquire without unreasonable effort or expense that is necessary to make an
informed investment decision with respect to the investment and to verify the
accuracy and completeness of the information contained in the PPM. Each
Limited Partner hereby acknowledges that no representations as to potential
profit, cash flows, taxable income or loss, funds from operations or yield,
if any, in respect of Kramont OP, Kramont or CV Partnership have been made by
Kramont OP or Kramont or any employee or representative or Affiliate of
Kramont OP or Kramont, and that any projections submitted to such Limited
Partner shall not constitute any representation or warranty of any kind or
nature, express or implied. Each Limited Partner acknowledges that no
projections regarding taxes have been provided by Kramont OP or any of its
partners, or any employee or representative or affiliate of any of its
partners, and the Limited Partners are each relying on their own tax advisors
with respect to the transactions contemplated by this Agreement.
(i) Residence. The signature page correctly sets forth the state
of principal residence, in the case of an individual Limited Partner signing
this Agreement, and the legal residence, in the case of an entity which is a
Limited Partner signing this Agreement.
(j) Reliance. Each Limited Partner understands and acknowledges
that (i) the Kramont Common OP Units are being offered and sold to it without
registration under the Securities Act in a private placement that is exempt
from the registration provisions of the Securities Act and (ii) the
availability of such exemption, depends in part on, and Kramont OP will rely
upon the accuracy and truthfulness of, the foregoing representations and such
Limited Partner hereby consents to such reliance.
7. Representation and Warranties of Kramont OP. Kramont OP represents
and warrants to Kramont and the Limited Partners as follows:
(a) Organization; Authority. Kramont OP is a limited partnership
duly formed, validly existing and in good standing under the laws of the
jurisdiction of its formation with the requisite partnership power and
authority to enter into and to consummate the transactions contemplated by
this Agreement and otherwise to carry out its obligations hereunder. This
Agreement has been duly executed and delivered by Kramont OP and constitutes
the valid and legally binding obligation of Kramont OP, enforceable against
Kramont OP, in accordance with its terms.
(b) Issuance of Contributed Interests. All action required to be
taken by Kramont OP as a condition to the issuance and sale of the Kramont
Common OP Units to Kramont and the Limited Partners pursuant hereto has been
taken. Immediately following the Effective Time, such Kramont Common OP
Units will represent duly and validly issued Kramont Common OP Units
representing limited partner interests in Kramont OP, and each party hereto
will have the rights of a general partner, in the case of Kramont, on the one
hand, and a limited partner, in the case of the Limited Partners and Kramont,
on the other hand, of Kramont OP and will have all the rights accruing to a
general and/or limited partner under the Partnership Agreement. The
consummation of the transactions contemplated by this Agreement will convey
each Limited Partner good title to such Limited Partner's Kramont Common OP
Units, free and clear of all Liens, except for those created by such Limited
Partner, or those expressly set forth in the Partnership Agreement.
(c) As of the Effective Time but prior to the transactions
contemplated by Section 1, Kramont OP will have issued to Kramont only
Kramont Common OP Units and Kramont OP Preferred Units (as defined in the
Partnership Agreement) equal in number and having substantially similar
economic terms, rights and preferences as the outstanding common shares and
preferred shares, respectively, in Kranzco immediately prior to the
transactions contemplated by the Reorganization Agreement. As of the
Effective Time, other than the Kramont Common OP Units and Kramont OP
Preferred Units described in the previous sentence (and the obligation of
Kramont OP to issue Kramont Common OP Units to Kramont in the future in
connection with the exercise by holders of outstanding stock options to
acquire shares of Kramont), there will not be outstanding any securities
convertible into or exchangeable for Kramont Common OP Units or Kramont OP
Preferred Units, and Kramont OP shall not be party to any agreement to issue
any such securities.
(d) Disclosure. The information regarding Kramont and Kramont OP
in the PPM provided by or on behalf of Kramont OP to the Limited Partners and
Kramont, taken as a whole, does not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading.
8. Representations and Warranties of Holdings. Holdings represents
and warrants to Kramont and the Limited Partners as follows:
(a) Organization; Authority. Holdings is a limited partnership
duly formed, validly existing and in good standing under the laws of the
jurisdiction of its formation with the requisite partnership power and
authority to enter into and to consummate the transactions contemplated by
this Agreement and otherwise to carry out its obligations hereunder. This
Agreement has been duly executed and delivered by Holdings and constitutes
the valid and legally binding obligation of Holdings, enforceable against
Holdings, in accordance with its terms.
(b) Issuance of Interests in Holdings. All action required to be
taken by Holdings as a condition to the issuance and sale of the units of
limited partner interest in Holdings to the Limited Partners pursuant hereto
has been taken. Immediately following the Effective Time, such units of
limited partner interest in Holdings will represent duly and validly issued
units of limited partner interest in Holdings representing limited partner
interests in Holdings, and each holder of such units will have all the rights
accruing to a limited partner under the partnership agreement of Holdings.
The consummation of the transactions contemplated by this Agreement will
convey to such Limited Partners and to Kramont OP good title to the units of
limited partner interest in Holdings, free and clear of all Liens, except for
those created by such party, or those expressly set forth in the partnership
agreement of Holdings.
(c) No Prior Activities; Other Interests. Except for the
obligations and liabilities incurred in connection with its formation and the
negotiation and consummation of the transactions contemplated by this
Agreement, Holdings has not engaged, and prior to the Effective Time Holdings
will not engage, in any business of any type or kind or incurred any
liabilities or obligations or entered into or will enter into any agreements
or arrangements with any person or entity. Holdings does not own and, prior
to the Effective Time will not own, directly or indirectly, any interest or
investment (whether equity or debt) in any corporation, partnership, joint
venture, business, trust or other entity, except as contemplated by this
Agreement.
9. Execution of Partnership Agreement; No Liability. (a)
Concurrently with the execution of this Agreement, (i) each Limited Partner
that is contributing its Limited Partner Contributed Interests to Kramont OP
pursuant to Section 1(c)(i) hereof shall execute a counterpart signature page
to the Amended and Restated Agreement of Limited Partnership of Kramont OP
substantially in the form attached hereto as Exhibit C (the " Partnership
Agreement") and (ii) each limited partner that is contributing its Limited
Partner Contributed Interests to Holdings pursuant to Section 1(c)(ii) shall
execute a counterpart signature page to the Agreement of Limited Partnership
of Holdings substantially in the form attached hereto as Exhibit D and a
counterpart signature page to the Partnership Agreement. By execution of
this Agreement, each Limited Partner hereby appoints Meshon as his, her or
its attorney-in-fact, with full power and authority in its, his or her name,
place and stead to (i) approve any and all changes to the Partnership
Agreement which in his good faith judgment do not adversely affect the
economic rights of the Limited Partners as Meshon shall deem necessary or
appropriate to effect the transactions contemplated by this Agreement and the
Reorganization Agreement, such approval to be conclusively evidenced by
Meshon's own execution of a counterpart signature page to the Partnership
Agreement, in his capacity as a Limited Partner and an attorney-in-fact and
(ii) execute any and all documents and instruments and take all such other
actions as may be necessary or appropriate in order to consummate the
transactions contemplated by this Agreement.
(b) Anything in this Agreement notwithstanding, Meshon shall have
no liability to any Limited Partner or any other Person for any act or
omission in connection with the transactions contemplated hereunder or under
the Reorganization Agreement except in the case of gross negligence or
intentional malfeasance.
10. Further Assurances. Each of the parties hereto shall use its
reasonable best efforts, on and after the date hereof, to take or cause to be
taken, all actions, and to do, or cause to be done all things, necessary,
proper or desirable under applicable laws and regulations to carry out the
purposes of this Agreement and to vest (i) Kramont OP, with full record and
beneficial ownership, as of the Closing, to (A) all Contributed Interests
contributed by the Limited Partners to Kramont OP pursuant to Section 1(c)(i)
hereof and (B) all of the units of limited partner interest in Holdings
contributed by the Limited Partners to Kramont OP pursuant to Section
1(c)(ii) hereof and (ii) Holdings, with full record and beneficial ownership,
as of the Closing, to all Limited Partner Contributed Interests contributed
by the Limited Partners to Holdings pursuant to Section 1(c)(ii) hereunder.
Without limiting the foregoing, Kramont OP shall use its best efforts to
obtain all consents and approvals, to enter into all amendatory agreements
and to make all filings and applications and take all other actions which may
be required for the consummation of the transactions contemplated by this
Agreement, including, without limitation, all applicable regulatory filings.
Nothing in this paragraph requires any Limited Partner to incur any expenses.
11. Closing. The closing of the transactions contemplated hereby shall
occur without any further action on the part of Kramont, Holdings, Kramont OP
or CV GP on the same day and immediately following the consummation of the
transactions contemplated by the Reorganization Agreement (the "Closing").
It is a condition to the obligation of each Limited Partner to consummate the
transactions contemplated by this Agreement, that the representations and
warranties of Kramont set forth in Section 5, of Kramont OP set forth in
Section 7 and of Holdings set forth in Section 8, shall be true and correct
in all material respects. It is a condition to the obligation of Kramont OP
and Holdings to consummate the transactions contemplated by this Agreement
with respect to any Limited Partner that the representations and warranties
of such Limited Partner set forth in Section 6 shall be true and correct in
all material respects. To the extent the representations and warranties of
any Limited Partner are not true and correct in any material respect, Kramont
OP and Holdings will not be obligated to consummate the transactions
contemplated by this Agreement with such Limited Partner but may consummate
the transactions contemplated by this Agreement with such Limited Partner in
Kramont OP and Holdings' discretion, but shall be obligated to consummate the
transactions contemplated as this Agreement with any other Limited Partners.
At the Closing, Meshon shall deliver the certificates representing the units
of limited partner interest in CV Partnership and Assignments of Partnership
Interest in Holdings in accordance with Section 3 and without further action
on the part of any Limited Partner, and Holdings will issue the units of
limited partner interest and Kramont OP will issue the Kramont Common OP
Units in accordance with Section 2. Notwithstanding the provisions of this
Paragraph 11, in the event that the Reorganization Agreement is terminated
for any reason prior to the consummation of the Merger, this Agreement shall
terminate and the Limited Partners, Kramont, Kramont OP, Holdings, and CV GP
shall have no liability to each other and no further obligations pursuant to
this Agreement, and the power of attorney granted to Meshon shall terminate.
12. Effect of Transactions. The contributions of the Limited Partners
contemplated by this Agreement are subject to and will become effective only
upon consummation of the KRT Trust II Merger, the KRT Partnership Merger, and
the transactions contemplated by the Reorganization Agreement. Thereafter,
immediately upon admission of the Limited Partners signing this Agreement as
limited partners of Kramont OP, the partnership interest of KRT Trust I LLC
in Kramont OP will be cancelled without consideration. Upon the occurrence
of the events set forth in this Section 12: (i) Kramont OP shall own all the
assets formerly owned by Kranzco other than its interest in KRT Trust, and
(ii) all of the outstanding partnership interests in Kramont OP shall be the
Kramont Preferred OP Units and Kramont Common OP Units described on
Schedule 12 owned by Kramont, as general and limited partner, and the Kramont
Common OP Units owned by the Limited Partners signing this Agreement as
limited partners.
13. Waiver. Each Limited Partner acknowledges that such Limited
Partner has been offered the opportunity pursuant to Section 11.2D of the CV
Partnership Agreement as in effect on the date hereof to exchange such
Limited Partner's OP Units for an equal number of Common Shares of Kramont,
effective upon and subject to the consummation of the Reorganization
Agreement, and such Limited Partner has declined such offer.
14. Binding Effect. This Agreement shall be binding on each limited
partner of CV Partnership who executes this Agreement at the time such
Limited Partner executes this Agreement, notwithstanding that less than all
of the limited partners in CV Partnership may execute this Agreement and that
different Limited Partners may execute at different times.
15. Complete Agreement; Construction. This Agreement, including the
exhibits, constitutes the entire agreement between the parties with respect
to the subject matter hereof, and supersedes all previous negotiations,
commitments and writings with respect to such subject matter.
16. Survival of Agreements. Except as otherwise contemplated by this
Agreement, all representations, covenants and agreements of the parties
contained in this Agreement will survive the consummation of the transactions
contemplated hereby.
17. Governing Law; Consent to Jurisdiction. This Agreement will be
governed by and construed in accordance with the laws of the State of
Delaware, without regard to the principles of conflicts of laws thereof.
Each party hereby irrevocably submits to the non-exclusive jurisdiction of
any New York state or federal court sitting in the City of New York, Borough
of Manhattan (collectively, the "Courts") in respect of any action, claim,
suit, investigation or proceeding (including, without limitation, an
investigation or partial proceeding), whether commenced or threatened,
arising out of or relating to this Agreement, and irrevocably accepts for
itself and in respect of its Contributed Interests and any Kramont Common OP
Units acquired by it, generally and unconditionally, jurisdiction to the
Courts. The parties hereto irrevocably waives to the fullest extent it may
effectively do so under applicable law any objection that it may now or
hereafter have to the laying of venue of any such proceeding brought in any
Court and any claim that any such proceeding brought in any Court has been
brought in an inconvenient forum. Each party hereby irrevocably waives, to
the fullest extent permitted by law, personal service of process and consents
to process being served in any such suit, action or proceeding by receiving a
copy thereof sent to such party at the address in effect for notices to it
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law. EACH PARTY HERETO HEREBY WAIVES ANY AND ALL RIGHTS TO A
TRIAL BY JURY IN CONNECTION WITH ANY ACTION ARISING OUT OF THIS AGREEMENT.
18. Notices. All notices and other communications hereunder must be in
writing and must be delivered by hand, federal express or courier service
(with proof of service), mailed by registered or certified mail (return
receipt requested and first-class postage prepaid) or sent by facsimile
transmission (confirmed by any of the methods that follow) to the party for
whom it is intended at the following address: (a) If to Kramont or Kramont
OP: 128 Fayette Street, Conshohocken, PA 19428-0805, Attention: Mr. Norman M.
Kranzdorf, Fax: (610) 941-9193, with copies to: (i) Robinson Silverman Pearce
Aronsohn & Berman LLP, 1290 Avenue of the Americas, New York, NY 10104,
Attention: Alan S. Pearce, Esq., Fax: (212) 541-4630; (ii) CV, 100 Century
Road, West Palm Beach, FL 33417, Attention: Louis P. Meshon, Sr., Fax: (561)
640-3160, with a copy to Montgomery CV Realty L.P., Plymouth Plaza, 580
Germantown Pike, Suite 200, Plymouth Meeting, PA 19462, Attention: Louis P.
Meshon, Sr., Fax: (610) 834-8110, and (iii) Fox, Rothschild, O'Brien &
Frankel LLP, 2000 Market Street, Tenth Floor, Philadelphia, PA 19103,
Attention: Stanley S. Cohen, Esq., Fax: (215) 299-2150, (b) if to Holdings:
Plymouth Plaza, 580 Germantown Pike, Suite 200, Plymouth Meeting, PA 19462,
Attention: Louis P. Meshon, Sr., Fax: (610) 834-6110, with a copy to Fox,
Rothschild, O'Brien & Frankel LLP, 2000 Market Street, Tenth Floor,
Philadelphia, PA 19103, Attention: Stanley S. Cohen, Esq., Fax: (215) 299-
2150; (c) if to CV GP: 128 Fayette Street, Conshohocken, PA 19428-0805,
Attention: Mr. Norman M. Kranzdorf, Fax: (610) 941-9193, with copies to:
Robinson Silverman Pearce Aronsohn & Berman LLP, 1290 Avenue of the Americas,
New York, NY 10104, Attention: Alan S. Pearce, Esq., Fax: (212) 541-4630;
and (d) if to any of the Limited Partners, to the address set forth on the
signature page executed by such Limited Partner, or at such other address for
a party as may be specified by written notice as given, and such notice shall
be deemed to have been delivered as of the date so delivered.
19. Amendments. This Agreement may not be modified or amended except by
an agreement in writing signed by the parties.
20. Successors and Assigns. This Agreement is not assignable, in whole
or in part, directly or indirectly, by any party hereto without the prior
written consent of the other, and any attempt to assign any rights or
obligations arising under this Agreement without such consent shall be void;
provided, however, that the provisions of this Agreement shall be binding
upon, inure to the benefit of and be enforceable by the parties and their
respective successors and permitted assigns.
21. No Third-Party Beneficiaries. The provisions of this Agreement are
solely for the benefit of the parties hereto and their respective successors
and permitted assigns and should not be deemed to confer upon third parties
any remedy, claim, liability, reimbursement, claim of action or other right
in excess of those existing without reference to this Agreement.
22. Title and Headings. Titles and headings to sections herein are
inserted for the convenience of reference only and are not intended to be a
part of or to affect the meaning or interpretation of this Agreement.
23. Legal Enforceability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof. Any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction. Without
prejudice to any rights or remedies otherwise available to any party hereto,
each party hereto acknowledges that damages would be an inadequate remedy for
any breach of the provisions of this Agreement and agrees that the
obligations of the parties hereunder are specifically enforceable.
24. Counterparts. This Agreement may be executed in one or more
counterparts, each of which when executed shall be deemed an original, but
all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.
KRAMONT REALTY TRUST
By:_______________________________________
Name:
Title:
KRT OPERATING PARTNERSHIP, L.P.
By: KRT Trust, its general partner
By:__________________________________
Name:
Title:
CV PARTNER HOLDINGS, L.P.
By: CV OP Holdings LLC, its general partner
By: __________________________________
Name:
Title:
CV GP L.P.
By: CV GP LLC, its General Partner
By: KRT Operating Partnership, L.P., Sole
Member
By: Kramont Realty Trust, its
General Partner
By:________________________
Print Name:
Title:
<PAGE>
MONTGOMERY CV REALTY TRUST,
general partner of CV Partnership, hereby consents
to the transactions contemplated by this Agreement
MONTGOMERY CV REALTY TRUST
By:_____________________________________
Name:
Title:
CV OP HOLDINGS LLC,
hereby consents to the transactions
contemplated by this Agreement
CV OP HOLDINGS LLC
By:
------------------------------
Name: Louis P. Meshon, Sr.
Title: Managing Member
Exhibit A
to the Unit
Contribution Agreement
ASSIGNMENT OF PARTNERSHIP INTEREST
ASSIGNMENT made as of the __ day of _______, 2000, by ________________
(the "Assignor"), a holder of units of limited partner interest in CV Partner
Holdings, L.P. ("Holdings"), a Delaware limited partnership, to Kramont
Operating Partnership, L.P., a Delaware limited partnership (the "Assignee").
WHEREAS, Assignor is the holder of units of limited partner interest in
Holdings, pursuant to that Agreement of Limited Partnership of Holdings,
dated as of December 10, 1999 (the "Partnership Agreement"); and
WHEREAS, Assignor desires to assign to the Assignee all of the units of
limited partner interest in Holdings owned by the Assignor (other than the
Meshon Retained Interest (as defined in the Unit Contribution Agreement)),
and Assignee desires to acquire such interest pursuant to the terms of that
certain Unit Contribution Agreement dated as of December 10, 1999 among
Kramont Realty Trust, a Maryland real estate investment trust, the limited
partners of Montgomery CV Realty L.P. signatories thereto ("Limited
Partners"), Assignee, Holdings and CV GP LLC, a Delaware limited liability
company ("CV GP") (the "Unit Contribution Agreement");
NOW, THEREFORE, in accordance with the terms of the Unit Contribution
Agreement, the Assignor does hereby assign unto the Assignee all of its
right, title and interest in and to all of the units of limited partner
interest in Holdings (other than the Meshon Retained Interest (as defined in
the Unit Contribution Agreement)) held by such Assignor, subject, however, to
all of the terms and conditions contained in the Partnership Agreement.
TO HAVE AND TO HOLD the same unto Assignee, its successors and assigns
forever;
AND the Assignee hereby accepts said interest and assumes and agrees to
perform all of the terms, covenants and conditions on the part of the
Assignor to be observed and performed under the Partnership Agreement.
This Assignment of Partnership Interest shall be governed by, and
construed in accordance with, the laws of the State of Delaware, without
regard to principles of conflicts of laws thereof.
This Assignment of Partnership Interest may be executed in one or more
counterparts, all of which together shall constitute one agreement.
<PAGE>
IN WITNESS WHEREOF, the Assignor and the Assignee executed this
instrument as of the date and the year first above written.
Assignor
By:__________________
Name:
Title:
Assignee
KRAMONT OPERATING PARTNERSHIP, L.P.
By: Kramont Realty Trust, its
General Partner
By:___________________
Name:
Title:
Exhibit B
to the Unit
Contribution Agreement
CV Partnership Agreement
[See Exhibit J to this Amendment No. 1 to
Agreement and Plan of Reorganization and Merger]
Exhibit C
to the Unit
Contribution Agreement
Kramont OP Partnership Agreement
[See Appendix E to this Joint Proxy Statement/Prospectus]
Exhibit D
to the Unit
Contribution Agreement
AGREEMENT OF LIMITED PARTNERSHIP
OF
CV PARTNER HOLDINGS, L.P.
This Agreement of Limited Partnership of CV Partner Holdings, L.P.
(this "Agreement"), is entered into by and between CV OP Holdings LLC, as
general partner (the "General Partner"), and Louis P. Meshon, Sr., as limited
partner (the "Initial Limited Partner").
The General Partner and the Initial Limited Partner hereby form a
limited partnership pursuant to and in accordance with the Delaware Revised
Uniform Limited Partnership Act (6 Del.C. Section 17-101, et seq.), as
amended from time to time (the "Act"), and hereby agree as follows:
1. Name. The name of the limited partnership formed hereby is CV
Partner Holdings, L.P. (the "Partnership").
2. Purpose. The Partnership is formed for the object and purpose
of, and the nature of the business to be conducted and promoted by the
Partnership is, engaging in any lawful act or activity for which limited
partnerships may be formed under the Act and engaging in any and all
activities necessary or incidental to the foregoing.
3. Registered Office. The registered office of the Partnership
in the State of Delaware is c/o Corporation Service Company, 1013 Centre
Road, Wilmington, New Castle County, Delaware 19805.
4. Registered Agent. The name and address of the registered
agent of the Partnership for service of process on the Partnership in the
State of Delaware is Corporation Service Company, 1013 Centre Road,
Wilmington, New Castle County, Delaware 19805.
5. Partners. The names and the business, residence or mailing
addresses of the General Partner and the Initial Limited Partner are as
follows:
General Partner:
CV OP Holdings LLC
c/o Louis P. Meshon, Sr.
Montgomery CV Realty L.P.
Plymouth Plaza
580 West Germantown Pike
Suite 200
Plymouth Meeting, PA 19462
Initial Limited Partner:
Louis P. Meshon, Sr.
Montgomery CV Realty L.P.
Plymouth Plaza
580 West Germantown Pike
Suite 200
Plymouth Meeting, PA 19462
6. Powers. The powers of the General Partner include all powers,
statutory and otherwise, possessed by general partners under the laws of the
State of Delaware. Notwithstanding any other provisions of this Agreement,
the General Partner is authorized to execute and deliver any document on
behalf of the Partnership without any vote or consent of any other partner.
7. Dissolution. The Partnership shall dissolve, and its affairs
shall be wound up, at such time as (a) all of the partners of the Partnership
approve in writing, (b) an event of withdrawal of a general partner has
occurred under the Act, (c) at any time there are no limited partners of the
Partnership unless the Partnership is continued in accordance with the Act,
or (d) an entry of a decree of judicial dissolution has occurred under
Section 17-802 of the Act; provided, however, the Partnership shall not be
dissolved or required to be wound up upon an event of withdrawal of a general
partner described in Section 7(b) if (i) at the time of such event of
withdrawal, there is at least one (1) other general partner of the
Partnership who carries on the business of the Partnership (any remaining
general partner being hereby authorized to carry on the business of the
Partnership), or (ii) within ninety (90) days after the occurrence of such
event of withdrawal, all remaining partners agree in writing to continue the
business of the Partnership and to the appointment, effective as of the date
of the event of withdrawal, of one (1) or more additional general partners of
the Partnership.
8. Capital Contributions. The General Partner and the Initial
Limited Partner have not made any contributions to the Partnership.
9. Additional Contributions. No partner of the Partnership is
required to make any additional capital contribution to the Partnership.
10. Allocation of Profits and Losses. The Partnership's profits
and losses shall be allocated 100% to the Initial Limited Partner prior to
consummation of the transactions described in Section 15 (and thereafter in
accordance therewith).
11. Distributions. Distributions shall be made to the partners of
the Partnership at the times and in the aggregate amounts determined by the
General Partner. Such distributions shall be allocated solely to the Initial
Limited Partner prior to consummation of the transactions described in
Section 15 (and thereafter in accordance therewith).
12. Assignments.
(a) The Initial Limited Partner may assign all or any part of
its partnership interest in the Partnership and may withdraw from the
Partnership only with the consent of the General Partner.
(b) The General Partner may assign all or any part of its
partnership interest in the Partnership and may withdraw from the Partnership
without the consent of any limited partner of the Partnership.
13. Withdrawal. Except to the extent set forth in Section 12, no
right is given to any partner of the Partnership to withdraw from the
Partnership.
14. Admission of Additional or Substitute Partners.
(a) One (1) or more additional or substitute limited partners
of the Partnership may be admitted to the Partnership with only the consent
of the General Partner. Notwithstanding anything to the contrary contained
in this Agreement, upon the contribution of units of limited partner interest
in the Partnership by KRT Partnership to CV GP, as contemplated by the
Contribution Agreement, CV GP shall be admitted to the Partnership as an
additional limited partner of the Partnership.
(b) One (1) or more additional or substitute general partners
of the Partnership may be admitted to the Partnership with only the consent
of the General Partner.
15. Authorization of Unit Contribution. Notwithstanding
anything to the contrary contained in this Agreement, including Sections 10,
11, 12, 13 and 14 hereof, the Partnership, and the General Partner on behalf
of the Partnership, without any further act, vote or approval of any other
partner of the Partnership, is hereby authorized to execute, deliver and
perform an agreement among the Partnership, KRT Operating Partnership, L.P.,
a Delaware limited partnership ("KRT Partnership"), Kramont Realty Trust, a
Maryland real estate investment trust ("Kramont"), the limited partners of
Montgomery CV Realty L.P., a Delaware limited partnership ("CV Partnership")
who are parties thereto (the "CV LPs"), CV GP L.P., a Delaware limited
partnership ("CV GP"), and such other persons or entities that may be parties
to such agreement, in such form as the General Partner may determine in its
sole discretion (the "Contribution Agreement"), that contemplates (i) the
contribution of OP Units, representing limited partner interests in CV
Partnership, by the CV LPs to the Partnership, (ii) the issuance of units of
limited partner interest in the Partnership to the CV LPs on a one-for-one
basis in return therefor and the admission of the Partnership as a limited
partner of CV Partnership (following which all items of income or loss of the
Partnership and all distributions of the Partnership (whether of ordinary
cash flow, capital proceeds, liquidation proceeds, or otherwise) shall be
allocated solely to the holders of units of limited partner interest in the
Partnership in proportion to their units of limited partner interest in the
Partnership), (iii) the contribution of the CV LPs' units of limited partner
interest in the Partnership (other than the Meshon Retained Interest, as
defined in the Contribution Agreement) to KRT Partnership, (iv) the issuance
by KRT Partnership of units of limited partner interest in KRT Partnership to
the CV LP's in exchange therefor, the admission of the CV LPs as limited
partners of KRT Partnership, and the withdrawal of the CV LPs (other than
Louis P. Meshon, Sr.) as limited partners of the Partnership, (v) the
contribution of the units of limited partner interest in the Partnership
(other than the Meshon Retained Interest as defined in the Contribution
Agreement) from KRT Partnership to CV GP, and the admission of CV GP as a
limited partner of the Partnership, and (vi) such other matters as may be
contemplated therein. The General Partner may amend this Agreement to
reflect the transactions contained in the agreement contemplated by the
foregoing sentence without any further vote, act or approval of any other
partner of the Partnership or any holder of units of limited partner interest
in the Partnership. Notwithstanding anything to the contrary contained in
this Agreement, the Partnership, and the General Partner on behalf of the
Partnership, shall not be required to make a distribution to any partner or
holder of a unit of limited partner interest in the Partnership on account of
its interest in the Partnership if such distribution would violate
Section 17-607 of the Act or any other applicable law. As used herein, a
"unit of limited partner interest" means a fractional, undivided share of any
and all benefits to which the holder of such an interest is entitled as
provided in this Agreement, together with all obligations of such holder to
comply with the terms and provisions of this Agreement.
16. Liability of Initial Limited Partner. The limited partners
(including the Initial Limited Partner) shall not have any liability for the
obligations or liabilities of the Partnership except to the extent provided
in the Act.
17. Term. The term of the Partnership shall be perpetual.
18. Governing Law. This Agreement shall be governed by, and
construed under, the laws of the State of Delaware, all rights and remedies
being governed by said laws, without regard to principles of conflict of
laws.
19. Amendments. This Agreement may be amended with the written
consent of the General Partner and the holders of a majority of the units of
limited partner interest in the Partnership.
IN WITNESS WHEREOF, the undersigned, intending to be legally bound
hereby, have duly executed this Agreement of Limited Partnership as of the
10th day of December, 1999.
GENERAL PARTNER:
CV OP HOLDINGS LLC
By:__________________________________
INITIAL LIMITED PARTNER:
_____________________________
Louis P. Meshon, Sr.
SCHEDULE 1
Kramont Common OP Units
to be issued pursuant to Section 2(a)
Name Number of Kramont Common OP Units
---- ---------------------------------
Kramont
SCHEDULE 2
Kramont Common OP Units
to be issued pursuant to Section 2(b)
Limited Partner Number of Kramont Common OP Units
-------------- ---------------------------------
SCHEDULE 12
Name Number of Kramont Common OP Units
---- ---------------------------------
Kramont Common OP Units
Class A-1 OP Preferred Units
Class B-1 OP Preferred Units
Class D OP Preferred Units
COUNTERPART SIGNATURE PAGE
TO CONTRIBUTION AGREEMENT
The undersigned hereby agrees to be bound by the terms and conditions
set forth in this Contribution Agreement.
Address for Notice provisions:
____________________________________
____________________________________
State of legal residence:___________
Number of units of limited partner
interest currently owned in CV
Partnership:________________________
By checking the box below, the undersigned
confirms that, at the time specified in
Section 6(e), it was, and at the date
hereof it is, and at the Closing Date it
will be, an "accredited investor" as
defined in Rule 501(a) under the
Securities Act. [ ]
Unless the box below is checked or the
undersigned has elected the Redemption
Right, the undersigned will contribute all
of its Limited Partner Contributed
Interests to Kramont OP. If the box below
is checked, the undersigned will
contribute its Limited Partner Contributed
Interests to Holdings and will then
contribute all of its limited partner
interest in Holdings (except the Meshon
Retained Interest) to Kramont OP.[ ]
[ ] By checking this box, the undersigned
elects pursuant to section 8.6A(i) of
the Partnership Agreement to have the
Redemption Right effective
immediately.
____________________________________
Name:_______________________________
COUNTERPART SIGNATURE PAGE
TO AGREEMENT OF LIMITED PARTNERSHIP
OF KRAMONT OPERATING PARTNERSHIP, L.P.
The undersigned hereby agrees to be bound by the terms and conditions
set forth in the Agreement of Limited Partnership of Kramont Operating
Partnership, L.P., dated as of __________.
____________________________________
Name:_______________________________
Address for Notice provisions:
____________________________________
____________________________________
COUNTERPART SIGNATURE PAGE
TO AGREEMENT OF LIMITED PARTNERSHIP
OF CV PARTNER HOLDINGS, L.P.(1)
The undersigned hereby agrees to be bound as a Limited Partner by
the terms and conditions set forth in the Agreement of Limited Partnership of
CV Partner Holdings, L.P., dated as of ______________.
[ ]
By: ________________________________
Name:
Address for Notice provisions:
____________________________________
___________________________
(1) To be used in connection with the admission of (i) the limited partners
of Montgomery CV Realty L.P. who transfer their interest to CV Partner
Holdings, L.P., (ii) Kramont Operating Partnership, L.P. and (iii) CV GP
L.P. as limited partners of CV Partner Holdings, L.P.
COUNTERPART SIGNATURE PAGE
TO AMENDED AND RESTATED AGREEMENT OF
LIMITED PARTNERSHIP OF MONTGOMERY CV REALTY L.P.(2)
The undersigned hereby agrees to be bound as a Partner by the terms
and conditions set forth in the Amended and Restated Agreement of Limited
Partnership of Montgomery CV Realty L.P., dated as of ______________.
[ ]
By: ________________________________
Name:
Address for Notice provisions:
____________________________________
_______________________
(2) To be used in connection with the admission of (i) CV Partner Holdings,
L.P., (ii) Kramont Operating Partnership, L.P. and (iii) CV GP L.P. as
partners of Montgomery CV Realty L.P.
<PAGE>
COUNTERPART SIGNATURE PAGE
TO LIMITED LIABILITY COMPANY AGREEMENT
OF CV OP HOLDINGS LLC(3)
The undersigned hereby agrees to be bound as a member by the terms
and conditions set forth in the Limited Liability Company Agreement of CV OP
Holdings LLC, dated as of ______________.
[ ]
By: ________________________________
Name:
Address for Notice provisions:
____________________________________
____________________
(3) To be used in connection with the admission of (i) Kramont Operating
Partnership, L.P. and (ii) CV GP L.P. as members of CV OP Holdings LLC.
<PAGE>
Exhibit J
to Amendment No. 1
to the Merger Agreement
=============================================================================
SECOND AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
MONTGOMERY CV REALTY L.P.
________, 2000
=============================================================================
TABLE OF CONTENTS
Page
ARTICLE 1 Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 2 Organizational Matters. . . . . . . . . . . . . . . . . . . . .14
2.1 Continuation. . . . . . . . . . . . . . . . . . . . . . . . . .14
2.2 Name. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
2.3 Registered Office and Agent; Principal Office . . . . . . . . .14
2.4 Power of Attorney . . . . . . . . . . . . . . . . . . . . . . .14
2.5 Term. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
ARTICLE 3 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
3.1 Purpose and Business. . . . . . . . . . . . . . . . . . . . . .16
3.2 Powers. . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
ARTICLE 4 Capital Contributions . . . . . . . . . . . . . . . . . . . . .17
4.1 Capital Contributions of the Partners . . . . . . . . . . . . .17
4.2 Additional Funds. . . . . . . . . . . . . . . . . . . . . . . .20
4.3 Issuance of Additional Partnership Interests;
Admission of Additional Limited Partners. . . . . . . . . . . .21
4.4 Repurchase of Shares; Excess Shares . . . . . . . . . . . . . .22
4.5 No Third Party Beneficiary. . . . . . . . . . . . . . . . . . .22
4.6 No Interest; No Return. . . . . . . . . . . . . . . . . . . . .23
4.7 No Preemptive Rights. . . . . . . . . . . . . . . . . . . . . .23
ARTICLE 5 Distributions . . . . . . . . . . . . . . . . . . . . . . . . .23
5.1 Regular Distributions . . . . . . . . . . . . . . . . . . . . .23
5.2 Qualification as a REIT . . . . . . . . . . . . . . . . . . . .23
5.3 Withholding . . . . . . . . . . . . . . . . . . . . . . . . . .23
5.4 Additional Partnership Interests. . . . . . . . . . . . . . . .23
5.5 Distributions Upon Liquidation. . . . . . . . . . . . . . . . .24
ARTICLE 6 Allocations . . . . . . . . . . . . . . . . . . . . . . . . . .24
ARTICLE 7 Management and Operations of Business . . . . . . . . . . . . .24
7.1 Management. . . . . . . . . . . . . . . . . . . . . . . . . . .24
7.2 Certificate of Limited Partnership. . . . . . . . . . . . . . .28
7.3 Reimbursement of the General Partner's Allocable Expenses . . .29
7.4 Outside Activities of the General Partner . . . . . . . . . . .30
7.5 Contracts with Affiliates . . . . . . . . . . . . . . . . . . .30
7.6 Indemnification.. . . . . . . . . . . . . . . . . . . . . . . .30
7.7 Liability of the General Partner. . . . . . . . . . . . . . . .32
7.8 Other Matters Concerning the General Partner. . . . . . . . . .33
7.9 Title to Partnership Assets . . . . . . . . . . . . . . . . . .34
7.10 Reliance by Third Parties . . . . . . . . . . . . . . . . . . .34
ARTICLE 8 Rights and Obligations of Limited Partners. . . . . . . . . . .34
8.1 Limitation of Liability . . . . . . . . . . . . . . . . . . . .35
8.2 Management of Business. . . . . . . . . . . . . . . . . . . . .35
8.3 Outside Activities of Limited Partners. . . . . . . . . . . . .35
8.4 Return of Capital . . . . . . . . . . . . . . . . . . . . . . .35
8.5 Rights of Limited Partners Relating to the Partnership. . . . .35
8.6 Redemption Rights . . . . . . . . . . . . . . . . . . . . . . .36
ARTICLE 9 Books, Records, Accounting, and Reports . . . . . . . . . . . .41
9.1 Records and Accounting. . . . . . . . . . . . . . . . . . . . .41
9.2 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . .41
9.3 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
ARTICLE 10 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . .42
10.1 Preparation of Tax Returns. . . . . . . . . . . . . . . . . . .42
10.2 Tax Elections . . . . . . . . . . . . . . . . . . . . . . . . .42
10.3 Tax Matters Partner . . . . . . . . . . . . . . . . . . . . . .42
10.4 Withholding . . . . . . . . . . . . . . . . . . . . . . . . . .44
ARTICLE 11 Transfers and Withdrawals . . . . . . . . . . . . . . . . . . .45
11.1 Transfer. . . . . . . . . . . . . . . . . . . . . . . . . . . .45
11.2 Transfer of the General Partner's and the Company's
Partnership Interests . . . . . . . . . . . . . . . . . . . . .45
11.3 Limited Partners' Rights to Transfer. . . . . . . . . . . . . .46
11.4 Substituted Limited Partners. . . . . . . . . . . . . . . . . .48
11.5 Assignees . . . . . . . . . . . . . . . . . . . . . . . . . . .48
11.6 General Provisions. . . . . . . . . . . . . . . . . . . . . . .49
ARTICLE 12 Admission of Partners . . . . . . . . . . . . . . . . . . . . .50
12.1 Admission of Successor General Partner. . . . . . . . . . . . .50
12.2 Admission of Additional Limited Partners. . . . . . . . . . . .50
12.3 Amendment of Agreement and Certificate of Limited Partnership .51
ARTICLE 13 Dissolution, Liquidation, and Termination . . . . . . . . . . .51
13.1 Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . .51
13.2 Winding Up. . . . . . . . . . . . . . . . . . . . . . . . . . .52
13.3 No Obligation to Contribute Deficit . . . . . . . . . . . . . .53
13.4 Rights of Limited Partners. . . . . . . . . . . . . . . . . . .53
13.5 Notice of Dissolution . . . . . . . . . . . . . . . . . . . . .53
13.6 Termination of Partnership and Cancellation of Certificate
of Limited Partnership. . . . . . . . . . . . . . . . . . . . .53
13.7 Reasonable Time for Winding-Up. . . . . . . . . . . . . . . . .54
13.8 Waiver of Partition . . . . . . . . . . . . . . . . . . . . . .54
ARTICLE 14 Amendment of Partnership Agreement;
Action by Limited Partners. . . . . . . . . . . . . . . . . . .54
14.1 Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . .54
14.2 Action by Limited Partners. . . . . . . . . . . . . . . . . . .55
ARTICLE 15 General Provisions. . . . . . . . . . . . . . . . . . . . . . .56
15.1 Addresses and Notice. . . . . . . . . . . . . . . . . . . . . .56
15.2 Titles and Captions . . . . . . . . . . . . . . . . . . . . . .56
15.3 Certain Terms . . . . . . . . . . . . . . . . . . . . . . . . .56
15.4 Further Action. . . . . . . . . . . . . . . . . . . . . . . . .56
15.5 Binding Effect. . . . . . . . . . . . . . . . . . . . . . . . .56
15.6 Creditors . . . . . . . . . . . . . . . . . . . . . . . . . . .57
15.7 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . .57
15.8 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . .57
15.9 Applicable Law. . . . . . . . . . . . . . . . . . . . . . . . .57
15.10 Invalidity of Provisions. . . . . . . . . . . . . . . . . . . .57
15.11 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . .57
EXHIBIT A PARTNERS' CONTRIBUTIONS AND PARTNERSHIP INTERESTS
EXHIBIT B ALLOCATIONS OF PARTNERSHIP ITEMS
EXHIBIT C DESCRIPTION OF FLORIDA LAND
EXHIBIT D FORM OF NOTICE OF REDEMPTION
EXHIBIT E PROPERTIES TO WHICH SECTION 7.1A(3) IS APPLICABLE
EXHIBIT F FORM OF LETTER
SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF
MONTGOMERY CV REALTY L.P.
This Second Amended and Restated Agreement of Limited Partnership of
Montgomery CV Realty L.P. (the "Partnership"), dated as of ________, 2000, is
entered into by and among CV GP L.P. ("CV GP"), a Delaware limited
partnership, and the other parties whose names are set forth on Exhibit A
attached hereto.
WHEREAS the Partnership was formed pursuant to the Revised Uniform
Limited Partnership Act of the State of Delaware by filing, on May 29, 1997,
a certificate of limited partnership with the Secretary of State of the State
of Delaware and entering into the Agreement of Limited Partnership, as such
agreement was amended and restated as of December 31, 1997 (the "Original
Agreement"); and
WHEREAS, Montgomery CV Realty Trust ("CV Trust"), a Delaware business"
trust and wholly owned subsidiary of CV Reit, Inc., a Delaware corporation
("CV"), conveyed its general partner interest in the Partnership to CV in
connection with the merger of CV Trust with and into CV, caused CV to be
admitted to the Partnership as successor General Partner and withdrew as
general partner of the Partnership.
WHEREAS, CV assigned its general partner interest in the Partnership to
Kramont Realty Trust ("Kramont"), a Maryland real estate investment trust, in
connection with the merger of CV with and into Kramont, caused Kramont to be
admitted to the Partnership as successor General Partner and withdrew as
general partner of the Partnership.
WHEREAS, Kramont assigned its general partner interest in the
Partnership to Kramont Operating Partnership L.P. ("Kramont OP"), a Delaware
limited partnership, caused Kramont OP to be admitted to the Partnership as
successor General Partner and withdrew as general partner of the Partnership.
WHEREAS, Kramont OP assigned its general partner interest in the
Partnership to CV GP, caused CV GP to be admitted to the Partnership as
successor General Partner and withdrew as general partner of the Partnership.
WHEREAS, the Partners desire to continue the Partnership and to amend
and to restate the Original Agreement as set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and other valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties do hereby amend and restate the
Original Agreement in its entirety and agree as follows:
ARTICLE
Defined Terms
The following definitions shall be applied for all purposes of this
Agreement, unless otherwise clearly indicated to the contrary:
"Act" means the Delaware Revised Uniform Limited Partnership Act, as it
may be amended from time to time, and any successor to such statute.
"Additional Limited Partner" means a Person admitted to the Partnership
as a Limited Partner pursuant to Section 4.3 and who is shown as such on the
books and records of the Partnership.
"Adjusted Capital Account Deficit" means with respect to any Partner,
the negative balance, if any, in such Partner's Capital Account as of the end
of any relevant fiscal year, determined after giving effect to the following
adjustments:
(a) credit to such Capital Account any portion of such negative
balance which such Partner (i) is treated as obligated to restore to the
Partnership pursuant to the provisions of section 1.704-1(b)(2)(ii)(c) of the
Regulations, or (ii) is deemed to be obligated to restore to the Partnership
pursuant to the penultimate sentences of sections 1.704-2(g)(1) and
1.704-2(i)(5) of the Regulations; and
(b) debit to such Capital Account the items described in sections
1.704-1(b)(2)(ii)(d)(4), (5), and (6) of the Regulations.
"Adjustment Factor" means 1.0 (as adjusted from time to time in
accordance with this definition); provided that, in the event that Kramont
(i) declares or pays a dividend on its outstanding Shares in Shares or makes
a distribution to all holders of its outstanding Shares in Shares, (ii)
subdivides or splits its outstanding Shares, or (iii) combines its
outstanding Shares into a smaller number of Shares, the Adjustment Factor
shall be adjusted by multiplying the Adjustment Factor by a fraction, the
numerator of which shall be the number of Shares issued and outstanding on
the record date for such dividend, distribution, subdivision, or combination
(assuming for such purposes that such dividend, distribution, subdivision, or
combination has occurred as of such time) and the denominator of which shall
be the actual number of Shares (determined without the above assumption)
issued and outstanding on the record date for such dividend, distribution,
subdivision, or combination. Any adjustment to the Adjustment Factor shall
become effective immediately after the effective date of such event
retroactive to the record date, if any, for the event giving rise thereto; it
being intended that (x) adjustments to the Adjustment Factor are to be made
in order to avoid unintended dilution or anti-dilution as a result of
transactions in which Shares are issued, redeemed, or exchanged without
corresponding issuance, redemption, or exchange of OP Units and (y) if a
Specified Redemption Date shall fall between the record date and the
effective date of any event of the type described above, the Adjustment
Factor applicable to such redemption shall be adjusted to take into account
such event.
"Affiliate" means, (a) with respect to any individual Person, any member
of the Immediate Family of such Person or a trust established for the benefit
of such member, or (b) with respect to any Entity, any Person which, directly
or indirectly through one or more intermediaries, controls, is controlled by,
or is under common control with, such Entity. For the purposes of this
definition, "control" when used with respect to any Person means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise, and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Agreement" means this Second Amended and Restated Agreement of Limited
Partnership, as amended, modified, supplemented or restated from time to
time, as the context requires.
"Assignee" means a Person to whom one or more OP Units have been
transferred in a manner permitted under this Agreement, but who has not
become a Substituted Limited Partner, and who has the rights set forth in
Section 11.5.
"Available Cash" means, with respect to any applicable period of
measurement, the excess, if any, during such period of:
(a) the gross cash receipts of the Partnership from all sources
whatsoever, including, without limitation, the following:
(i) all rents, revenues, income, and proceeds derived by the
Partnership from its operations, including, without limitation,
distributions received by the Partnership from any Entity in which the
Partnership has an interest;
(ii) all proceeds and revenues received by the Partnership on
account of any sales of property of the Partnership or as a refinancing
of or payments of principal, interest, costs, fees, penalties, or
otherwise on account of any borrowings or loans made by the Partnership
or financings or refinancings of any property of the Partnership;
(iii) the amount of any insurance proceeds and condemnation
awards received by the Partnership;
(iv) all capital contributions or loans received by the
Partnership;
(v) all cash amounts previously reserved by the Partnership,
to the extent such amounts are no longer needed for the specific
purposes for which such amounts were reserved;
(vi) the proceeds of liquidation of the Partnership's
property in accordance with this Agreement; and
(vii) reductions in reserves not accompanied by cash
expenditures;
over (b) the sum of:
(i) all operating costs and expenses, including costs
relating to tenant improvements, brokerage expenses, taxes, and other
expenses of the Properties of the Partnership and capital expenditures
made during such period (without deduction, however, for any capital
expenditures, charges for Depreciation, or other expenses not paid in
cash or expenditures from reserves;
(ii) all costs and expenses expended or paid during such
period in connection with the sale or other disposition, or acquisition,
financing or refinancing, of property of the Partnership or the recovery
of insurance or condemnation proceeds;
(iii) all fees, if any, provided for under this Agreement;
(iv) all debt service, including principal and interest, paid
during such period on all indebtedness (including under any line of
credit) of the Partnership;
(v) all capital contributions, advances, reimbursements, or
similar payments made to any Person in which the Partnership has an
interest;
(vi) all loans made by the Partnership in accordance with the
terms of this Agreement;
(vii) all reimbursements to the General Partner or its
Affiliates during such period; and
(viii) any new reserves or increases in reserves reasonably
determined by the General Partner to be necessary for working capital,
acquisitions, capital improvements, payments of periodic expenditures,
debt service, or other purposes for the Partnership or any Person in
which the Partnership has an interest.
Notwithstanding the foregoing, Available Cash shall not include any cash
received or reductions in reserves, or take into account any disbursements
made or reserves established, after commencement of the dissolution and
liquidation of the Partnership.
"Capital Account" means with respect to any Partner, the Capital Account
maintained for such Partner in accordance with section 1.704-1(b) of the
Regulations and the following provisions:
a. to each Partner's Capital Account there shall be credited (i)
such Partner's Capital Contributions, (ii) such Partner's distributive share
of Net Income and any items in the nature of income or gain which are
specially allocated to such Partner pursuant to Paragraphs 1 and 2 of Exhibit
B, and (iii) the amount of any Partnership liabilities assumed by such
Partner or which are secured by any asset distributed to such Partner;
b. to each Partner's Capital Account there shall be debited (i)
the amount of cash and the Gross Asset Value of any property distributed to
such Partner pursuant to any provision of this Agreement, (ii) such Partner's
distributive share of Net Losses and any items in the nature of expenses or
losses which are specially allocated to such Partner pursuant to Paragraphs 1
and 2 of Exhibit B, and (iii) the amount of any liabilities of such Partner
assumed by the Partnership or which are secured by any asset contributed by
such Partner to the Partnership; and
c. in the event all or a portion of a Partnership Interest is
transferred in accordance with the terms of this Agreement, the transferee
shall succeed to the Capital Account of the transferor to the extent it
related to the transferred Partnership Interest.
The foregoing provisions and the other provisions of this Agreement relating
to the maintenance of Capital Accounts are intended to comply with sections
1.704-1(b) and 1.704-2 of the Regulations, and shall be interpreted and
applied in a manner consistent with such Regulations. In the event the
General Partner shall reasonably determine that it is prudent to modify the
manner in which the Capital Accounts, or any debits or credits thereto
(including, without limitation, debits or credits relating to liabilities
which are secured by contributed or distributed assets or which are assumed
by the Partnership, the General Partner or any Limited Partner) are computed
in order to comply with such Regulations, the General Partner may make such
modification; provided that it does not have an adverse effect on the amounts
distributable to any Partner pursuant to Article 13 upon the dissolution of
the Partnership. Pursuant to Regulations section 1.704-1(b)(2)(iv)(f) and (h)
and after giving effect to Section 2.1, but before giving effect to the
remainder of Article 4, the balance in the Capital Account of each of the
Trust and the Original Limited Partner shall equal zero.
"Capital Contribution" means, with respect to any Partner, any cash,
cash equivalents, or the Gross Asset Value of property which such Partner
contributes or is deemed to contribute to the Partnership pursuant to Article
4.
"Cash Amount" means an amount of cash equal to the Value on the
Specified Redemption Date of the Shares Amount.
"Certificate" means the Certificate of Limited Partnership of the
Partnership filed in the office of the Delaware Secretary of State, as
amended or restated from time to time in accordance with the terms hereof and
the Act.
"Charter" means the Declaration of Trust (or other instrument serving a
similar function) of Kramont, as amended and restated from time to time.
"Code" means the Internal Revenue Code of 1986, as amended and in effect
from time to time, as interpreted by the applicable regulations thereunder.
Any reference herein to a specific section or sections of the Code shall be
deemed to include a reference to any corresponding provision of future law.
"Company" means Kramont, a Maryland real estate investment trust.
"Contributed Property" means each property or other asset, in such form
as may be permitted by the Act, contributed or deemed contributed to the
Partnership by any Partner (including any deemed contributions to the
Partnership on termination and reconstitution thereof pursuant to Regulations
promulgated under section 708 of the Code).
"Depreciation" means, with respect to any asset of the Partnership for
any fiscal year or other period, the depreciation, depletion, amortization,
or other cost recovery deduction, as the case may be, allowed or allowable
for Federal income tax purposes in respect of such asset for such fiscal year
or other period; provided, however, that except as otherwise provided in the
Regulations, if there is a difference between the Gross Asset Value
(including the Gross Asset Value, as increased pursuant to paragraph 1 of the
definition of Gross Asset Value) and the adjusted tax basis of such asset at
the beginning of such fiscal year or other period, Depreciation for such
asset shall be an amount that bears the same ratio to the beginning Gross
Asset Value of such asset as the Federal income tax depreciation, depletion,
amortization, or other cost recovery deduction for such fiscal year or other
period bears to the beginning adjusted tax basis of such asset; provided,
further, that if the Federal income tax depreciation, depletion,
amortization, or other cost recovery deduction for such asset for such fiscal
year or other period is zero, Depreciation of such asset shall be determined
with reference to the beginning Gross Asset Value of such asset using any
reasonable method selected by the General Partner.
"Entity" means any general partnership, limited partnership,
corporation, joint venture, trust, business trust, real estate investment
trust, limited liability company, cooperative, association or other entity.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time (or any corresponding provisions of succeeding
laws).
"Florida Land" means the property described in Exhibit C.
"GAAP" means United States generally accepted accounting principles, as
in effect from time to time.
"General Partner" means CV GP or its successors as the general partner
of the Partnership from time to time.
"General Partner Interest" means a Partnership Interest held by the
General Partner, in its capacity as general partner. A General Partner
Interest may be expressed as a number of OP Units.
"Gross Asset Value" means, with respect to any asset of the Partnership,
such asset's adjusted basis for Federal income tax purposes, except as
follows:
1. the initial Gross Asset Value of any asset contributed by a
Partner to the Partnership shall be the gross fair market value of such
asset, without reduction for liabilities, as determined by the contributing
Partner and the Partnership on the date of contribution thereof (as reflected
on Exhibit A, as such Exhibit may be amended from time to time);
2. if the General Partner reasonably determines that an
adjustment is necessary or appropriate to reflect the relative economic
interests of the Partners, the Gross Asset Values of all Partnership assets
shall be adjusted in accordance with sections 1.704-1(b)(2)(iv)(f) and (g) of
the Regulations to equal their respective gross fair market values, without
reduction for liabilities, as reasonably determined by the General Partner,
as of the following times:
a. a Capital Contribution (other than a de minimis Capital
Contribution) to the Partnership by a new or existing Partner as
consideration for a Partnership Interest; or
b. the distribution by the Partnership to a Partner of more
than a de minimis amount of Partnership assets as consideration for the
repurchase of a Partnership Interest; or
c. the liquidation of the Partnership within the meaning of
section 1.704-1(b)(2)(ii)(g) of the Regulations;
3. the Gross Asset Values of Partnership assets distributed to
any Partner shall be the gross fair market values of such assets without
reduction for liabilities, as reasonably determined by the General Partner as
of the date of distribution; and
4. the Gross Asset Values of Partnership assets shall be
increased (or decreased) to reflect any adjustments to the adjusted basis of
such assets pursuant to sections 734(b) or 743(b) of the Code, but only to
the extent that such adjustments are taken into account in determining
Capital Accounts pursuant to section 1.704-1(b)(2)(iv)(m) of the Regulations
(as set forth in Exhibit B); provided, however, that Gross Asset Values shall
not be adjusted pursuant to this paragraph (4) to the extent that the General
Partner reasonably determines that an adjustment pursuant to paragraph (2)
above is necessary or appropriate in connection with a transaction that would
otherwise result in an adjustment pursuant to this paragraph (4).
At all times, Gross Asset Values shall be adjusted by any Depreciation taken
into account with respect to the Partnership's assets for purposes of
computing Net Income and Net Loss.
"Immediate Family" means, with respect to any individual, such
individual's spouse, parents, parents-in-law, descendants, nephews, nieces,
brothers, sisters, brothers-in-law, sisters-in-law, stepchildren,
sons-in-law, and daughters-in-law or any trust solely for the benefit of any
of the foregoing family members whose sole beneficiaries include the
foregoing family members.
"Incapacity" or "Incapacitated" means, (i) as to any individual Partner,
death, total physical disability, or entry of an order, judgment, or decree
by a court of competent jurisdiction adjudicating such Partner incompetent to
manage such Partner's person or estate; (ii) as to any corporation which is a
Partner, the filing of a certificate of dissolution, or its equivalent, for
the corporation or the revocation of its charter; (iii) as to any partnership
which is a Partner, the dissolution and commencement of winding up of the
partnership; (iv) as to any estate which is a Partner, the distribution by
the fiduciary of the estate's entire interest in the Partnership; (v) as to
any trustee of a trust which is a Partner, the termination of the trust (but
not the substitution of a new trustee); or (vi) as to any Partner, the
bankruptcy of such Partner. For purposes of this definition, bankruptcy of a
Partner shall be deemed to have occurred when (a) the Partner commences a
voluntary proceeding seeking liquidation, reorganization, or other relief
under any bankruptcy, insolvency, or other similar law now or hereafter in
effect; (b) the Partner is adjudged as bankrupt or insolvent, or a final and
nonappealable order for relief under any bankruptcy, insolvency, or similar
law now or hereafter in effect has been entered against the Partner; (c) the
Partner executes and delivers a general assignment for the benefit of the
Partner's creditors; (d) the Partner files an answer or other pleading
admitting or failing to contest the material allegations of a petition filed
against the Partner in any proceeding of the nature described in clause (b),
above; (e) the Partner seeks, consents to, or acquiesces in the appointment
of a trustee, receiver, or liquidator for the Partner or for all or any
substantial part of the Partner's properties; (f) any proceeding seeking
liquidation, reorganization, or other relief of or against such Partner under
any bankruptcy, insolvency, or other similar law now or hereafter in effect
has not been dismissed within one hundred twenty (120) days after the
commencement thereof; (g) the appointment without the Partner's consent or
acquiescence of a trustee, receiver, or liquidator has not been vacated or
stayed within ninety (90) days of such appointment; or (h) an appointment
referred to in clause (g) which has been stayed is not vacated within ninety
(90) days after the expiration of any such stay.
"Indemnitee" means (i) any Person made a party to a proceeding by reason
of (A) such Person's status as (1) the General Partner or an Affiliate
thereof, (2) a director, trustee, officer, manager or general partner of the
Partnership or the General Partner (or an Affiliate thereof), or (3) in the
case of a director, trustee, officer, manager or general partner of any other
Entity, each Person serving in such capacity at the request of the
Partnership or the General Partner, or (B) such Person's liabilities,
pursuant to a loan guarantee or otherwise, for any indebtedness of the
Partnership or any Subsidiary of the Partnership (including, without
limitation, any indebtedness which the Partnership or any Subsidiary of the
Partnership has assumed or taken assets subject to); and (ii) such other
Persons (including Affiliates of the General Partner or the Partnership) as
the General Partner may designate from time to time (whether before or after
the event giving rise to potential liability), in its sole and absolute
discretion.
"Kramont" shall mean Kramont Realty Trust, a Maryland real estate
investment trust, and the general partner of Kramont OP.
"Lien" means any lien, security interest, mortgage, deed of trust,
charge, claim, encumbrance, pledge, option, or right of first offer or first
refusal and any other right or interest of others of any kind or nature,
actual or contingent, or other encumbrance of any nature whatsoever.
"Limited Partner" means any Person named as a Limited Partner in Exhibit
A attached hereto, as such Exhibit may be amended from time to time, or any
Substituted Limited Partner or Additional Limited Partner, in such Person's
capacity as a limited partner of the Partnership. All Partners other than
the General Partner (in its capacity as General Partner) are Limited
Partners. For purposes of any vote of the Limited Partners in connection
with any merger, consolidation, or conversion involving the Partnership
(except as provided in the definition of "Qualifying Limited Partner
Interest"), the Limited Partners shall be treated as a single class or group.
"Limited Partner Interest" means a Partnership Interest of a Limited
Partner in the Partnership representing a fractional part of the Partnership
Interests of all Limited Partners and includes any and all benefits to which
the holder of such a Partnership Interest may be entitled, as provided in
this Agreement, together with all obligations of such Person to comply with
the terms and provisions of this Agreement. A Limited Partner Interest may
be expressed as a number of OP Units.
"Liquidating Event" has the meaning set forth in Section 13.1.
"Liquidator" has the meaning set forth in Section 13.2.
"Master Agreement" means the Definitive Master Agreement dated as of
September 19, 1997, among CV Reit, Inc., Montgomery CV Trust, Drexel Realty,
Inc., and certain other Persons, as amended.
"Meshon" means Louis P. Meshon, Sr.
"Net Income" or "Net Loss" means, for each fiscal year or other
applicable period, an amount equal to the Partnership's taxable income or
loss for such year or period as determined for Federal income tax purposes by
the General Partner, determined in accordance with section 703(a) of the Code
(for this purpose, all items of income, gain, loss or deduction required to
be stated separately pursuant to section 703(a) of the Code shall be included
in taxable income or loss), adjusted as follows: (a) by including as an item
of gross income any tax-exempt income received by the Partnership and not
otherwise taken into account in computing Net Income or Net Loss; (b) by
treating as a deductible expense any expenditure of the Partnership described
in section 705(a)(2)(B) of the Code (or which is treated as a section
705(a)(2)(B) expenditure pursuant to section 1.704-1(b)(2)(iv)(i) of the
Regulations) and not otherwise taken into account in computing Net Income or
Net Loss, including amounts paid or incurred to organize the Partnership
(unless an election is made pursuant to section 709(b) of the Code) or to
promote the sale of interests in the Partnership and by treating deductions
for any losses incurred in connection with the sale or exchange of
Partnership property disallowed pursuant to sections 267(a)(1) or 707(b) of
the Code as expenditures described in section 705(a)(2)(B) of the Code; (c)
by taking into account Depreciation in lieu of depreciation, depletion,
amortization, and other cost recovery deductions taken into account in
computing taxable income or loss; (d) by computing gain or loss resulting
from any disposition of Partnership property with respect to which gain or
loss is recognized for Federal income tax purposes by reference to the Gross
Asset Value of such property rather than its adjusted tax basis; (e) in the
event of an adjustment of the Gross Asset Value of any Partnership asset
which requires that the Capital Accounts of the Partnership be adjusted
pursuant to sections 1.704-1(b)(2)(iv)(e), (f), and (g) of the Regulations,
by taking into account the amount of such adjustment as if such adjustment
represented additional Net Income or Net Loss pursuant to Exhibit B; and (f)
by not taking into account in computing Net Income or Net Loss items
separately allocated to the Partners pursuant to Paragraphs 1 and 2 of
Exhibit B and Sections 4.1 and 7.3B.
"Nonrecourse Deductions" has the meaning set forth in sections
1.704-2(b)(1) and 1.704-2(c) of the Regulations.
"Nonrecourse Liabilities" has the meaning set forth in section
1.704-2(b)(3) of the Regulations.
"OP Unit" means a fractional, undivided share of the Partnership
Interests of all Partners issued pursuant to Sections 4.1, 4.2 and 4.3. The
number of OP Units outstanding and the Percentage Interests in the
Partnership represented by such OP Units are set forth in Exhibit A, as such
Exhibit may be amended from time to time. The ownership of OP Units shall be
evidenced by such form of certificate for units as the General Partner adopts
from time to time. The General Partner may reflect on any such certificate
any transfer or other restriction, forfeitability risk, or similar matter
that pertains to the OP Units evidenced thereby.
"Partner" means a General Partner or a Limited Partner, and "Partners"
means the General Partner and the Limited Partners collectively.
"Partner Minimum Gain" means an amount, with respect to each Partner
Nonrecourse Debt, equal to the Partnership Minimum Gain that would result if
such Partner Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Regulations section 1.704-2(i)(3).
"Partner Nonrecourse Debt" has the meaning set forth in Regulations
section 1.704-2(b)(4).
"Partner Nonrecourse Deductions" has the meaning set forth in
Regulations section 1.704-2(i)(2), and the amount of Partner Nonrecourse
Deductions with respect to a Partner Nonrecourse Debt for a Partnership
taxable year shall be determined in accordance with the rules of Regulations
section 1.704-2(i)(2).
"Partnership" means Montgomery CV Realty L.P., a Delaware limited
partnership, and any successor thereto.
"Partnership Interest" means a partnership interest in the Partnership
held by either a Limited Partner, the General Partner, or the predecessor in
interest of a Partner or of an Assignee and includes any and all benefits to
which the holder of such a Partnership Interest may be entitled as provided
and limited in this Agreement, including specifically, but without
limitation, Section 11.5, together with all obligations of such Person to
comply with the terms and provisions of this Agreement. A Partnership
Interest may be expressed as a number of OP Units.
"Partnership Minimum Gain" has the meaning set forth in Regulations
section 1.704-2(b)(2), and the amount of Partnership Minimum Gain, as well as
any net increase or decrease in a Partnership Minimum Gain, for a Partnership
taxable year shall be determined in accordance with the rules of Regulations
section 1.704-2(d).
"Partnership Record Date" means the record date established by the
General Partner for the distribution of Available Cash pursuant to Section
5.1.
"Partnership Year" means the fiscal year of the Partnership, as set
forth in Section 9.2.
"Percentage Interest" means, as to a Partner or Assignee, owning OP
Units the fractional part of the Partnership Interests owned by such Partner
or Assignee and determined from time to time by dividing the number of OP
Units owned by such Partner or Assignee at any such time by the total number
of OP Units outstanding at such time.
"Permitted Partners" has the meaning set forth in subparagraph 1(b) of
Exhibit B.
"Permitted Transferee" means any person to whom OP Units are permitted
to be Transferred in accordance with Section 11.3 (determined without regard
to Section 11.3E(iii)).
"Person" means an individual or Entity.
"Qualifying Limited Partner Interest" at any time means (a) if 5% or
more of the OP Units at that time are not then held by the General Partner or
its Affiliates, a majority of the OP Units of the Limited Partners (not
including OP Units originally issued to the General Partner and then held by
the General Partner or its Affiliates, but specifically including OP Units
originally issued to other Limited Partners and subsequently acquired by the
General Partner or its Affiliates pursuant to Section 8.6 or otherwise) and
(b) otherwise, the OP Units then held by the General Partner and its
Affiliates.
"Quarter" means each of the three month periods ending on March 31, June
30, September 30, and December 31.
"Regulations" means the final, temporary, or proposed Income Tax
Regulations promulgated under the Code, as such regulations may be amended
from time to time (including corresponding provisions of succeeding
regulations).
"REIT" means a real estate investment trust as defined in section 856 of
the Code.
"REIT Requirements" has the meaning set forth in Section 5.2.
"Restricted Partner" has the meaning set forth in Section 1(b) of
Exhibit B.
"Section," "Article," or "Exhibit," when used without reference to the
Code, ERISA, the Act, the Regulations, regulations of the Department of
Labor, or other statute or document means a section or article of or exhibit
to, as the case may be, this Agreement.
"Share" means a common share of beneficial interest of the Company, par
value $.01 per share.
"Shares Amount" means a number of Shares equal to the product of the
number of OP Units offered for redemption by a Redeeming Partner times the
Adjustment Factor; provided that, in the event the Company issues to all
holders of Shares rights, options, warrants, or convertible or exchangeable
securities entitling such holders to subscribe for or to purchase Shares
(collectively, the "rights"), then, for purposes of computing the Cash Amount
and the Shares Amount, (i) but only if the Redeeming Partner shall tender to
the General Partner the consideration then needed pursuant to such rights if
such rights are then exercisable, the Shares Amount shall also include the
number of Shares that a holder of Shares (in an amount equal to the product
of the number of OP Units offered for redemption times the Adjustment Factor)
would be entitled to receive upon exercise of such rights, options, warrants,
or securities or (ii) if such rights are not at such time exercisable, the
Shares Amount shall also include such rights that a holder of that number of
Shares would be entitled to receive. In the case of a merger, consolidation,
or recapitalization involving, or other change in identity, form or place of
organization of, the Company, the "Shares Amount" shall mean a number of
shares, certificates of beneficial interest, cash or other property or other
securities of the successor to the Company in connection with such change
equal to the product of the number of OP Units offered for redemption by a
Redeeming Partner times the Adjustment Factor times the number (or fractional
number) of such shares, certificates of beneficial interest, cash or other
property or other securities issued or paid in exchange for one Share in
connection with the transaction or series of related transactions effecting
such change (and such shares, certificates of beneficial interest, cash or
other property or other securities shall be considered "Shares" for purposes
hereof).
"Specified Redemption Date" means the tenth business day after receipt
by the General Partner of a Notice of Redemption.
"Stock Option Plans" means any plan adopted or assumed from time to time
by the Company, Kramont OP, the General Partner, the Partnership or any of
their respective Affiliates pursuant to which Shares are issued, or options
to acquire Shares are granted, to employees, officers, directors or trustees
of the General Partner, the Partnership, or their respective Affiliates in
consideration for services or future services.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, or other Entity of which a majority of (i) the voting power of
the voting equity securities; or (ii) the outstanding equity interests, is
owned, directly or indirectly (including, without limitation, through one or
more other Subsidiaries), by such Person.
"Substituted Limited Partner" means a Person who is admitted as a
limited partner to the Partnership pursuant to Section 11.4.
"Tax Items" has the meaning set forth in Exhibit B.
"Terminating Capital Transaction" means any sale or other disposition of
all or substantially all of the assets of the Partnership or a related series
of transactions that, taken together, result in the sale or other disposition
of all or substantially all of the assets of the Partnership.
"Transfer," as a noun, means any sale, assignment, conveyance, pledge,
hypothecation, gift, encumbrance, or other transfer and, as a verb, means to
sell, assign, convey, pledge, hypothecate, give, encumber, or otherwise
transfer.
"Value" means, with respect to any Share, the average of the daily
market price for the ten (10) consecutive trading days immediately preceding
the date on which the Notice of Redemption is received by the General Partner
(or, if such date is not a trading day, on the next succeeding trading day).
The market price for each such trading day shall be (i) if such shares are
listed or admitted to trading on any securities exchange or the Nasdaq
National Market, the closing price, regular way, on such day, or if no such
sale takes place on such day, the average of the closing bid and asked prices
on such day, (ii) if such shares are not listed or admitted to trading on any
securities exchange or the Nasdaq National Market, the last reported sale
price on such day or, if no sale takes place on such day, the average of the
closing bid and asked prices on such day, as reported by a reliable quotation
source designated by the General Partner or (iii) if such shares are not
listed or admitted to trading on any securities exchange or the Nasdaq
National Market and no such last reported sale price or closing bid and asked
prices are available, the average of the reported high bid and low asked
prices on such day, as reported by a reliable quotation source designated by
the General Partner, or if there shall be no bid and asked prices on such
day, the average of the high bid and low asked prices, as so reported, on the
most recent day (not more than ten (10) days prior to the date in question)
for which prices have been so reported; provided that, if there are no bid
and asked prices reported during the ten (10) days prior to the date in
question, the value of such shares shall be determined by the General Partner
acting in good faith on the basis of such quotations, if any, and other
information as it considers, in its reasonable judgment, appropriate. In the
event that any such Share includes rights that a holder of such share has or
would be entitled to receive, then the value of such rights shall be
determined by the General Partner acting in good faith on the basis of such
quotations and other information as it considers, in its reasonable judgment,
appropriate, and the value of such rights, as determined, shall be added to
the value of a Share, as determined in accordance with this definition, to
determine the Value of such Share.
Certain additional terms and phrases have the meanings set forth in
Exhibit B.
ARTICLE 2
Organizational Matters
2.1 Continuation. The Partners hereby agree to continue the
Partnership under and pursuant to the Act. The Partnership is a limited
partnership formed pursuant to the provisions of the Act and upon the terms
and conditions set forth in this Agreement. Except as expressly provided
herein to the contrary, the rights and obligations of the Partners and the
administration and termination of the Partnership shall be governed by the
Act. The Partnership Interest of each Partner shall be personal property for
all purposes.
2.2 Name. The name of the Partnership is Montgomery CV Realty
L.P. The Partnership's business may be conducted under any other name or
names deemed advisable by the General Partner, including the name of the
General Partner or any Affiliate thereof. The words "Limited Partnership,"
"L.P.," "Ltd." or similar words or letters shall be included in the
Partnership's name where necessary for the purposes of complying with the
laws of any jurisdiction that so requires. The General Partner in its sole
and absolute discretion may, upon 5 days prior written notice to the Limited
Partners, change the name of the Partnership.
2.3 Registered Office and Agent; Principal Office. The address of
the registered office of the Partnership in the State of Delaware and the
name and address of the registered agent for service of process on the
Partnership in the State of Delaware is The Corporation Trust Company, 1209
Orange Street, Wilmington, DE 19801 or such other address and/or registered
agent as the General Partner may from time to time designate. The principal
office of the Partnership shall be 580 West Germantown Pike, Plymouth
Meeting, PA 19462, or such other place as the General Partner may from time
to time designate by notice to the Limited Partners. The Partnership may
maintain offices at such other place or places within or outside the State of
Delaware as the General Partner deems advisable.
2.4 Power of Attorney.
A. Each Limited Partner and each Assignee hereby constitutes
and appoints the General Partner, any Liquidator, and authorized officers and
attorneys-in-fact of each, and each of those acting singly, in each case with
full power of substitution, as its true and lawful agent and
attorney-in-fact, with full power and authority in its name, place and stead
to:
(1) execute, swear to, acknowledge, deliver, file, and
record in the appropriate public offices (a) all certificates, documents, and
other instruments (including, without limitation, this Agreement and the
Certificate and all amendments or restatements thereof) that the General
Partner or the Liquidator deems appropriate or necessary to form, qualify, or
continue the existence or qualification of the Partnership as a limited
partnership (or a partnership in which the Limited Partners have limited
liability) in the State of Delaware and in all other jurisdictions in which
the Partnership may or plans to conduct business or own property, including,
without limitation, any documents necessary or advisable to convey any
Contributed Property to the Partnership; (b) all instruments that the General
Partner deems appropriate or necessary to reflect any amendment, change,
modification, or restatement of this Agreement in accordance with its terms;
(c) all conveyances and other instruments or documents that the General
Partner or the Liquidator deems appropriate or necessary to reflect the
dissolution and termination of the Partnership pursuant to the terms of this
Agreement, including, without limitation, a certificate of cancellation; (d)
all instruments relating to the admission, withdrawal, removal, or
substitution of any Partner pursuant to, or other events described in,
Article 11, 12, or 13 or the Capital Contribution of any Partner; and (e) all
certificates, documents, and other instruments relating to the determination
of the rights, preferences and privileges of any Partnership Interest; and
(2) execute, swear to, seal, acknowledge, and file all
ballots, consents, approvals, waivers, certificates, and other instruments
appropriate or necessary, in the sole and absolute discretion of the General
Partner or any Liquidator, to make, evidence, give, confirm, or ratify any
vote, consent, approval, agreement, or other action which is made or given by
the Partners hereunder or is consistent with the terms of this agreement or
appropriate or necessary, in the sole discretion of the General Partner or
any Liquidator, to effectuate the terms or intent of this Agreement.
Nothing contained herein shall be construed as authorizing the General
Partner or any Liquidator to amend this Agreement except in accordance with
Article 14 or as may be otherwise expressly provided for in this Agreement.
B. The foregoing power of attorney is hereby declared to be
irrevocable and a power coupled with an interest, in recognition of the fact
that each of the Partners will be relying upon the power of the General
Partner and any Liquidator to act as contemplated by this Agreement in any
filing or other action by it on behalf of the Partnership, and it shall
survive and not be affected by the subsequent Incapacity of any Limited
Partner or Assignee and the Transfer of all or any portion of such Limited
Partner's or Assignee's OP Units and shall extend to such Limited Partner's
or Assignee's heirs, successors, assigns, and personal representatives. Each
such Limited Partner or Assignee hereby agrees to be bound by any
representation made by the General Partner or any Liquidator, acting in good
faith pursuant to such power of attorney, and each such Limited Partner or
Assignee hereby waives any and all defenses which may be available to
contest, negate, or disaffirm the action of the General Partner or any
Liquidator, taken in good faith under such power of attorney. Each Limited
Partner or Assignee shall execute and deliver to the General Partner or the
Liquidator, within fifteen (15) days after receipt of the General Partner's
or Liquidator's request therefor, such further designations, powers of
attorney, and other instruments as the General Partner or the Liquidator, as
the case may be, deems necessary to effectuate this Agreement and the
purposes of the Partnership.
2.5 Term. The term of the Partnership commenced on the date the
Certificate was filed and shall continue until December 31, 2096, unless the
Partnership is dissolved sooner pursuant to the provisions of Article 13 or
as otherwise provided by law.
ARTICLE 3
Purpose
3.1 Purpose and Business. The purpose and nature of the business
to be conducted by the Partnership is to conduct any business that may be
lawfully conducted by a limited partnership formed pursuant to the Act
including, without limitation, to engage in the following activities: to
acquire, hold, own, develop, construct, improve, maintain, manage, operate,
sell, lease, transfer, encumber, convey, exchange, and otherwise dispose of
or deal with real and personal property of all kinds; to undertake such other
activities as may be necessary, advisable, desirable, incidental, or
convenient to the business of the Partnership; and to engage in such other
ancillary activities as shall be necessary or desirable to effectuate the
foregoing purposes; all with a view to enabling the Partnership, consistent
with operation of the Partnership in a prudent manner, to make pro rata
distributions to all the Partners of at least 29 cents per OP Unit per
quarter (or such greater amount as may be required to enable the General
Partner to make distributions to Kramont OP sufficient to enable Kramont OP
to make distributions to the Company sufficient to enable the Company to pay
a regular quarterly dividend of at least 29 cents per share and any other
dividend required to cause the Company to continue to qualify as a REIT to
which the provisions of part II of subchapter M of chapter 1 of the Code
apply), it being understood that no guarantee can be given that this purpose
can be achieved. (In the event that an event described in clauses (i), (ii),
or (iii) of the definition of "Adjustment Factor" occurs with respect to the
Shares, the figure of 29 cents contained in this Section 3.1 and in Sections
4.2C and 4.3A shall be adjusted and shall be deemed to refer to the per share
equivalent of a distribution by the Company of the same total amount as would
have been distributed had no such event occurred and had 29 cents per share been
distributed), provided, however, that such business shall be limited to and
conducted in such a manner as to permit Kramont at all times to be classified
as a real estate investment trust for federal income tax purposes. The
Partnership shall have all powers necessary, advisable, desirable,
incidental, or convenient to accomplish the purposes enumerated. In
connection with the foregoing, but subject to all of the terms, covenants,
conditions, and limitations contained in this Agreement and any other
agreement entered into by the Partnership, the Partnership shall have full
power and authority to enter into, perform, and carry out contracts of any
kind, to borrow money and to issue evidences of indebtedness, whether or not
secured by mortgage, trust deed, pledge, or other Lien, and, directly or
indirectly, to acquire and construct additional properties necessary or
useful in connection with its business.
3.2 Powers. The Partnership is empowered to do any and all acts
and things necessary, appropriate, proper, advisable, incidental to, or
convenient for the furtherance and accomplishment of the purposes and
business described herein and for the protection and benefit of the
Partnership (including specifically, but without limitation, to exercise all
of the powers set out in Section 7.1); provided, that the Partnership shall
refrain from taking any action which, in the General Partner's good faith
belief, (i) could adversely affect the ability of the Company to continue to
qualify as a REIT to which the provisions of part II of subchapter M of
chapter 1 of the Code apply (and as a "corporation subject to a tax imposed
by subchapter M," within the meaning of section 11(c) of the Code) or to pay
the regular quarterly dividend described in Section 3.1; (ii) could subject
the Company to any additional taxes or other liability under the Code,
including specifically, but without limitation, under sections 30, 42, 45A,
49, 50, 55, 453, 453A, 531, 541, 857, 1294, or 4981 of the Code; or
(iii) could violate any law or regulation of any governmental body or agency
having jurisdiction over the General Partner, its Affiliates, or their
respective securities or properties.
ARTICLE 4
Capital Contributions
4.1 Capital Contributions of the Partners.
A. The Partners owning OP Units or their predecessors in
interest have made the Capital Contributions and have been issued OP Units in
exchange therefor and have the Percentage Interest in the Partnership, all as
set forth in Exhibit A (as such Exhibit A may hereafter be amended or
corrected by the General Partner to reflect the provisions hereof). To the
extent the Partnership acquires any property by the merger of any other
Entity into the Partnership, or by the contribution to the Partnership of
interests in other Entities, Persons who receive Partnership Interests in
exchange for their interests in the Entity merging into the Partnership or,
in the case of a contribution to the Partnership of interests in other
Entities, in exchange for such interests in the other Entities, shall become
Partners and shall be deemed to have made Capital Contributions as provided
in the applicable merger agreement, the applicable contribution agreement, or
any other applicable document and as set forth in Exhibit A. Each Partner
shall own OP Units in the amounts set forth in Exhibit A and shall have a
Percentage Interest in the Partnership set forth in Exhibit A (but such OP
Units and Percentage Interests may be further adjusted pursuant to Sections
4.1C). The number of OP Units held by the General Partner, in its capacity
as general partner, shall be deemed to be the General Partner Interest.
The number of OP Units issued to each Partner and the Capital
Account of certain Partners shall be further adjusted in the circumstances
provided in Section 4.1 (and the Gross Asset Value of property contributed by
any Partner whose Capital Account is so adjusted shall be correspondingly
adjusted). No Partner whose number of OP Units is reduced pursuant to
Section 4.1 shall be required solely by reason thereof to return to the
Partnership any distributions received prior to such reduction (but such
Person may otherwise have liability to the Partnership or to other Persons
under the Master Agreement). If, as a result of the making of any
distributions prior to any such reduction, the Capital Accounts of the
Partners shall be disproportionate to their Percentage Interests following
such reduction, gross income or gross deductions of the Partnership shall be
allocated to eliminate the disproportion so resulting.
B. The General Partner shall contribute (or shall cause the
Company and its qualified REIT subsidiaries to contribute) to the Partnership
the net cash flow of the Company and such qualified REIT subsidiaries
(including net sales and refinancing proceeds) attributable to ownership of
the Florida Land (after payment of any expenditures of the Company and such
qualified REIT subsidiaries with respect to the Florida Land, including,
without limitation, management fees and principal and interest on any debt of
the Company and such qualified REIT subsidiaries attributable to the Florida
Land) and shall follow (and shall cause the Company and its qualified REIT
subsidiaries to follow) the directions of the Partnership with respect to the
management, ownership, leasing, development, financing, and sale of the
Florida Land. Such contribution shall be made promptly upon the realization
of such amounts. No additional OP Units shall be issued to the Company or
the General Partner, or such qualified REIT subsidiaries in connection with
such contribution. Although, notwithstanding Section 4.1A and unless the
General Partner shall otherwise determine, title to the Florida Land and all
interests therein shall remain vested in the Company or such qualified REIT
subsidiaries and shall not be, and shall not be deemed to have been, granted,
assigned, transferred, or otherwise conveyed to or vested in the Partnership,
this Agreement, including without limitation the determination of Capital
Contributions, Available Cash, and Net Income and Net Loss, shall be applied
as though the Florida Land had been contributed to the Partnership by CV on
December 31, 1997, subject to any debt of CV and such qualified REIT
subsidiaries attributable to the Florida Land. The intent of this provision
and of Section 7.3B is that the Partnership (and not the General Partner,
Kramont OP, the Company, or such qualified REIT subsidiaries) shall have the
economic benefits and burdens that the Partnership would have had if it did
own the Florida Land, subject to any debt of the Company and such qualified
REIT subsidiaries attributable to the Florida Land, with the effect that the
income, loss, cash flow, and cash expenditures attributable to the Florida
Land shall be treated as income, loss, cash flow, and cash expenditures of
the Partnership and not of the General Partner, Kramont OP, the Company, or
such qualified REIT subsidiaries (and, to the extent they are for any reason
not so treated, the principles of the antepenultimate sentence of Section
7.3B shall apply). The General Partner may at any time transfer (or cause to
be transferred) all or any portion of the Florida Land, or all or any portion
of the ownership interests in an Entity owning the Florida Land, to the
Partnership and, to the extent of such transfer, this Section 4.1B and
Section 7.3B, to the extent relating to the Florida Land, shall cease to
apply. No additional OP Units shall be issued to the General Partner,
Kramont OP, the Company, or its qualified REIT subsidiaries in connection
with such a transfer.
C. (1) Sections 1.6(c), 1.9, and 2.1 of the Master
Agreement provide that the number of OP Units to be issued to the Meshon
Parties and the Levy Parties (each as defined in the Master Agreement) may,
in certain circumstances, be adjusted. Such Sections 1.6(c), 1.9, and 2.1
are hereby incorporated herein, to the extent relating to OP Units to be
issued to the Meshon Parties and the Levy Parties, but not otherwise
reflected on Exhibit A. Any OP Units issued pursuant to the preceding
sentences of this Section 4.1C shall be deemed for purposes of Section 8.6 to
have been issued on the date hereof. To the extent ascertainable on the date
hereof, the amounts reflected on Exhibit A shall give effect to the
provisions of this Section 4.1C and, to the extent ascertained hereafter, any
adjustments to such amounts shall be reflected on an amended or corrected
Exhibit A prepared by the General Partner pursuant to Section 4.1A.
(2) In the event of any inaccuracy in or breach of any
representation or warranty made in the Master Agreement by any Limited
Partner (or predecessor in interest of a Limited Partner or Assignee) other
than the General Partner and if the Company exercises its rights under
section 1.4(b) of the Master Agreement, but subject to the provisions of
section 12.2 of the Master Agreement (relating to time limitations on
representations and warranties), the number of OP Units held by such Limited
Partner (or the successor in interest of such Limited Partner) shall be
reduced. If such inaccuracy or breach related to matters entering into the
calculation of net operating income of any real property, interests in which
were directly or indirectly contributed to the Partnership by such Limited
Partner (or predecessor in interest of a Limited Partner or Assignee), the
number of OP Units shall be reduced by 1 for each $1.16 per annum by which
the net operating income attributable to the interest so contributed was
overstated. If such inaccuracy or breach related to any other matter, the
number of OP Units shall be reduced by 1 for each $11 by which the
Partnership is damaged by reason of such inaccuracy or breach. The
provisions of this Section 4.1C shall not preclude the exercise of any other
remedy otherwise available to any party for any inaccuracy in or breach of
any representation or warranty made in the Master Agreement or other breach
hereof or of the Master Agreement by any other party.
D. The Partners shall have no obligation to make any
additional Capital Contributions or loans to the Partnership.
E. The General Partner shall give notice to any Partner or
Assignee affected thereby at the time of making any adjustment under
Section 4.1C.
4.2 Additional Funds.
A. The sums of money required to finance the business and
affairs of the Partnership shall be derived from, among other things, the
initial Capital Contributions made to the Partnership by the Partners as set
forth in Section 4.1 and from funds generated from the operation and business
of the Partnership including, without limitation, distributions directly or
indirectly received by the Partnership from any Entity. The General Partner
may, in its sole and absolute discretion, in such amounts and at such times
as it solely shall determine to be necessary or appropriate, (i) cause the
Partnership to issue additional Partnership Interests and admit additional
limited partners to the Partnership in accordance with Section 4.3; (ii) make
additional Capital Contributions to the Partnership (subject to the
provisions of Section 4.2C); (iii) in the event additional financing is
needed from sources other than as set forth in the preceding sentence for any
reason, cause the Partnership to borrow money, enter into loan arrangements,
issue debt securities, obtain letters of credit, or otherwise borrow money on
a secured or unsecured basis; (iv) make a loan or loans to the Partnership
(subject to Section 4.2C); or (v) except as provided in Section 7.1A(3), sell
any assets or properties of the Partnership.
B. In no event shall the Limited Partners be required to
make any additional Capital Contributions or any loan to, or otherwise
provide any financial accommodation for the benefit of, the Partnership.
C. If the Company shall, after the date of this Second
Amended and Restated Agreement of Limited Partnership, issue any debt
securities (otherwise than to enable the Company to pay its regular quarterly
dividend of 29 cents per share and any other dividend required to cause the
Company to continue to qualify as a REIT to which the provisions of part II
of subchapter M of chapter 1 of the Code apply), preferred stock, or common
stock (including additional Shares (otherwise than (i) in connection with
payment of the Shares Amount or (ii) in connection with the conversion or
exchange of securities of the Company solely in conversion or exchange for
other securities of the Company) or rights, options, warrants, or convertible
or exchangeable securities containing the right to subscribe for or purchase
any of the foregoing (collectively, "Securities"), the Company shall (i) in
the case of debt securities, lend to Kramont OP, and Kramont OP shall lend to
the General Partner, and the General Partner shall lend to the Partnership an
amount equal to the proceeds of or consideration received for such Securities
on the same terms and conditions, including interest rate and repayment
schedule, as shall be applicable with respect to or incurred in connection
with the issuance of such Securities and the proceeds of, or consideration
received from, any subsequent exercise, exchange, or conversion thereof (if
applicable); (ii) in the case of equity Securities senior or junior to the
Shares as to dividends and distributions on liquidation, contribute to
Kramont OP, and Kramont OP shall contribute to the General Partner, and the
General Partner shall contribute to the Partnership an amount equal to the
proceeds of or consideration (including any property or other non-cash
assets) received for such Shares or other Securities and the proceeds of, or
consideration received from, any subsequent exercise, exchange, or conversion
thereof (if applicable), and receive from the Partnership interests in the
Partnership in consideration therefor with the same economic terms and
conditions, including dividend, dividend priority, and liquidation
preference, as are applicable to such Securities; and (iii) in the case of
Shares or other equity Securities on a parity with the Shares as to dividends
and distributions on liquidation (including, without limitation, Shares or
other Securities issued upon exercise of options issued under the Stock
Option Plans), contribute to Kramont OP, and Kramont OP shall contribute to
the General Partner, and the General Partner shall contribute to the
Partnership an amount equal to the proceeds of or consideration (including
any property or other non-cash assets) received for such Shares or other
Securities and the proceeds of, or consideration received from, any
subsequent exercise, exchange, or conversion thereof (if applicable), and
receive from the Partnership a number of additional OP Units in consideration
therefor equal to the product of (x) the number of Shares or other equity
Securities on a parity with Shares (appropriately adjusted if such parity is
not share-for-share) issued the Company, multiplied by (y) a fraction the
numerator of which is one and the denominator of which is the Adjustment
Factor in effect on the date of such contribution. Any interests in the
Partnership with rights different from OP Units held by the limited partners
on the date hereof so issued to the General Partner shall be held at all
times by the General Partner and shall not be transferable except to a
successor General Partner hereunder. Notwithstanding the foregoing, if at
any time the Company, Kramont OP or the General Partner issues any Shares
pursuant to a Stock Option Plan (whether pursuant to the exercise of a stock
option or the grant of a restricted share award or otherwise), the following
shall occur with respect to each such Share: (i) the Company shall be deemed
to contribute to the capital of Kramont OP, Kramont OP shall be deemed to
contribute to the capital of CV GP, and CV GP shall be deemed to contribute
to the capital of the Partnership an amount of cash equal to the current per
share market price of a Share on the date such share is issued (or, if
earlier, the date the related option is exercised); (ii) the Partnership
shall be deemed to purchase from the Company a Share for an amount of cash
equal to the amount of cash deemed contributed by the Company to the
Partnership in clause (i) above (and such Share is deemed delivered to its
owner under the Stock Option Plan); (iii) the net proceeds (including the
amount of any payments made on a loan with respect to a stock purchase award)
received by the Company with respect to such Share, if any, shall be
concurrently transferred to the Partnership through Kramont OP and CV GP (and
such net proceeds so transferred shall not constitute a capital
contribution); and (iv) the Partnership shall issue to CV GP for each such
Share one (1) additional OP Unit registered in the name of CV GP and Kramont
OP shall issue one OP Unit to the Company. The Partnership shall retain any
net proceeds that are paid directly to the Partnership.
4.3 Issuance of Additional Partnership Interests;
Admission of Additional Limited Partners.
A. In addition to any Partnership Interests issuable by the
Partnership pursuant to Section 4.2, the General Partner is authorized to
cause the Partnership to issue additional Partnership Interests (or options
therefor) in the form of OP Units or other Partnership Interests junior to
the OP Units to any Persons at any time or from time to time, for
consideration not less than the fair market value thereof (or the fair market
value as of the date an option is granted) (as such fair market value is
determined in the good faith discretion of the directors or trustees of the
general partner of the General Partner), and on such terms and conditions, as
the General Partner shall establish in each case in its sole and absolute
discretion, without any approval being required from any Limited Partner
(other than the Company, if the Company is not the General Partner) or any
other Person; provided, however, that (i) such issuance does not effect a
material adverse impact (as such material adverse impact is determined in the
good faith discretion of the directors or trustees, of the general partner of
the General Partner) on (A) the existing Limited Partners' right to exercise
their rights under Section 8.6, (B) the economic effect upon the Limited
Partners of the allocations set forth in Exhibit B (other than due to the
issuance of OP Units or other interests in the Partnership as set forth in
this Section 4.3 or Section 4.2C), or (C) the ability of the Company to pay
the regular quarterly dividend of at least 29 cents per share described in
Section 3.1; (ii) such issuance does not cause the Partnership to become,
with respect to any employee benefit plan subject to title I of ERISA or
section 4975 of the Code, a "party in interest" (as defined in section 3(14)
of ERISA) or a "disqualified person" (as defined in section 4975(e) of the
Code); and (iii) such issuance would not cause any portion of the assets of
the Partnership to constitute assets of any employee benefit plan pursuant to
section 2510.3-101 of the regulations of the United States Department of
Labor. Subject to the limitations set forth in the preceding sentence and in
Articles 11 and 12, the General Partner may take such steps as it, in its
reasonable discretion, deems necessary or appropriate to admit any Person as
a Limited Partner of the Partnership, including, without limitation, amending
the Certificate, Exhibit A, or any other provision of this Agreement (except
as provided in Section 14.1C)
B. [INTENTIONALLY OMITTED]
4.4 Repurchase of Shares; Excess Shares. In the event that the
General Partner or any Affiliate thereof shall elect to purchase from the
Company's shareholders Shares for the purpose of delivering such Shares to
satisfy an obligation under any dividend reinvestment program adopted by the
Company or any Affiliate thereof, any employee stock purchase plan adopted by
the Company or any Affiliate thereof, or any other obligation or arrangement
undertaken by the Company or any Affiliate thereof in the future, the
purchase price paid by the Company or any Affiliate thereof for such Shares
and any other expenses incurred by the Company or any Affiliate thereof in
connection with such purchase shall be considered expenses of the Partnership
and shall be reimbursed to the Company or such Affiliate, subject to the
condition that: (i) if such Shares subsequently are to be sold by the Company
or any Affiliate thereof, as provided in Section 4.2C, the Company shall pay
to the Partnership an amount equal to any net proceeds received by the
Company or such Affiliate for such Shares (provided that an exchange of
Shares for OP Units pursuant to Section 8.6 would not be considered a sale
for such purposes); and (ii) if such Shares are not sold by the Company or
any Affiliate thereof within 30 days after the purchase thereof, the General
Partner shall cause the Partnership to cancel a number of OP Units held by
the Company, as a Limited Partner, equal to the product of (x) the number of
such Shares and (y) a fraction, the numerator of which is one and the
denominator of which is the Adjustment Factor in effect on the date of such
contribution.
4.5 No Third Party Beneficiary. No creditor or other third party
having dealings with the Partnership shall have the right to enforce the
right or obligation of any Partner to make Capital Contributions or loans or
to pursue any other right or remedy hereunder or at law or in equity, it
being understood and agreed that the provisions of this Agreement shall be
solely for the benefit of, and may be enforced solely by, the parties hereto
and their respective successors and assigns.
4.6 No Interest; No Return. No Partner shall be entitled to
interest on its Capital Contribution or on such Partner's Capital Account.
Except as provided herein or by law, no Partner shall have any right to
demand or receive the return of its Capital Contribution from the
Partnership.
4.7 No Preemptive Rights. Subject to any preemptive rights that
may be granted pursuant to Section 4.3, no Person shall have any preemptive
or other similar right with respect to (i) additional Capital Contributions
or loans to the Partnership or (ii) issuance or sale of any OP Units or other
Partnership Interests.
ARTICLE 5
Distributions
5.1 Regular Distributions. Except for distributions pursuant to
Section 13.2 in connection with the dissolution and liquidation of the
Partnership, and subject to the provisions of Sections 5.3, 5.4, and 5.5, the
General Partner shall cause the Partnership to distribute, from time to time
as determined by the General Partner, but in any event not less frequently
than quarterly, all Available Cash, to the Partners, in accordance with each
Partner's respective Percentage Interest; provided, however, that in no event
may a Partner receive a distribution of Available Cash with respect to an OP
Unit if such Partner is entitled to receive a distribution out of such
Available Cash with respect to a Share for which such OP Unit has been
exchanged.
5.2 Qualification as a REIT. CV GP may (and, if CV GP is at any
time not the general partner of the Partnership, the general partner of the
Partnership shall use its best efforts, if so requested by CV GP, to) cause
the Partnership (including, without limitation, by causing any Entity in
which the Partnership holds an interest to make distributions to the
Partnership) to distribute sufficient amounts under this Article 5 to enable
CV GP to make distributions to Kramont OP sufficient to enable Kramont OP to
make distributions to the Company sufficient to enable the Company to pay
shareholder dividends that will (i) satisfy the requirements for qualifying
as a REIT under the Code and Regulations ("REIT Requirements"), and
(ii) avoid any Federal income or excise tax liability of the Company
(provided, however, that a general partner of the Partnership shall not be
bound to comply with this covenant to the extent such distributions would
violate applicable Delaware law).
5.3 Withholding. With respect to any withholding tax or other
similar tax liability or obligation to which the Partnership may be subject
as a result of any act or status of any Partner or to which the Partnership
becomes subject with respect to any OP Unit, the Partnership shall have the
right to withhold amounts of Available Cash distributable to such Partner or
with respect to such OP Units, to the extent of the amount of such
withholding tax or other similar tax liability or obligation pursuant to the
provisions contained in Section 10.4.
5.4 Additional Partnership Interests. If the Partnership issues
Partnership Interests in accordance with Section 4.2 or 4.3, the distribution
priorities set forth in Section 5.1 shall be amended, as necessary, to
reflect the distribution priority of such Partnership Interests and
corresponding amendments shall be made to the provisions of Exhibit B.
5.5 Distributions Upon Liquidation. Proceeds from a Terminating
Capital Transaction and any other cash received or reductions in reserves
made after commencement of the liquidation of the Partnership shall be
distributed to the Partners in accordance with Section 13.2. Notwithstanding
any provision to the contrary contained in this Agreement, the Partnership,
and the General Partner on behalf of the Partnership, shall not be required
to make a distribution to a Partner on account of its interest in the
Partnership if such distribution would violation Section 17-607 of the Act or
any other applicable law.
ARTICLE 6
Allocations
The Net Income, Net Loss, and other items of the Partnership shall
be allocated pursuant to the provisions of Sections 4.1 and 7.3B and Exhibit
B.
ARTICLE 7
Management and Operations of Business
7.1 Management.
A. Except as otherwise expressly provided in this Agreement,
all management powers over the business and affairs of the Partnership are
and shall be exclusively vested in the General Partner, and no Limited
Partner shall have any right to participate in or exercise control or
management power over the business and affairs of the Partnership. The
General Partner may not be removed by the Limited Partners with or without
cause. In addition to the powers now or hereafter granted a general partner
of a limited partnership under applicable law or which are granted to the
General Partner under any other provision of this Agreement, the General
Partner shall have full power and authority to do all things deemed necessary
or desirable by it to conduct the business of the Partnership, to exercise
all powers set forth in Section 3.2 hereof, and to effectuate the purposes
set forth in Section 3.1 hereof, including, without limitation:
(1) (a) the making of any expenditures, the lending or
borrowing of money, including, without limitation, making prepayments on
loans and borrowing money to permit the Partnership to make distributions to
its Partners in such amounts as will enable the General Partner to make
distributions to Kramont OP sufficient to permit Kramont OP to make
distributions to the Company sufficient to permit the Company (so long as the
Company qualifies as a REIT) to avoid the payment of any Federal income tax
(including, for this purpose, any excise tax pursuant to section 4981 of the
Code) and to make distributions to its shareholders in amounts sufficient to
permit the Company to maintain REIT status, (b) the assumption or guarantee
of, or other contracting for, indebtedness and other liabilities, (c) the
issuance of evidences of indebtedness (including the securing of the same by
deed, mortgage, deed of trust, or other lien or encumbrance on the
Partnership's assets), (d) the incurring of any obligations it deems
necessary for the conduct of the activities of the Partnership, and (e) the
execution and delivery, on the Partnership's behalf, of evidences of
indebtedness and documents granting security for the payment thereof (with or
without warrant of attorney to confess judgment against the Partnership upon
default) and, without limiting the generality of the foregoing, the granting
of a warrant of attorney to confess judgment against the Partnership;
(2) the making of tax, regulatory, and other filings, or
rendering of periodic or other reports to governmental or other agencies
having jurisdiction over the business or assets of the Partnership;
(3) the acquisition, disposition, transfer, mortgage, pledge,
encumbrance, hypothecation, or exchange of any assets of the Partnership
(including the exercise or grant of any conversion, option, privilege, or
subscription right or other right available in connection with any assets at
any time held by the Partnership), or the merger or other combination or
conversion of the Partnership with or into another entity; provided that (a)
no disposition of an interest in a property listed on Exhibit E (whether by
disposition of such property or by disposition of the Partnership's interest
in an Entity owning such property) may be made prior to the date listed with
respect to such property on Exhibit E (but only to the extent the Person
identified with reference to the property on Exhibit E is a Limited Partner
hereunder), without the consent of each individual listed with respect to
such property on Exhibit E (b) (x) prior to August 1, 2000, except with the
consent or at the request of Meshon and Paul Cohen (but only to the extent
each is a Limited Partner hereunder), in the case of the Woodbourne Square
Shopping Center shopping center, (y) prior to August 1, 1998, except with the
consent or at the request of Meshon, in the case of the Rio Grande Plaza
shopping center, or (z) prior to July 31, 2002, except with the consent or at
the request of Meshon and Paul Cohen (but only to the extent each is a
Limited Partner hereunder), in the case of the Chesterbrook Shopping Center
Plaza shopping center, or, notwithstanding clauses (x), (y),and (z), except
as required under the Master Agreement, the Partnership shall take no action
(other than making capital improvements to the property involved, causing a
sale not otherwise prohibited hereunder of the property involved or the
Partnership's interest therein, making the principal amortization payments
scheduled under the respective loan documents in effect on the date hereof,
or issuing additional Partnership Interests under Section 4.3) which, of
itself, would cause a reduction in the share of Meshon or Paul Cohen, (but
only to the extent each is a Limited Partner hereunder) of the liabilities to
which the Rio Grande Plaza, Woodbourne Square Shopping Center and
Chesterbrook Shopping Center Plaza shopping centers are subject, if such
reduction would, of itself, cause a realization or recognition of income to
Meshon or Paul Cohen (to the extent a party hereto); provided that the
consent of any individual described in this Section 7.1A(3) shall not be
required after such individual's death;
(4) the use of the assets of the Partnership (including,
without limitation, cash on hand) for any purpose consistent with the terms
of this Agreement and on any terms it sees fit, including, without
limitation, the financing of the conduct of the operations of the Company or
its Affiliates, the Partnership, or any of the Partnership's Subsidiaries,
the lending of funds to other Persons (including, without limitation, the
Subsidiaries of the Partnership and/or the Company or its Affiliates), and
the repayment of obligations of the Partnership and its Subsidiaries and any
other Person in which it has an equity investment, and the making of capital
contributions to its Subsidiaries;
(5) the management, operation, expansion, development,
construction, leasing, landscaping, repair, alteration, demolition, or
improvement of any real property or improvements owned by the Partnership or
any Subsidiary of the Partnership;
(6) the negotiation, execution, and performance of any
contracts, conveyances, or other instruments that the General Partner
considers necessary, advisable, desirable, incidental, or convenient to the
conduct of the Partnership's operations or the implementation of the General
Partner's powers under this Agreement, including contracting with
contractors, developers, consultants, accountants, legal counsel, other
professional advisors, and other agents and the payment of their expenses and
compensation out of the Partnership's assets;
(7) the distribution of Partnership cash or other Partnership
assets in accordance with this Agreement;
(8) the holding, managing, investing, and reinvesting cash
and other assets of the Partnership;
(9) the collection and receipt of revenues and income of the
Partnership;
(10) the establishment of one or more divisions of the
Partnership, the selection and dismissal of employees of the Partnership
(including, without limitation, employees who may be designated as officers
having titles such as "president," "vice president," "secretary" and
"treasurer" of the Partnership), and agents, outside attorneys, accountants,
consultants and contractors of the Partnership, and the determination of
their compensation and other terms of employment or engagement;
(11) the maintenance of such insurance for the benefit of the
Partnership and the Partners as it deems necessary or appropriate;
(12) the formation of, or acquisition of an interest in, and
the contribution of property to, any further limited or general partnerships,
limited liability companies, joint ventures, or other relationships that it
deems desirable (including, without limitation, the acquisition or disposal
of interests in, and the contributions of property to, its Subsidiaries and
any other Person in which it has an equity investment from time to time);
(13) the control of any matters affecting the rights and
obligations of the Partnership, including the settlement, compromise,
submission to arbitration or any other form of dispute resolution, or
abandonment of any claim, cause of action, liability, debt or damages, due or
owing to or from the Partnership, the commencement or defense of suits, legal
proceedings, administrative proceedings, arbitration, or other forms of
dispute resolution, and the representation of the Partnership in all suits or
legal proceedings, administrative proceedings, arbitrations, or other forms
of dispute resolution, the incurring of legal expenses, and the
indemnification of any Person against liabilities and contingencies to the
extent permitted by law;
(14) the undertaking of any action in connection with the
Partnership's direct or indirect investment in its Subsidiaries or any other
Person (including, without limitation, the contribution or loan of funds by
the Partnership to such Persons);
(15) the determination of the fair market value of any
Partnership property distributed in kind using such method of valuation as
the General Partner may adopt;
(16) the enforcement of any rights against any Partner
pursuant to representations, warranties, covenants and indemnities relating
to such Partner's contribution of property or assets to the Partnership or
otherwise;
(17) the exercise, directly or indirectly, through any
attorney-in-fact acting under a general or limited power of attorney, of any
right, including the right to vote, appurtenant to any asset or investment
held by the Partnership;
(18) the exercise of any of the powers of the General Partner
enumerated in this Agreement on behalf of or in connection with any
Subsidiary of the Partnership or any other Person in which the Partnership
has a direct or indirect interest, or jointly with any such Subsidiary or
other Person;
(19) the exercise of any of the powers of the General Partner
enumerated in this Agreement on behalf of any Person in which the Partnership
does not have an interest pursuant to contractual or other arrangements with
such Person;
(20) the issuance of additional OP Units, in the General
Partner's sole and absolute discretion, in connection with Capital
Contributions by Additional Limited Partners and additional Capital
Contributions by Partners pursuant to Article 4;
(21) the opening of bank accounts on behalf of, and in the
name of, the Partnership and its Subsidiaries;
(22) the commencing of a case under title 11 of the United
States Code, as the same may be amended from time to time, the making of an
assignment for the benefit of creditors and the dissolution of the
Partnership pursuant to the laws of the State of Delaware, as the same may be
amended from time to time, the consenting to or the acquiescing in the filing
of any of the foregoing by any Person other than the General Partner or to
take any action in furtherance of any of the foregoing;
(23) the transfer of any property of the Partnership in
complete or partial satisfaction of a creditor's claims including, without
limitation, the holder of a mortgage or other lien on property of the
Partnership, by executing and delivering a deed in lieu of foreclosure, bill
of sale or otherwise;
(24) the confessing of a judgment;
(25) not contesting any foreclosure action commenced with
respect to the property of the Partnership or any other action claiming a
default under any mortgage or other lien on property of the Partnership; and
(26) the making, execution, and delivery of any and all deeds,
leases, notes, mortgages, deeds of trust, security agreements, conveyances,
contracts, guarantees, warranties, indemnities, waivers, releases, or legal
instruments or agreements in writing necessary, advisable, desirable,
incidental, or convenient in the judgment of the General Partner, for the
accomplishment of any of the foregoing.
B. Each of the Limited Partners agrees that the General Partner
is authorized to perform the above-mentioned acts, and to execute, deliver
and perform any agreements, and transactions on behalf of the Partnership
without any further act, approval, or vote of the Partners, notwithstanding
any other provision of this Agreement to the fullest extent permitted under
the Act or other applicable law, rule, or regulation. The execution,
delivery, or performance by the General Partner or the Partnership of any
agreement authorized or permitted under this Agreement shall not constitute a
breach by the General Partner of any duty that the General Partner may owe
the Partnership or the Limited Partners or any other Persons under this
Agreement or of any duty stated or implied by law or equity.
C. At all times from and after the date hereof, the General
Partner may cause the Partnership to establish and maintain at any and all
times working capital accounts and other cash or similar balances in such
amount as the General Partner, in its sole and absolute discretion, deems
appropriate and reasonable from time to time.
D. In exercising its authority under this Agreement, the General
Partner may, but (except as provided in Sections 3.2, 7.1A(3), and 10.2)
shall be under no obligation to, take into account the tax consequences to
any Partner of any action taken by it. The General Partner and the
Partnership shall not have liability to a Limited Partner under any
circumstances as a result of an income tax liability incurred by such Limited
Partner as a result of an action (or inaction) by the General Partner taken
pursuant to its authority under and in accordance with this Agreement.
7.2 Certificate of Limited Partnership. The General Partner shall
use all reasonable efforts to cause to be filed such other certificates or
documents as may be reasonable and necessary or appropriate for the
formation, continuation, qualification, and operation of a limited
partnership (or a partnership in which the limited partners have limited
liability) in the State of Delaware and any other state, or the District of
Columbia, in which the Partnership may elect to do business or own property.
To the extent that such action is determined by the General Partner to be
reasonable and necessary or appropriate, the General Partner shall file
amendments to and restatements of the Certificate and do all of the things to
maintain the Partnership as a limited partnership (or a partnership in which
the limited partners have limited liability) under the laws of the State of
Delaware and each other state, or the District of Columbia, in which the
Partnership may elect to do business or own property. Subject to the terms
of Section 8.5A(3), the General Partner shall not be required, before or
after filing, to deliver or mail a copy of the Certificate or any amendment
thereto to any Limited Partner.
7.3 Reimbursement of the General Partner's Allocable Expenses.
A. Except as provided in this Section 7.3 and elsewhere in
this Agreement (including the provisions of Articles 5 and 6 regarding
distributions, payments, and allocations to which it may be entitled), the
General Partner shall not be compensated for its services as general partner
of the Partnership.
B. On such monthly or other basis as the General Partner may
determine in its sole and absolute discretion, the Partnership shall pay for
the account of the General Partner or reimburse the General Partner for (and,
on a monthly basis or such other basis as the General Partner and the Company
shall agree, the Partnership shall, if the Company or its Affiliate is not
the General Partner, pay for the account of the Company or its Affiliate or
reimburse the Company or its Affiliate for) the following "Reimbursable
Amounts": all expenses that it (or any of its Affiliates) incurs relating to
the ownership and operation of, or for the benefit of, the Partnership;
including, without limitation, the allocable portion of: all of its (and its
Affiliates') payroll and fringe benefit expense, professional fees
(including, without limitation, legal, audit, advisory, directors', and
management, executive service, and similar fees), corporate insurance expense
(including, without limitation, directors' and officers' insurance), public
company expenses, office expenses, Delaware franchise taxes (regardless of
whether or not included in the Company's liability for deferred income taxes
on the date hereof, but not including any taxes attributable, under the rules
of Treasury Regulation section 1.704-1(b)(2)(iv)(n), to periods ending on or
before December 31, 1997), Pennsylvania capital stock, loans, and corporate
net income taxes (regardless of whether or not included in the Company's
liability for deferred income taxes on the date hereof, but not including any
taxes attributable, under the rules of Treasury Regulation section
1.704-1(b)(2)(iv)(n), to periods ending on or before December 31, 1997), and
other expenses of a similar nature; and, so long as the Company (or any of
its Affiliates) owns the Florida Land, any net negative cash flow (taking
into account any expenditures of the Company or its qualified REIT
subsidiaries with respect to the Florida Land, including, without limitation,
management fees and payment of principal and interest on debt attributable to
the Florida Land) attributable to the Florida Land. To the extent of
Reimbursable Amounts not otherwise treated as expenses of the Partnership,
gross income of the Partnership for the year of reimbursement or payment for
a Partner's account shall be allocated to the Partner receiving such
reimbursement and such reimbursement or payment for a Partner's account shall
constitute a distribution from the Partnership to such Partner. To the
extent of Reimbursable Amounts that are otherwise treated as expenses of the
Partnership, payment of such amounts by the Partner receiving reimbursement
shall be treated as a loan by such Partner to the Partnership and such
reimbursement shall be treated as repayment of such loan. Any reimbursement
or payment for a Partner's account pursuant to this Section 7.3B shall be in
addition to any reimbursement made as a result of indemnification pursuant to
Section 7.6.
7.4 Outside Activities of the General Partner. The General
Partner or any of its Subsidiaries, other than the Partnership and any
Subsidiaries of the Partnership, may not, directly or indirectly enter into
or conduct any business not connected with the ownership, acquisition,
development, and disposition of Partnership Interests and (subject to
Sections 4.1B and 7.3B) the Florida Land and the management of the business
of the Partnership and the management of (subject to Sections 4.1B and 7.3B)
the Florida Land, and such activities as are incidental thereto, except that
the General Partner may acquire, hold, develop, operate, and dispose of the
properties which cannot be acquired by the Partnership or which the owner
thereof is, for tax or other reasons, unwilling to transfer to the
Partnership. If such properties are acquired by the General Partner, there
shall be a proper allocation of expenses between the General Partner and the
Partnership. The General Partner directly or indirectly may acquire Limited
Partner Interests and shall be entitled to exercise all rights of a Limited
Partner relating to such Limited Partner Interests.
7.5 Contracts with Affiliates.
A. The Partnership may lend or contribute funds or other
assets to its Subsidiaries or other Persons in which it has an equity
investment and such Subsidiaries and Persons may borrow funds from the
Partnership, on terms and conditions established in the sole and absolute
discretion of the General Partner. The foregoing authority shall not create
any right or benefit in favor of any Subsidiary or any other Person.
B. Except as provided in Section 7.4, the Partnership may
Transfer assets to joint ventures, other partnerships, corporations, or other
business entities in which it is or thereby becomes a participant upon such
terms and subject to such conditions consistent with this Agreement and
applicable law as the General Partner, in its sole and absolute discretion,
believes are advisable and in the best interests of the Partnership.
C. Except as expressly permitted by this Agreement, neither
the General Partner nor any of its Affiliates (or any officers or directors
of either) shall sell, Transfer, or convey any property to, or purchase any
property from, the Partnership, directly or indirectly, except pursuant to
transactions that are determined by the General Partner in good faith to be
fair and reasonable.
D. The General Partner, in its sole and absolute discretion
and without the approval of the Limited Partners, may propose and adopt, on
behalf of the Partnership, employee benefit plans, stock option plans, and
similar plans funded by the Partnership for the benefit of employees of the
General Partner, the Partnership, Subsidiaries of the Partnership, or any
Affiliate of any of them in respect of services performed, directly or
indirectly, for the benefit of the Partnership, the General Partner, or any
Subsidiaries of the Partnership.
7.6 Indemnification.
A. To the fullest extent permitted by Delaware law, the
Partnership shall indemnify each Indemnitee from and against any and all
losses, claims, damages, liabilities, joint, several, or joint and several,
expenses (including, without limitation, reasonable attorneys' fees and other
legal fees and expenses), judgments, fines, settlements, and other amounts
arising from any and all claims, demands, actions, suits, or proceedings,
civil, criminal, administrative, or investigative, that relate to the
operations of the Partnership or its Affiliates as set forth in this
Agreement, in which such Indemnitee may be involved, or is threatened to be
involved, as a party or otherwise, except to the extent it is finally
determined by a court of competent jurisdiction, from which no further appeal
may be taken, that such Indemnitee's action constituted intentional acts or
omissions constituting gross negligence, willful misconduct, or fraud.
Without limitation, the foregoing indemnity shall extend to any liability of
any Indemnitee, pursuant to a loan guaranty or otherwise for any indebtedness
of the Partnership or any Subsidiary of the Partnership (including, without
limitation, any indebtedness which the Partnership or any Subsidiary of the
Partnership has assumed or taken subject to), and the General Partner is
hereby authorized and empowered, on behalf of the Partnership, to enter into
one or more indemnity agreements consistent with the provisions of this
Section 7.6 in favor of any Indemnitee having or potentially having liability
for any such indebtedness. Any indemnification pursuant to this Section 7.6
shall be made only out of the assets of the Partnership, and neither the
General Partner nor any Limited Partner shall have any obligation to
contribute to the capital of the Partnership, or otherwise provide funds, to
enable the Partnership to fund its obligations under this Section 7.6.
B. Reasonable expenses (including reasonable legal fees)
incurred by an Indemnitee who is a party to a proceeding shall be paid or
reimbursed by the Partnership in advance of the final disposition of the
proceeding.
C. The indemnification provided by this Section 7.6 shall be
in addition to any other rights to which an Indemnitee or any other Person
may be entitled under any agreement, pursuant to any vote of the Partners, as
a matter of law or otherwise, and shall continue as to an Indemnitee who has
ceased to serve in such capacity unless otherwise provided in a written
agreement to which such Indemnitee is a party.
D. The Partnership may, but shall not be obligated to,
purchase and maintain insurance (including so-called "D&O insurance"), on
behalf of the Indemnitees and such other Persons as the General Partner shall
determine, against any liability that may be asserted against or expenses
that may be incurred by such Person in connection with the Partnership's
activities, regardless of whether the Partnership would have the power or
obligation to indemnify such Person against such liability under the
provisions of this Agreement.
E. For purposes of this Section 7.6, the Partnership shall
be deemed to have requested an Indemnitee to serve as fiduciary of an
employee benefit plan whenever the performance by such Indemnitee of its
duties to the Partnership also imposes duties on, or otherwise involves
services by, such Indemnitee to the plan or participants or beneficiaries of
the plan; excise taxes assessed on an Indemnitee with respect to an employee
benefit plan pursuant to applicable law shall constitute fines within the
meaning of this Section 7.6; and actions taken or omitted by the Indemnitee
with respect to an employee benefit plan in the performance of its duties for
a purpose reasonably believed by it to be in the interest of the participant
and beneficiaries of the plan shall be deemed to be for a purpose which is
not opposed to the best interests of the Partnership.
F. In no event may an Indemnitee subject any of the Partners
to personal liability by reason of the indemnification provisions set forth
in this Agreement.
G. An Indemnitee shall not be denied indemnification in
whole or in part under this Section 7.6 because the Indemnitee had an
interest in the transaction with respect to which the indemnification applies
if the transaction was otherwise permitted by the terms of this Agreement.
H. The provisions of this Section 7.6 are for the benefit of
the Indemnitees and their heirs, successors, assigns, and administrators and
shall not be deemed to create any rights for the benefit of any other
Persons. Any amendment, modification, or repeal of this Section 7.6 or any
provision hereof shall be prospective only and shall not in any way affect
the Partnership's liability to any Indemnitee under this Section 7.6, as in
effect immediately prior to such amendment, modification, or repeal with
respect to claims arising from or relating to matters occurring, in whole or
in part, prior to such amendment, modification, or repeal, regardless of when
such claims may arise or be asserted.
I. If and to the extent any payments to the General Partner
pursuant to this Section 7.6 constitute gross income to the General Partner
(as opposed to the repayment of advances made on behalf of the Partnership),
such amounts shall constitute guaranteed payments within the meaning of
Section 707(c) of the Code, shall be treated consistently therewith by the
Partnership and all Partners, and shall not be treated as distributions for
purposes of computing the Partners' Capital Accounts.
7.7 Liability of the General Partner.
A. Notwithstanding anything to the contrary set forth in
this Agreement, neither the General Partner nor any of its officers or
directors shall be liable for monetary damages to the Partnership, any
Partners, or any Assignees for losses sustained or liabilities incurred as a
result of errors in judgment or of any act or omission if the General Partner
acted in good faith and without gross negligence or malfeasance.
B. The Limited Partners expressly acknowledge that the
General Partner is acting on behalf of the Partnership and the partners of
the Partnership, collectively, that the General Partner, subject to the
provisions of Section 7.1D, is under no obligation to consider the separate
interest of the Limited Partners (including, without limitation, the tax
consequences to Limited Partners or Assignees) in deciding whether to cause
the Partnership to take (or decline to take) any actions (except that the
General Partner shall comply with Sections 3.2, 7.1A(3) and 10.2), and that
the General Partner shall not be liable for monetary damages for losses
sustained, liabilities incurred, or benefits not derived by Limited Partners
in connection with such decisions, provided that the General Partner has
acted in good faith and without gross negligence or malfeasance. With
respect to any indebtedness of the Partnership which any Limited Partner may
have guaranteed, the General Partner shall have no duty to keep such
indebtedness outstanding.
C. Subject to its obligations and duties as General Partner
set forth in Section 7.1A, the General Partner may exercise any of the powers
granted to it by this Agreement and perform any of the duties imposed upon it
hereunder either directly or by or through its agents. The General Partner
shall not be responsible for any misconduct or negligence on the part of any
such agent appointed by the General Partner in good faith.
D. Any amendment, modification, or repeal of this Section
7.7 or any provision hereof shall be prospective only and shall not in any
way affect the limitations on the General Partner's and its officers' and
directors' liability to the Partnership and the Limited Partners under this
Section 7.7 as in effect immediately prior to such amendment, modification,
or repeal with respect to claims arising from or relating to matters
occurring, in whole or in part, prior to such amendment, modification, or
repeal, regardless of when such claims may arise or be asserted.
7.8 Other Matters Concerning the General Partner.
A. The General Partner may rely and shall be protected in
acting, or refraining from acting, upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent, order,
bond, debenture, or other paper or document believed by it in good faith to
be genuine and to have been signed or presented by the proper party or
parties.
B. The General Partner may consult with legal counsel,
accountants, appraisers, management consultants, investment bankers,
architects, engineers, environmental consultants, and other consultants and
advisers selected by it, and any act taken or omitted to be taken in reliance
upon the opinion or advice of such Persons as to matters which such General
Partner reasonably believes to be within such Person's professional or expert
competence shall be conclusively presumed to have been done or omitted in
good faith and in accordance with such opinion or advice.
C. The General Partner shall have the right, in respect of
any of its powers or obligations hereunder, to act through any of its duly
authorized officers and duly appointed attorneys-in-fact. Each such attorney
shall, to the extent provided by the General Partner in the power of
attorney, have full power and authority to do and perform all and every act
and duty which is permitted or required to be done by the General Partner
hereunder.
D. Notwithstanding any other provisions of this Agreement or
the Act, any action of the General Partner on behalf of the Partnership or
any decision of the General Partner to refrain from acting on behalf of the
Partnership, undertaken in the good faith belief that such action or omission
is necessary or advisable in order (i) to protect the ability of the Company
to continue to qualify as a REIT to which the provisions of part II of
subchapter M of chapter 1 of the Code apply (and as a "corporation subject to
a tax imposed by subchapter M," within the meaning of section 11(c) of the
Code) or the ability of the General Partner to make distributions to Kramont
OP sufficient to enable Kramont OP to make distributions to the Company
sufficient to enable the Company to pay the regular quarterly dividend
described in Section 3.1; or (ii) to avoid the Company's incurring any taxes
or other liability under the Code, including specifically, but without
limitation, under section 30, 42, 45A, 49, 50, 55, 453, 453A, 531, 541, 857,
1294, or 4981 of the Code, is expressly authorized under this Agreement and
is deemed approved by all of the Limited Partners.
7.9 Title to Partnership Assets. Title to Partnership assets,
whether real, personal, or mixed and whether tangible or intangible, shall be
deemed to be owned by the Partnership as an entity, and no Partner,
individually or collectively, shall have any ownership interest in such
Partnership assets or any portion thereof. Title to any or all of the
Partnership assets may be held in the name of the Partnership, the General
Partner, or one or more nominees, as the General Partner may determine,
including Affiliates of the General Partner. The General Partner hereby
declares and warrants that any Partnership asset for which legal title is
held in the name of the General Partner or any nominee or Affiliate of the
General Partner shall be held by the General Partner or such nominee or
Affiliate for the use and benefit of the Partnership in accordance with the
provisions of this Agreement; provided, that the General Partner shall use
reasonable efforts to cause beneficial and record title to such assets to be
vested in the Partnership as soon as reasonably practicable. All Partnership
assets shall be recorded as the property of the Partnership in its books and
records, irrespective of the name in which legal title to such Partnership
assets is held. The Florida Land is not a Partnership asset for purposes of
this Section 7.9.
7.10 Reliance by Third Parties. Notwithstanding anything to the
contrary in this Agreement, any Person dealing with the Partnership shall be
entitled to assume that the General Partner has full power and authority,
without consent or approval of any other Partner or Person, to encumber,
sell, or otherwise use in any manner any and all assets of the Partnership
and to enter into any contracts on behalf of the Partnership, and take any
and all actions on behalf of the Partnership, and such Person shall be
entitled to deal with the General Partner as if the General Partner were the
Partnership's sole party in interest, both legally and beneficially. Each
Limited Partner hereby waives any and all defenses or other remedies which
may be available against such Person to contest, negate, or disaffirm any
action of the General Partner in connection with any such dealing. In no
event shall any Person dealing with the General Partner or its
representatives be obligated to ascertain that the terms of this Agreement
have been complied with or to inquire into the necessity or expedience of any
act or action of the General Partner or its representatives. Each and every
certificate, document, or other instrument executed on behalf of the
Partnership by the General Partner or its representatives shall be conclusive
evidence in favor of any and every Person relying thereon or claiming
thereunder that (i) at the time of the execution and delivery of such
certificate, document, or instrument, this Agreement was in full force and
effect; (ii) the Person executing and delivering such certificate, document,
or instrument was duly authorized and empowered to do so for and on behalf of
the Partnership; and (iii) such certificate, document, or instrument was duly
executed and delivered in accordance with the terms and provisions of this
Agreement and is binding upon the Partnership.
ARTICLE 8
Rights and Obligations of Limited Partners
8.1 Limitation of Liability. The Limited Partners shall have no
liability under this Agreement except as expressly provided in this
Agreement, including Section 10.4, or under the Act.
8.2 Management of Business. No Limited Partner or Assignee (other
than the General Partner, any of its Affiliates or any officer, director,
employee, agent, member, manager, trustee or general partner of the General
Partner, the Partnership, or any of their Affiliates, in their capacity as
such) shall take part in the operation, management, or control (within the
meaning of the Act) of the Partnership's business, transact any business in
the Partnership's name, or have the power to sign documents for or otherwise
bind the Partnership. The transaction of any such business by the General
Partner, any of its Affiliates or any officer, director, employee, partner,
agent, or trustee of the General Partner, the Partnership, or any of their
Affiliates, in their capacity as such, shall not affect, impair, or eliminate
the limitations on the liability of the Limited Partners or Assignees under
this Agreement.
8.3 Outside Activities of Limited Partners. Subject to any
agreements entered into pursuant to Section 7.5 hereof and any other
agreements entered into by a Limited Partner or its Affiliates with the
Partnership or any of its Subsidiaries, any Limited Partner (other than CV
GP) and any officer, director, employee, agent, trustee, member, manager,
Affiliate, or shareholder of any Limited Partner (other than CV GP) shall be
entitled to and may have business interests and engage in business activities
in addition to those relating to the Partnership, including business
interests and activities that are in direct competition with the Partnership
or that are enhanced by the activities of the Partnership. Neither the
Partnership nor any Partners shall have any rights by virtue of this
Agreement in any business ventures of any Limited Partner or Assignee. None
of the Limited Partners nor any other Person shall have any rights by virtue
of this Agreement or the Partnership relationship established hereby in any
business ventures of any other Person and such Person shall have no
obligation pursuant to this Agreement to offer any interest in any such
business ventures to the Partnership, any Limited Partner, or any such other
Person, even if such opportunity is of a character which, if presented to the
Partnership, any Limited Partner or such other Person, could be taken by such
Person.
8.4 Return of Capital. Except pursuant to Section 8.6, no Limited
Partner shall be entitled to the withdrawal or return of its Capital
Contribution, except to the extent of distributions made pursuant to this
Agreement or upon dissolution of the Partnership as provided herein. Except
to the extent provided by Exhibit B (or Sections 4.1 or 7.3B) or as otherwise
expressly provided in this Agreement, no Limited Partner or Assignee shall
have priority over any other Limited Partner or Assignee, either as to the
return of Capital Contributions or as to profits, losses, or distributions.
8.5 Rights of Limited Partners Relating to the Partnership.
A. In addition to the other rights provided by this
Agreement or by the Act, and except as limited by Section 8.5B hereof, each
Limited Partner shall have the right, for a purpose reasonably related to
such Limited Partner's interest as a limited partner in the Partnership, upon
written demand with a statement of the purpose of such demand and at such
Limited Partner's own reasonable expense (including such copying and
administrative charges as the General Partner may establish from time to
time):
(1) to obtain a copy of the Partnership's Federal,
state, and local income tax returns for each Partnership Year;
(2) to obtain a current list of the name and last known
mailing address of each Partner;
(3) to obtain a copy of this Agreement and the
Certificate and all amendments and/or restatements thereto, together with
executed copies of all powers of attorney pursuant to which this Agreement,
the Certificate and all amendments and/or restatements thereto have been
executed; and
(4) to obtain true and full information regarding the
amount of cash and a description and statement of any other property or
services contributed by each Partner and which each Partner has agreed to
contribute in the future, and the date on which each became a Partner.
B. The General Partner shall provide to each Limited
Partner, without cost, copies of the Company's annual and quarterly reports
filed with the Securities and Exchange Commission pursuant to the Securities
Exchange Act of 1934.
C. Notwithstanding any other provision of this Section 8.5,
the General Partner may keep confidential from the Limited Partners, for such
period of time as the General Partner determines in its sole and absolute
discretion to be reasonable, any information that (i) the General Partner
reasonably believes to be in the nature of trade secrets or other
information, the disclosure of which the General Partner in good faith
believes is not in the best interests of the Partnership or could damage the
Partnership or its business; or (ii) the Partnership is required by law or by
agreements with an unaffiliated third party to keep confidential. To the
extent permitted by law, the General Partner shall keep confidential from the
Limited Partners any information that the General Partner determines, in its
sole and absolute discretion, to be in the nature of trade secrets or other
confidential information of the General Partner (or any of its Affiliates) or
to constitute material non-public information of or relating to the General
Partner (or any of its Affiliates) the disclosure of which is not in the best
interests of the General Partner (or any of its Affiliates) or its (or their)
business or could involve a violation of law.
8.6 Redemption Rights.
A. General.
(i) Subject to Section 8.6C, below, on or after the date
one year (or such other period as may be agreed between the General Partner
and the holder of such OP Unit) after the issuance of an OP Unit to a Limited
Partner pursuant to Article 4 (or upon the earlier death of such Limited
Partner), the holder of such OP Unit (other than an OP Unit that is or has
been held by the General Partner or any Affiliate of the General Partner)
shall have the right (the "Redemption Right") to require the Partnership to
redeem such OP Unit on a Specified Redemption Date and at a redemption price
equal to and in the form of the Cash Amount to be paid by the Partnership.
Any such Redemption Right shall be exercised pursuant to a Notice of
Redemption (in the form of Exhibit D hereto, as such form may be amended by
the General Partner, in its reasonable discretion, from time to time, upon no
less than 30 days' notice to the Limited Partners) delivered to the
Partnership (with a copy simultaneously to the General Partner) by the
Limited Partner who is exercising the Redemption Right (the "Redeeming
Partner"). A Limited Partner may not exercise the Redemption Right for fewer
than 1,000 OP Units or, if such Redeeming Partner holds fewer than 1,000 OP
Units, for fewer than all of the OP Units held by such Redeeming Partner. In
the sole discretion of the General Partner at the request of any Limited
Partner, the General Partner may substitute "six months" (or some period of
time greater than six months, but less than one year) for "one year" in
applying the first sentence of this Section 8.6A(i) to such Limited Partner
and, in connection with the exercise of such discretion, the General Partner
may require that the Redeeming Partner provide a letter to the Partnership
and the General Partner in substantially the form of Exhibit F hereto.
(ii) The Redeeming Partner shall have no right with
respect to any OP Units so redeemed to receive any distributions paid after
the Specified Redemption Date.
(iii) The Assignee of any Limited Partner may
exercise the rights of such Limited Partner pursuant to this Section 8.6 and
such Limited Partner shall be deemed to have assigned such rights to such
Assignee and shall be bound by the exercise of such rights by such Limited
Partner's Assignee. In connection with any exercise of such rights by such
Assignee on behalf of such Limited Partner, the Cash Amount shall be paid by
the Partnership directly to such Assignee and not to such Limited Partner.
B. General Partner Assumption of Right.
(i) If a Limited Partner has delivered a Notice of
Redemption, the General Partner shall, within 2 business days after receipt
of such Notice, deliver to Kramont a copy of such Notice of Redemption.
Kramont may, within 3 business days after receipt of such Notice, in its sole
discretion (subject to any limitations on ownership and transfer of Shares
set forth in Kramont's Declaration of Trust, as the same may be amended,
restated, and supplemented from time to time (the "Declaration")), but only
if Kramont has in effect (or, at the request of the Redeeming Partner,
consents and within 60 days after such election causes to be in effect) a
registration statement (the "Registration Statement") covering the immediate
resale of all the Shares to be issued to the Redeeming Partner pursuant to
such election (or, under then-applicable law, the Shares upon issuance would
be freely tradeable without such a registration statement's being in effect),
elect to assume directly and satisfy a Redemption Right by issuing to the
Redeeming Partner the Shares Amount on the Specified Redemption Date,
whereupon Kramont shall acquire the OP Units offered for redemption by the
Redeeming Partner, and the General Partner shall be treated for all purposes
of this Agreement as the owner of such OP Units by virtue of the
contributions of the OP Units by Kramont to Kramont OP and by Kramont OP to
the General Partner described in the third to last sentence of this Section
8.6B(i). If Kramont elects not to assume directly and satisfy the Redemption
Right by issuing the Shares Amount to the Redeeming Partner, it shall notify
the General Partner, and the General Partner may, in its sole discretion,
assume directly and satisfy the Redemption Right by paying the Cash Amount to
the Redeeming Partner on the Specified Redemption Date, whereupon the General
Partner shall acquire the OP Units offered for redemption by the Redeeming
Partner and shall be treated for all purposes of this Agreement as the owner
of such OP Units. If it shall be necessary under the second preceding
sentence for a Registration Statement to be caused to be in effect, Kramont
will use commercially reasonable efforts to cause such Registration Statement
to be filed within the 60-day period there described and to become effective
as soon as reasonably practicable. Unless Kramont, in its sole discretion,
shall exercise its right to assume directly and satisfy the Redemption Right,
Kramont shall not have any obligation to the Redeeming Partner or to the
Partnership with respect to the Redeeming Partner's exercise of the
Redemption Right, and unless the General Partner, in its sole discretion,
shall exercise its right to assume directly and satisfy the Redemption Right,
the General Partner shall not have any obligation to the Redeeming Partner or
to the Partnership with respect to the Redeeming Partner's exercise of the
Redemption Right. In the event Kramont or the General Partner shall exercise
its right to satisfy the Redemption Right in the manner described in the
second and third sentences of this Section 8.6B and shall fully perform its
obligations in connection therewith, the Partnership shall have no right or
obligation to pay any amount to the Redeeming Partner with respect to such
Redeeming Partner's exercise of the Redemption Right. In the event Kramont
shall exercise its right to satisfy the Redemption Right, each of the
Redeeming Partner, the Partnership, Kramont and the General Partner shall,
for Federal income tax purposes, treat the transaction between Kramont and
the Redeeming Partner as follows: (1) Kramont shall be deemed to have
acquired the OP Units from the Redeeming Partner in exchange for the Shares
Amount, (2) Kramont shall be deemed to contribute such OP Units to Kramont OP
in exchange for an equal number of OP Common Units (as defined in the amended
and restated agreement of limited partnership of Kramont OP), and (3) Kramont
OP shall be deemed to contribute such OP Units to CV GP. In the event the
General Partner shall exercise its right to satisfy the Redemption Right,
each of the Redeeming Partner, the Partnership and the General Partner shall,
for Federal income tax purposes, treat the transaction between the General
Partner and the Redeeming Partner as a sale of the Redeeming Partner's OP
Units to the General Partner. Nothing contained in this Section 8.6B shall
imply any right of the General Partner to require any Limited Partner to
exercise the Redemption Right afforded to such Limited Partner pursuant to
Section 8.6A.
(ii) In the event that Kramont determines to pay the
Redeeming Partner the Redemption Amount in the form of Shares, the total
number of Shares to be paid to the Redeeming Partner in exchange for the
Redeeming Partner's OP Units shall be the applicable Shares Amount. In the
event this amount is not a whole number of Shares, the Redeeming Partner
shall be paid (i) that number of Shares which equals the nearest whole number
less than such amount plus (ii) an amount of cash which the General Partner
determines, in its reasonable discretion, to represent the fair value of the
remaining fractional Share which would otherwise be payable to the Redeeming
Partner.
(iii) Each Redeeming Partner agrees to provide in a
timely fashion such information and to execute such documents as the General
Partner, Kramont and their Affiliates may reasonably require in connection
with the issuance of Shares upon exercise of the Redemption Right and the
registration of the resale of such Shares, including, without limitation, an
agreement pursuant to which the Redeeming Partner agrees to indemnify and to
hold harmless the General Partner, the Partnership, Kramont, the Affiliates
of any of them, and the respective officers, directors, trustees, general
partners, and agents of the General Partner, the Partnership, Kramont, and
such Affiliates with respect to any information provided by the Redeeming
Partner for inclusion in the Registration Statement and the General Partner
agrees to indemnify and to hold harmless the Redeeming Partner with respect
to information provided by Kramont in the Registration Statement.
(iv) So long as the Redeeming Partner confirms in writing
that the Redeeming Partner continues to intend in good faith to sell all of
its Shares received under this Section 8.6 under such Registration Statement,
Kramont shall use its best efforts to keep the Registration Statement
effective for up to one year after the effective date thereof, but only if
the Redeeming Partner agrees not to make any offers or sales of any Shares
under any such Registration Statement if the Redeeming Partner has received a
notice from the General Partner or Kramont to the effect that, for a stated
period (not in excess of 60 days), it would not for any reason (including,
without limitation, by reason of the General Partner's, Kramont's or any of
their Affiliate's having a good business reason not to disclose publicly
certain information which may be material) be in the best interests of the
General Partner, Kramont or any of their Affiliates for offers or sales to be
effected under such Registration Statement. The General Partner and Kramont
shall not give any Redeeming Partner such a notice more than twice in any 12-
month period.
(v) If a Limited Partner is considering exercising its
Redemption Right with respect to its OP Units and desires that the Shares it
receives from Kramont in exchange for the redeemed OP Units, if any, be the
subject to an effective Registration Statement at the time of receipt, it
may, at its sole option, follow the procedure set forth in this clause (v).
The Limited Partner shall give the General Partner written notice referring
to this clause and stating that it is considering exercising its Redemption
Right (a "Pre-Redemption Notice"). Upon receipt of the Pre-Redemption
Notice, the General Partner shall send it to Kramont and if Kramont
determines that it wishes to elect to assume the redemption obligation from
the Partnership and wishes to give the Redeeming Partner Shares, Kramont
shall file a Registration Statement with respect to the resale of all such
Shares as soon as practicable and use its commercially reasonable efforts to
cause such Registration Statement to become effective as soon as possible and
within not more than 60 days. The General Partner shall notify the Limited
Partner as soon as the Registration Statement has become effective. The
other provisions of this Section 8.6 shall apply with respect to such
Registration Statement and with respect to any Redemption Notice given by
such Limited Partner. Neither the giving of the Pre-Redemption Notice nor
the filing of the Registration Statement (nor its becoming effective) shall
obligate the Limited Partner to give a Notice of Redemption nor, if a Notice
of Redemption is subsequently given, obligate the General Partner or Kramont
to assume the redemption obligation and/or elect to give the Redeeming
Partner Shares, as the case may be, in exchange for its OP Units. If the
Limited Partner which gave the Pre-Redemption Notice does not give the
Partnership a Redemption Notice with respect to its OP Units within 180 days
after the effective date of such Registration Statement, neither the
Partnership, Kramont, nor the General Partner shall have any obligation to
continue to maintain the effectiveness of such Registration Statement and the
Limited Partner which gave the Pre-Redemption Notice shall be liable for the
costs of the Partnership, Kramont and the General Partner in filing the
Registration Statement (including without limitation, legal fees and
disbursements and any filing fees). No Limited Partner may give more than
one Pre-Redemption Notice (unless the General Partner shall otherwise
consent).
C. Exceptions to Exercise of Redemption Right.
Notwithstanding the provisions of Sections 8.6A and 8.6B, a Partner shall not
be entitled to exercise the Redemption Right pursuant to Section 8.6A if (but
only as long as), in the written opinion of counsel to Kramont, the delivery
of Shares to such Partner on the Specified Redemption Date (i) would be
prohibited under the Declaration, (ii) would cause a violation of the REIT
Requirements, or (iii) would be prohibited (after giving effect to any
applicable exemptions) under applicable Federal or state securities laws or
regulations (in each case regardless of whether the General Partner would in
fact assume and satisfy the Redemption Right).
D. No Liens on OP Units Delivered for Redemption. Each
Limited Partner covenants and agrees with the Partnership, the General
Partner and Kramont that the Redeeming Partner shall transfer good title to
all OP Units delivered for redemption to the Partnership, the General Partner
or Kramont, as the case may be, free and clear of all Liens (as defined in
Exhibit D), and, notwithstanding anything contained herein to the contrary,
none of the General Partner, the Partnership nor Kramont shall be under any
obligation to acquire OP Units which are or may be subject to any Liens.
Each Limited Partner further agrees that, in the event any state or local
property transfer tax is imposed on the Limited Partner (or jointly on the
Limited Partner and the transferee) as a result of the transfer of its OP
Units to the Partnership, the General Partner or Kramont, such Limited
Partner shall assume and pay such transfer tax.
E. Additional Partnership Interests. In the event that the
Partnership issues OP Units to any Additional Limited Partner pursuant to
Article 4, the General Partner shall make such amendments to this Section 8.6
as it determines are necessary to reflect the issuance of such OP Units
(including setting forth any restrictions on the exercise of the Redemption
Right with respect to OP Units described in this Section 8.6E).
F. Successor to CV GP. If CV GP shall cease to serve as
General Partner, all of CV GP's rights under this Section 8.6 shall vest in
CV GP's successor as General Partner, if such successor is an Affiliate of CV
GP (or would have been an Affiliate of CV GP had CV GP continued to exist),
and otherwise in such Affiliate of CV GP (or such Person that would have been
an Affiliate of CV GP, had CV GP continued to exist) as CV GP may designate
(or, if CV GP has not made any such designation, as any Person with authority
to act on behalf of CV GP in connection with the winding up of its affairs or
otherwise may designate).
ARTICLE 9
Books, Records, Accounting, and Reports
9.1 Records and Accounting. The General Partner shall keep or
cause to be kept at the principal office of the Partnership those records and
documents required to be maintained by the Act and other books and records
deemed by the General Partner to be appropriate with respect to the
Partnership's business, including, without limitation, all books and records
necessary to comply with applicable REIT Requirements and to provide to the
Limited Partners any information, lists, and copies of documents required to
be provided pursuant to Sections 8.5A and 9.3. Any records maintained by or
on behalf of the Partnership in the regular course of its business may be
kept on or be in the form of any information storage device or system,
provided that the records so maintained are convertible into clearly legible
written form within a reasonable period of time. The books of the
Partnership shall be maintained, for financial reporting purposes, on an
accrual basis in accordance with GAAP, and, for tax purposes, on an accrual
basis, or such other bases as the General Partner determines to be necessary
or appropriate.
9.2 Fiscal Year. The fiscal year of the Partnership shall be the
calendar year.
9.3 Reports.
A. As soon as practicable, but in no event later than 105
days after the close of each Partnership Year, the General Partner shall
cause to be mailed to each Limited Partner as of the close of the Partnership
Year, an annual report containing financial statements of the Partnership, or
of the Company if such statements are prepared solely on a consolidated basis
with the Company, for such Partnership Year, presented in accordance with
GAAP, such statements to be audited by a nationally recognized firm of
independent public accountant selected by the General Partner in its sole
discretion.
B. As soon as practicable, but in no event later than 45
days after the close of each calendar quarter (except the last calendar
quarter of each calendar year), the General Partner shall cause to be mailed
to each Limited Partner a report containing unaudited financial statements as
of the last day of the calendar quarter of the Partnership, or of the
Company, if such statements are prepared solely on a consolidated basis with
the Company, and such other information as may be required by applicable law
or regulation, or as the General Partner determines to be appropriate.
ARTICLE 10
Tax Matters
10.1 Preparation of Tax Returns. The General Partner shall arrange
for the preparation and timely filing of all returns of Partnership income,
gains, deductions, losses and other items required of the Partnership for
Federal and state income tax purposes and shall use reasonable efforts to
furnish, within ninety (90) days of the close of each taxable year, the tax
information reasonably required by Limited Partners for Federal and state
income tax reporting purposes. At the time of any sale or refinancing of any
property listed on Exhibit E, the General Partner shall give notice thereof
to each individual listed with respect to such property on Exhibit E.
10.2 Tax Elections. Except as otherwise provided herein, the
General Partner shall, in its sole and absolute discretion, determine whether
to make any available election pursuant to the Code. Except as provided in
Section 7.8D, the General Partner shall select (i) the "traditional method"
of making allocations pursuant to Regulation section 1.704-3 (either without
any curative allocations or with curative allocations to a contributing
Partner solely of gain from sale of the property contributed) with respect to
all Contributed Property received on or before the date of this Agreement,
and (ii) select any method allowed pursuant to Regulations section 1.704-3
with respect to all Contributed Property received after the date of this
Agreement. By executing this Agreement, each Partner hereby agrees to report
income, gain, loss, and deduction on such Partner's Federal income tax return
in a manner that is consistent with the use of the method so selected. The
General Partner shall have the right to seek to revoke any tax election it
makes, including, without limitation, the election under section 754 of the
Code, upon the General Partner's determination, in its sole and absolute
discretion, that it could have caused the Partnership to refrain from making
such election in the first instance.
10.3 Tax Matters Partner.
A. CV GP (or, if, for Federal income tax purposes, CV GP's
General Partner Interest is treated as an asset of some other Person, such
other Person) shall serve as the "tax matters partner" of the Partnership for
Federal income tax purposes for any taxable year of the Partnership for which
it is eligible to serve as such (regardless of whether CV GP is at the time
of serving as such the General Partner). The General Partner from time to
time shall serve as the tax matters partner for any other taxable year of the
Partnership (regardless of whether the General Partner was a partner in the
Partnership at any time during such year). All Partners and Assignees shall,
at the request of a tax matters partner described in the preceding sentence,
take such actions as are necessary, appropriate, or convenient to effect the
designation of such tax matters partner pursuant to section 301.6231(a)(7)-1
of the Regulations. Pursuant to Section 6230(e) of the Code, upon receipt of
notice from the Internal Revenue Service of the beginning of an
administrative proceeding with respect to the Partnership, the tax matters
partner shall furnish the Internal Revenue Service with the name, address,
taxpayer identification number, and profit interest of each of the Limited
Partners and the Assignees; provided, that such information is provided to
the tax matters partner by the Limited Partners and the Assignees.
B. The tax matters partner is authorized, but not required:
(1) to enter into any settlement with the Internal
Revenue Service with respect to any administrative or judicial proceedings
for the adjustment of Partnership items required to be taken into account by
a Partner for income tax purposes (such administrative proceedings being
referred to as a "tax audit" and such judicial proceedings being referred to
as "judicial review"), and in the settlement agreement the tax matters
partner may expressly state that such agreement shall bind all Partners,
except that such settlement agreement shall not bind any Partner (i) who
(within the time prescribed pursuant to the Code and Regulations) files a
statement with the Internal Revenue Service providing that the tax matters
partner shall not have the authority to enter into a settlement agreement on
behalf of such Partner; or (ii) who is a "notice partner" (as defined in
section 6231(a)(8) of the Code) or a member of a "notice group" (as defined
in section 6223(b)(2) of the Code);
(2) in the event that a notice of a final administrative
adjustment at the Partnership level of any item required to be taken into
account by a Partner for tax purposes (a "final adjustment") is mailed to the
tax matters partner, to seek judicial review of such final adjustment,
including the filing of a petition for readjustment with the Tax Court, the
United States Claims Court or the District Court of the United States for the
district in which the Partnership's principal place of business is located;
(3) to intervene in any action brought by any other
Partner for judicial review of a final adjustment;
(4) to file a request for an administrative adjustment
with the Internal Revenue Service and, if any part of such request is not
allowed by the Internal Revenue Service, to file an appropriate pleading
(petition or complaint) for judicial review with respect to such request;
(5) to enter into an agreement with the Internal Revenue
Service to extend the period for assessing any tax which is attributable to
any item required to be taken account of by a Partner for tax purposes, or an
item affected by such item; and
(6) to take any other action on behalf of the Partners
or the Partnership in connection with any tax audit or judicial review
proceeding to the extent permitted by applicable law or regulations.
The taking of any action and the incurring of any expense by the tax matters
partner in connection with any such proceeding, except to the extent required
by law, is a matter in the sole and absolute discretion of the tax matters
partner and the provisions relating to indemnification of the General Partner
set forth in Section 7.6 shall also be fully applicable to the tax matters
partner in its capacity as such. Notwithstanding the foregoing provisions of
this Section 10.3B, no tax matters partner described in the second sentence
of Section 10.3A may, without the prior written consent of the Company (which
may be withheld in the Company's sole discretion), bind the Company, any of
its Affiliates, or any qualified REIT subsidiary, partnership, limited
liability company, or other Entity through which the Company or any of its
Affiliates was a partner in the Partnership to any settlement agreement under
section 6224 of the Code, file a petition for readjustment of partnership
items in any court other than the Tax Court, or extend the period for
assessing tax under section 6229 of the Code with respect to the Company, any
of its Affiliates, or any qualified REIT subsidiary, partnership, limited
liability company, or other Entity through which the Company or any of its
Affiliates was a partner in the Partnership. The tax matters partner shall
comply with the responsibilities imposed on it by section 301.6223(g)-1T of
the Regulations.
C. The tax matters partner shall receive no compensation for
its services. All third party costs and expenses incurred by the tax matters
partner in performing its duties as such (including legal and accounting fees
and expenses) shall be borne by the Partnership. Nothing herein shall be
construed to restrict the Partnership from engaging one or more law or
accounting firms to assist the tax matters partner in discharging its duties
hereunder, so long as the compensation paid by the Partnership for such
services is reasonable.
10.4 Withholding. Each Limited Partner hereby authorizes the
Partnership to withhold from, or pay on behalf of or with respect to, such
Limited Partner any amount of Federal, state, local, or foreign taxes that
the General Partner determines that the Partnership is required by law to
withhold or pay with respect to any amount distributable or allocable to such
Limited Partner pursuant to this Agreement, including, without limitation,
any taxes required to be withheld or paid by the Partnership pursuant to
section 1441, 1442, 1445, or 1446 of the Code. Any amount so paid on behalf
of or with respect to a Limited Partner shall constitute a loan by the
Partnership to such Limited Partner, which loan shall be repaid by such
Limited Partner within fifteen (15) days after notice from the General
Partner that such payment must be made unless (i) the Partnership withholds
such payment from a distribution which would otherwise be made to the Limited
Partner; or (ii) the General Partner determines, in its sole and absolute
discretion, that such payment may be satisfied out of the available funds of
the Partnership which would, but for such payment, be distributed to the
Limited Partner. Any amounts withheld pursuant to the foregoing clauses (i)
or (ii) shall be treated as having been distributed to such Limited Partner.
Each Limited Partner hereby unconditionally and irrevocably grants to the
Partnership a security interest in such Limited Partner's Partnership
Interest to secure such Limited Partner's obligation to pay to the
Partnership any amounts required to be paid pursuant to this Section 10.4.
In the event that a Limited Partner fails to pay when due any amounts owed to
the Partnership pursuant to this Section 10.4, the General Partner may, in
its sole and absolute discretion, elect to make the payment to the
Partnership on behalf of such defaulting Limited Partner, and in such event
shall be deemed to have loaned such amount to such defaulting Limited Partner
and shall succeed to all rights and remedies of the Partnership as against
such defaulting Limited Partner. Without limitation, in such event, the
General Partner shall have the right to receive distributions that would
otherwise be distributable to such defaulting Limited Partner until such time
as such loan, together with all interest thereon, has been paid in full, and
any such distributions so received by the General Partner shall be treated as
having been distributed to the defaulting Limited Partner and immediately
paid by the defaulting Limited Partner to the General Partner in repayment of
such loan. Any amount payable by a Limited Partner hereunder shall bear
interest at the highest base or prime rate of interest published from time to
time by any of Citibank, N.A., Chase Manhattan Bank, and Morgan Guaranty
Trust Company of New York, plus four (4) percentage points, but in no event
higher than the maximum lawful rate of interest on such obligation, such
interest to accrue from the date such amount is due (i.e., fifteen (15) days
after demand) until such amount is paid in full. Each Limited Partner shall
take such actions as the Partnership or the General Partner shall request in
order to perfect or enforce the security interest created hereunder.
ARTICLE 11
Transfers and Withdrawals
11.1 Transfer.
A. The term "Transfer," when used in this Article 11 with
respect to an OP Unit, shall be deemed to refer to a transaction by which the
General Partner purports to assign or pledge all or any part of its General
Partner Interest to another Person or by which a Limited Partner purports to
assign or pledge all or any part of its Limited Partner Interest to another
Person. The term "Transfer" when used in this Article 11 does not include
any exchange of OP Units for Shares pursuant to Section 8.6 or any grant of a
security interest to the Partnership pursuant to Section 10.4.
B. No Partnership Interest shall be Transferred, in whole or
in part, except in accordance with the terms and conditions set forth in this
Article 11. Any Transfer or purported Transfer of a Partnership Interest not
made in accordance with this Article 11 shall be null and void.
11.2 Transfer of the General Partner's and
the Company's Partnership Interests.
A. The General Partner may not Transfer its General
Partnership Interest or withdraw as General Partner, but such Transfer or
withdrawal shall be permitted (1) if Limited Partners holding a Qualifying
Limited Partner Interest consent to such Transfer or withdrawal or (2) in the
case of a Transfer of all or a portion of the General Partner Interest to an
entity which is, directly or indirectly, wholly-owned by the Company
(including a qualified REIT subsidiary under section 856(i) of the Code). In
the case of any Transfer permitted by this Section 11.2A, the transferee may
be admitted as a General Partner with the consent of the transferor, but
without any requirement that any Limited Partner consent thereto, all as
provided in Section 12.1.
B. In the event the General Partner withdraws as General
Partner, except in accordance with clause (A), above, the General Partner's
General Partner Interest shall immediately be converted into a Limited
Partner Interest.
C. CV GP may Transfer any of its OP Units reflecting Limited
Partner Interests without the Consent of the General Partner or any Limited
Partner, but may not transfer any other Partnership Interest except to a
successor General Partner.
D. Except in the case of a change in identity, form, or
place of organization of the Company, however, effected, the Company shall
not engage in any merger (including a triangular merger), consolidation, or
other combination with or into another person, sale of all or substantially
all of its assets, or reclassification, recapitalization, or change of
outstanding Shares (other than a change in par value, or from par value to no
par value, or as a result of a subdivision or combination as described in the
definition of "Adjustment Factor") ("Termination Transaction"), unless the
Termination Transaction has been approved by the consent of Partners holding
a majority or more of the then outstanding OP Units (including any OP Units
held by the General Partner) and in connection with the Termination
Transaction all Limited Partners either will receive or will have the right
to elect to receive, for each OP Unit, an amount of cash, securities, or
other property equal to the product of the Adjustment Factor and the greatest
amount of cash, securities, or other property paid to a holder of Shares in
consideration of one Share at any time during the period from and after the
date on which the Termination Transaction is consummated; provided that, if,
in connection with the Termination Transaction, a purchase, tender, or
exchange offer shall have been made to and accepted by the holders or more
than 50% of the outstanding Shares, each holder of OP Units shall receive or
shall have the right to elect to receive the greatest amount of cash,
securities, or other property which such holder would have received had it
exercised the Redemption Right and received Shares in exchange for its OP
Units immediately prior to the expiration of such purchase, tender, or
exchange offer and had thereupon accepted such purchase, tender, or exchange
offer. Any Termination Transaction permitted under this Section 11.2D shall
be permitted notwithstanding the provisions of Section 7.4 or any other
provision of this Article 11.
11.3 Limited Partners' Rights to Transfer.
A. (1) Subject to the provisions of Sections 11.3C, 11.3D,
11.3E, and 11.4, a Limited Partner (other than CV GP) may, without the
consent of the General Partner:
(a) Transfer such Limited Partner's OP Units to any
other Limited Partner, to a member of the family (as defined in section
267(c)(4) of the Code) of such transferring Limited Partner, or to a trust
all of the beneficiaries of which are members of the family of such
transferring Limited Partner, or pursuant to Section 8.6; and
(b) pledge such Limited Partner's OP Units to any
financial institution as collateral for any loan with respect to which such
Limited Partner is personally liable.
(2) Subject to the provisions of Sections 11.3C, 11.3D
and 11.3E, a Limited Partner may Transfer any of such Limited Partner's OP
Units, otherwise than in accordance with clause (1), above, only with the
prior written consent of the General Partner.
B. If a Limited Partner is subject to Incapacity, the
executor, administrator, trustee, committee, guardian, conservator, or
receiver of such Limited Partner's estate shall have all of the rights of a
Limited Partner, but not more rights than those enjoyed by other Limited
Partners, for the purpose of settling or managing the estate and such power
as the Incapacitated Limited Partner possessed to Transfer all or any part of
the Incapacitated Limited Partner's interest in the Partnership. The
Incapacity of a Limited Partner, in and of itself, shall not dissolve or
terminate the Partnership.
C. The General Partner may prohibit any Transfer by a
Limited Partner of its OP Units if, in the opinion of legal counsel to the
Partnership, such Transfer would require filing of a registration statement
under the Securities Act of 1933, as amended, or would otherwise violate any
Federal or state securities laws or regulations applicable to the Partnership
or the OP Units. The General Partner may require (but shall not be obligated
to accept) an opinion of legal counsel to the Limited Partner, in form and
substance acceptable to the General Partner, to the effect that such filing
would not be required and that such laws and regulations would not be
violated.
D. No Transfer by a Limited Partner of its OP Units may be
made to any Person if: (i) in the opinion of legal counsel for the
Partnership, it would result in the Partnership's being treated as an
association or a publicly traded partnership taxable as a corporation; (ii)
such Transfer would cause the Partnership to become, with respect to any
employee benefit plan subject to Title I of ERISA other than a plan
maintained by the General Partner or any Affiliate thereof, a
"party-in-interest" (as defined in section 3(14) of ERISA) or, with respect
to any "plan" (as defined in section 4975(e)(1) of the Code) other than a
plan maintained by the General Partner or any Affiliate thereof, a
"disqualified person" (as defined in section 4975(e)(2) of the Code); (iii)
such Transfer would, in the opinion of legal counsel for the Partnership,
cause any portion of the assets of the Partnership to constitute assets of
any employee benefit plan pursuant to Department of Labor Regulations section
2510.3-101; (iv) such Transfer would subject the General Partner, any of its
Affiliates, or the Partnership to be regulated under the Investment Company
Act of 1940, the Investment Advisors Act of 1940, or the Employee Retirement
Income Security Act of 1974, each as amended; (v) except with the consent of
the General Partner, such Transfer is a sale or exchange, and such sale or
exchange would, when aggregated with all other sales and exchanges during the
12-month period ending on the date of the proposed Transfer, result in 50% or
more of the interests in Partnership capital and profits being sold or
exchanged; (vi) it would require the Partnership to register under the
Investment Company Act of 1940; (vii) except with the consent of the General
Partner, it would cause the Partnership to be considered for purposes of
section 1.7704-1(h)(1)(ii) of the Regulations to have more than 100 partners
at any time during any taxable year; or (viii) in the opinion of legal
counsel to the Company, it could adversely affect the ability of the Company
to continue to qualify as a REIT to which the provisions of part II of
subchapter M of chapter 1 of the Code apply (and as a "corporation subject to
a tax imposed by subchapter M," within the meaning of section 11(c) of the
Code), subject the Company to additional taxes or other liability under the
Code, or violate any law or regulation of any governmental body or agency
having jurisdiction over the General Partner, its Affiliates, the
Partnership, or their respective securities or properties.
E. Section 11.3A shall not prohibit a Limited Partner from
taking the following actions, to the extent otherwise permitted under this
Agreement: (i) exercising any options to purchase Shares issued to such
Limited Partner under a Stock Option Plan, (ii) in connection with an
exercise permitted by the preceding clause (i), delivering to the Company
Shares in payment of the exercise price of such options or the withholding
taxes payable in connection with such exercise, or (iii) transferring OP
Units or Shares to a Permitted Transferee of such Limited Partner, provided
that such transferee agrees in writing to the transfer restrictions contained
in this Agreement (including this Section 11.3E).
11.4 Substituted Limited Partners.
A. Subject in each case to Section 11.4D: (1) the General
Partner shall have the right to add or substitute a transferee which receives
OP Units pursuant to Section 11.2C as a Limited Partner and (2) each Limited
Partner shall have the right to substitute a Permitted Transferee which
receives OP Units pursuant to Section 11.3A(1) as a Limited Partner in such
Limited Partner's place.
B. The General Partner shall have the right to consent to
the admission of a transferee who receives OP Units pursuant to Section
11.3A(2), which consent may be given or withheld by the General Partner in
its sole and absolute discretion. The General Partner's failure or refusal
to permit such transferee to become a Substituted Limited Partner shall not
give rise to any cause of action against the Partnership or any Partner.
C. A transferee who has been admitted as a Substituted
Limited Partner in accordance with this Article 11 shall have all the rights
and powers and be subject to all the restrictions and liabilities of a
Limited Partner under this Agreement.
D. No Permitted Transferee will be admitted as a Substituted
Limited Partner unless (i) such transferee has furnished to the General
Partner (a) evidence of acceptance in form satisfactory to the General
Partner of all of the terms and conditions of this Agreement, including,
without limitation, the power of attorney granted in Section 2.4, and (b)
such other documents or instruments as may be required in the reasonable
discretion of the General Partner in order to effect such Person's admission
as a Substituted Limited Partner and (ii) in the case of a transferee who
receives OP Units in accordance with Section 11.3A(2), the General Partner
has consented to such admission in accordance with Section 11.4B. Upon the
admission of a Substituted Limited Partner, the General Partner shall reflect
the name, address, number of OP Units, and Percentage Interest of such
Substituted Limited Partner on the records of the Partnership and eliminate
or adjust, if necessary, the name, address, and interest of the predecessor
of such Substituted Limited Partner.
11.5 Assignees. If the General Partner, in its sole and absolute
discretion, does not consent to the admission of any transferee as a
Substituted Limited Partner, such transferee shall be considered an Assignee
for purposes of this Agreement. An Assignee shall be deemed to have had
assigned to it and shall be entitled to receive distributions from the
Partnership and the share of Net Income, Net Losses, and any other items,
gain, loss deduction, and credit of the Partnership attributable to the OP
Units assigned to such transferee and, as to the OP Units which were
transferred to such Person in a manner permitted under this Agreement, shall
have the rights and obligations set forth in Section 8.6 as though a Limited
Partner, but shall not be deemed to be a holder of OP Units for any other
purpose under this Agreement, and shall not be entitled to vote such OP Units
in any matter presented to the Limited Partners for a vote (such OP Units
being deemed, to the extent permitted by law, to have been voted on such
matter in the same proportion as all other OP Units held by Limited Partners
are voted). In the event any such transferee desires to make a further
assignment of any such OP Units, such transferee shall be subject to all of
the provisions of this Article 11 to the same extent and in the same manner
as any Limited Partner desiring to make an assignment of OP Units.
11.6 General Provisions.
A. No Limited Partner may withdraw from the Partnership
otherwise than as a result of a permitted Transfer of all of such Limited
Partner's OP Units in accordance with this Article 11 or pursuant to an
exchange of all of its OP Units pursuant to Section 8.6.
B. Any Limited Partner who shall Transfer all of its OP
Units in a Transfer permitted pursuant to this Article 11 shall cease to be a
Limited Partner upon the admission of all Assignees of such OP Units as
Substituted Limited Partners. Similarly, any Limited Partner who shall
Transfer all of its OP Units pursuant to an exchange of all of its OP Units
pursuant to Section 8.6 shall cease to be a Limited Partner.
C. Except with the consent of the General Partner, transfers
pursuant to this Article 11 (other than Transfers pursuant to Section 8.6B)
may be made only as of the first day of each calendar month.
D. If any Partnership Interest is transferred or assigned
during the Partnership's fiscal year in compliance with the provisions of
this Article 11 or exchanged pursuant to Section 8.6 on any day other than
the first day of a Partnership Year, then Net Income, Net Losses, each item
thereof, and all other items attributable to such interest for such
Partnership Year shall be divided and allocated between the transferor
Partner and the transferee Partner by taking into account their varying
interests during the Partnership Year in accordance with section 706(d) of
the Code, using such method as the General Partner shall determine in its
sole discretion. Solely for purposes of making such allocations, each of
such items for the calendar month in which the Transfer or assignment occurs
shall be allocated to the transferee Partner, and none of such items for the
calendar month in which an exchange occurs shall be allocated to the
exchanging Partner, provided, however, that the General Partner may adopt
such other conventions relating to allocations in connection with transfers,
assignments, or exchanges as it determines are necessary or appropriate. All
distributions of Available Cash attributable to such OP Units with respect to
which the Partnership Record Date is before the date of such transfer,
assignment, or exchange shall be made to the transferor Partner or the
exchanging Partner, as the case may be, and in the case of a Transfer or
assignment other than an exchange, all distributions of Available Cash
thereafter attributable to such OP Units shall be made to the transferee
Partner.
E. Ownership of an OP Unit shall be determined by the
identity of the registered holder thereof on the books of the Partnership.
Transfer of an OP Unit can be made only in conformity with all provisions of
this Agreement and upon compliance with the further requirement that such
transfer can be made only upon presentation of the certificate evidencing
such OP Unit, if any, accompanied by satisfactory and duly executed
instruments of transfer.
ARTICLE 12
Admission of Partners
12.1 Admission of Successor General Partner. A successor to all of
the General Partner Interest pursuant to Section 11 hereof who is proposed to
be admitted as a successor General Partner shall be admitted to the
Partnership as the General Partner, effective upon such transfer, and such
admission shall occur, and for all purposes shall be deemed to have occurred,
immediately prior to the time the assignor ceases to be a general partner of
the Partnership. Any such transferee shall carry on the business of the
Partnership without dissolution. In each case, the admission shall be
subject to the successor General Partner's executing and delivering to the
Partnership an acceptance of all of the terms and conditions of this
Agreement and such other documents or instruments as may be required to
effect the admission. In the case of such admission on any day other than
the first day of a Partnership Year, all items attributable to the General
Partner Interest for such Partnership Year shall be allocated between the
transferring General Partner and such successor as provided in Section 11.6D.
12.2 Admission of Additional Limited Partners.
A. After the admission to the Partnership of the Limited
Partners on the date hereof, a Person who makes a Capital Contribution to the
Partnership in accordance with this Agreement shall be admitted to the
Partnership as an Additional Limited Partner only upon furnishing to the
General Partner (i) evidence of acceptance in form satisfactory to the
General Partner of all of the terms and conditions of this Agreement,
including, without limitation, the power of attorney granted in Section 2.4,
and (ii) such other documents or instruments as may be required in the sole
discretion of the General Partner in order to effect such Person's admission
as an Additional Limited Partner.
B. Notwithstanding anything to the contrary in this Section
12.2, no Person shall be admitted as an Additional Limited Partner without
the consent of the General Partner, which consent may be given or withheld in
the General Partner's sole and absolute discretion. The admission of any
Person as an Additional Limited Partner shall become effective on the date
upon which the name of such Person is recorded on the books and records of
the Partnership, following the consent of the General Partner to such
admission.
C. If any Additional Limited Partner is admitted to the
Partnership on any day other than the first day of a Partnership Year, then
Net Income, Net Losses, each item thereof, and all other items allocable
among Partners and Assignees for such Partnership Year shall be allocated
among such Additional Limited Partner and all other Partners and Assignees by
taking into account their varying interests during the Partnership Year in
accordance with section 706(d) of the Code, using such method as the General
Partner shall determine in its sole discretion. All distributions of
Available Cash with respect to which the Partnership Record Date is before
the date of such admission shall be made solely to Partners and Assignees,
other than the Additional Limited Partner, and all distributions of Available
Cash thereafter shall be made to all of the Partners and Assignees, including
such Additional Limited Partner.
12.3 Amendment of Agreement and Certificate of Limited Partnership.
For the admission to the Partnership of any Partner, the General Partner
shall take all steps necessary and appropriate under the Act to amend the
records of the Partnership and, if necessary, to prepare as soon as practical
an amendment of this Agreement and, if required by law, shall prepare and
file an amendment to the Certificate and may for this purpose exercise the
power of attorney granted pursuant to Section 2.4 hereof.
ARTICLE 13
Dissolution, Liquidation, and Termination
13.1 Dissolution. The Partnership shall not be dissolved by the
admission of Substituted Limited Partners or Additional Limited Partners or
by the admission of a successor General Partner in accordance with the terms
of this Agreement. In the event of the withdrawal of the General Partner,
any successor General Partner shall continue the business of the Partnership.
The Partnership shall dissolve, and its affairs shall be wound up, only upon
the first to occur of any of the following ("Liquidating Events"):
A. the expiration of its term as provided in Section 2.5;
B. an event of withdrawal of the General Partner, as defined
in the Act (other than an event of bankruptcy listed in Sections 17-402(4)
and (5) of the Act), unless, at the time, there is at least one other General
Partner, who is hereby permitted to carry on the business of the Partnership,
and such General Partner does so (in accordance with Section 12.1 or
otherwise) or, within 90 days after such event of withdrawal a majority in
interest of the remaining Partners agree in writing to continue the business
of the Partnership and to the appointment, effective as of the date of
withdrawal, of a successor General Partner;
C. an election to dissolve the Partnership made by the
General Partner;
D. entry of a decree of judicial dissolution of the
Partnership pursuant to the provisions of the Act;
E. the sale of all or substantially all of the assets and
properties of the Partnership;
F. a final and non-appealable judgment is entered by a court
of competent jurisdiction ruling that the General Partner is bankrupt or
insolvent, or a final and non-appealable order for relief is entered by a
court with appropriate jurisdiction against the General Partner, in each case
under any Federal or state bankruptcy or insolvency laws as now or hereafter
in effect, unless prior to the entry of such order or judgment all of the
remaining Partners agree in writing to continue the business of the
Partnership and to the appointment, effective as of a date prior to the date
of such order or judgment, of a substitute General Partner; and
G. at any time that there are no limited partners of the
Partnership, unless the business of the Partnership is continued in
accordance with the Act.
13.2 Winding Up.
A. Upon the occurrence of a Liquidating Event that results
in the dissolution of the Partnership, the Partnership shall continue solely
for the purposes of winding up its affairs in an orderly manner, liquidating
its assets, and satisfying the claims of its creditors and Partners. No
Partner shall take any action that is inconsistent with, or not necessary to
or appropriate for, the winding up of the Partnership's business and affairs.
The General Partner, or, in the event there is no remaining General Partner,
any Person elected by Limited Partners holding at least a majority of the
Limited Partnership Interests (the General Partner or such other Person being
referred to herein as the "Liquidator"), shall be responsible for overseeing
the winding up and termination of the Partnership and shall take full account
of the Partnership's liabilities and property and the Partnership property
shall be liquidated as promptly as is consistent with obtaining the fair
value thereof, and the proceeds therefrom (which may, to the extent
determined by the General Partner, include shares of beneficial interest or
other securities of the General Partner or an Affiliate thereof) shall be
applied and distributed in the following order:
(1) First, to the payment and discharge (or making
reasonable provision for paying) of all of the Partnership's debts and
liabilities to creditors other than the Partners;
(2) Second, to the payment and discharge of all of the
Partnership's debts and liabilities to the Partners; and
(3) The balance, if any, to the General Partner and
Limited Partners to the extent of and in accordance with the positive
balances in their Capital Accounts, after giving effect to all contributions,
distributions, and allocations for all periods.
The General Partner shall not receive any additional compensation for any
services performed pursuant to this Article 13.
B. Notwithstanding the provisions of Section 13.2A which
require liquidation of the assets of the Partnership, but subject to the
order of priorities set forth therein, if prior to or upon dissolution of the
Partnership the Liquidator determines that an immediate sale of part or all
of the Partnership's assets would be impractical or would cause undue loss to
the Partners, the Liquidator may, in its sole and absolute discretion, defer
for a reasonable time the liquidation of any asset except those necessary to
satisfy liabilities of the Partnership (including to those Partners as
creditors) and/or distribute to the Partners, in lieu of cash, as tenants in
common and in accordance with the provisions of Section 13.2A, undivided
interests in such Partnership assets as the Liquidator deems not suitable for
liquidation. Any such distributions in kind shall be made only if, in the
good faith judgment of the Liquidator, such distributions in kind are in the
best interests of the Partners, and shall be subject to such conditions
relating to the disposition and management of such properties as the
Liquidator deems reasonable and equitable and to any agreements governing the
operation of such properties at such time. The Liquidator shall determine
the fair market value of any property distributed in kind using such
reasonable method of valuation as it may adopt.
C. In the sole discretion of the Liquidator, a pro rata
portion of the distributions that would otherwise be made to the General
Partner and Limited Partners pursuant to this Article 13 may be:
(1) distributed to a trust established for the benefit
of the General Partner and Limited Partners for the purposes of liquidating
Partnership assets, collecting amounts owed to the Partnership, and paying
any liabilities or obligations (including contingent) of the Partnership or
the General Partner arising out of or in connection with the Partnership.
The assets of any such trust shall be distributed to the General Partner and
Limited Partners from time to time, in the reasonable discretion of the
Liquidator, in the same proportions as the amount distributed to such trust
by the Partnership would otherwise have been distributed to the General
Partner and Limited Partners pursuant to this Agreement; or
(2) withheld or escrowed to provide a reasonable reserve
for Partnership liabilities (contingent or otherwise) and to reflect the
unrealized portion of any installment obligations owed to the Partnership,
provided that such withheld or escrowed amounts shall be distributed to the
General Partner and Limited Partners in the manner and order of priority set
forth in Section 13.2A as soon as practicable.
13.3 No Obligation to Contribute Deficit. If any Partner has a
deficit balance in such Partner's Capital Account (after giving effect to all
contributions, distributions and allocations for all taxable years, including
the year during which such liquidation occurs), such Partner shall have no
obligation to make any contribution to the capital of the Partnership with
respect to such deficit, and such deficit shall not be considered a debt owed
to the Partnership or to any other Person for any purpose whatsoever.
13.4 Rights of Limited Partners. Except as otherwise provided in
this Agreement, each Limited Partner shall look solely to the assets of the
Partnership for the return of its Capital Contributions and shall have no
right or power to demand or receive property other than cash from the
Partnership. Except as otherwise provided in this Agreement, no Limited
Partner shall have priority over any other Partner as to the return of its
Capital Contributions, distributions, or allocations.
13.5 Notice of Dissolution. In the event a Liquidating Event
occurs or an event occurs that would, but for the provisions of an election,
objection, consent, or agreement by one or more Partners pursuant to Section
13.1, result in a dissolution of the Partnership, the General Partner shall,
within thirty (30) days thereafter, provide written notice thereof to each of
the Partners.
13.6 Termination of Partnership and Cancellation of Certificate of
Limited Partnership. Upon the completion of the liquidation of the
Partnership's assets, as provided in Section 13.2, the Partnership shall be
terminated, a certificate of cancellation shall be filed, and all
qualifications of the Partnership as a foreign limited partnership in
jurisdictions other than the state of Delaware shall be canceled and such
other actions as may be necessary to terminate the Partnership shall be
taken.
13.7 Reasonable Time for Winding-Up. A reasonable time shall be
allowed for the orderly winding-up of the business and affairs of the
Partnership and the liquidation of its assets pursuant to Section 13.2 in
order to minimize any losses otherwise attendant upon such winding-up, and
the provisions of this Agreement shall remain in effect among the Partners
during the period of liquidation.
13.8 Waiver of Partition. Each Partner hereby waives any right to
partition of the Partnership property.
ARTICLE 14
Amendment of Partnership Agreement;
Action by Limited Partners
14.1 Amendments.
A. Amendments to this Agreement may be proposed by the
General Partner or by any Limited Partner or Limited Partners holding in the
aggregate 25% or more of the Partnership Interests. Following such proposal,
the General Partner shall submit any proposed amendment to the Limited
Partners. The General Partner shall seek the written vote of the Partners on
the proposed amendment or shall call a meeting on 15 days' notice to vote
thereon and to transact any other business that it may deem appropriate. For
purposes of obtaining a written vote, the General Partner may require a
response within a reasonable specified time, but not less than fifteen (15)
days, and failure to respond in such time period shall constitute a vote
which is consistent with the General Partner's recommendation with respect to
the proposal. Except as provided in Section 14.1B, 14.1C, or 14.1D, a
proposed amendment shall be adopted and be effective as an amendment hereto
if it is approved by the General Partner and it receives the consent of
Limited Partners holding a Qualifying Limited Partner Interest.
B. Notwithstanding Section 14.1A, the General Partner shall
have the power, without the consent of the Limited Partners, to amend this
Agreement (other than Sections 4.3, 7.4, 7.5, 11.2, and 14.2) to the extent
expressly set forth herein (including, without limitation, in Section 8.6E)
or as may be required to facilitate or implement any of the following
purposes:
(1) to add to the obligations of the General Partner or
surrender any right or power granted to the General Partner or any Affiliate
of the General Partner for the benefit of the Limited Partners;
(2) to reflect the admission, substitution, termination,
or withdrawal of Partners in accordance with this Agreement;
(3) to set forth the designations, rights, powers,
duties, and preferences of the holders of any additional Partnership
Interests issued pursuant to Section 4.3 hereof;
(4) to reflect a change that is of an inconsequential
nature and does not adversely affect the Limited Partners in any material
respect; to cure any ambiguity, correct, or supplement in an inconsequential
manner any provision in this Agreement not inconsistent with law or with
other provisions; or to make other changes with respect to matters arising
under this Agreement that will not be inconsistent with law or with the
provisions of this Agreement; and
(5) to satisfy any requirements, conditions, or
guidelines contained in any order, directive, opinion, ruling, or regulation
of a Federal or state agency or contained in Federal or state law.
The General Partner shall provide notice to the Limited Partners when any
action under this Section 14.1B is taken.
C. Notwithstanding Section 14.1A and 14.1B, this Agreement
shall not be amended without the consent of each Partner adversely affected
if such amendment would (i) convert a Limited Partner's interest in the
Partnership into a general partnership interest; (ii) modify the limited
liability of a Limited Partner in a manner adverse to such Limited Partner;
(iii) alter rights of the Partner to receive distributions pursuant to
Article 5 or Article 13 or the allocations specified in Article 6 (except as
permitted pursuant to Article 4 and Sections 5.4 and 14.1B(3)); (iv) cause
the termination of the Partnership prior to the time set forth in Sections
2.5 and 13.1; or (v) amend Section 5.4 or 7.1A(3) or this Section 14.1C (or,
in the case of an amendment pursuant to Section 14.1B, amend Section 4.1B,
8.5A, 8.6, or 9.3, the final sentence of Section 10.3B, or, except as
provided in Article 4, Exhibit A).
14.2 Action by Limited Partners.
A. Meetings of the Partners may be called by the General
Partner and shall be called upon the receipt by the General Partner of a
written request by Limited Partners holding 25 percent or more of the
Partnership Interests. The request shall state the nature of the business to
be transacted. Notice of any such meeting shall be given to all Partners not
less than seven (7) days nor more than thirty (30) days prior to the date of
such meeting. Partners may vote in person or by proxy at such meeting.
Whenever the vote or consent of the Limited Partners is permitted or required
under this Agreement, such vote or consent may be given at a meeting of the
Partners by the holders of such percentage of the Percentage Interests or OP
Units as is expressly required by this Agreement or may be given in
accordance with the procedure prescribed in Section 14.1A or in accordance
with the procedure prescribed in Section 14.2B.
B. Any vote or consent of the Limited Partners permitted or
required under this Agreement and action required or permitted to be taken at
a meeting of the Partners may be taken without a meeting if written
consent(s) setting forth the action so taken is signed by the holders of such
percentage of the Percentage Interests or the OP Units as is expressly
required by this Agreement. Such consent may be in one instrument or in
several instruments. Such consent shall be filed with the records of the
Partnership.
C. Each Limited Partner may authorize any Person or Persons
to act for such Limited Partner by proxy on all matters in which a Limited
Partner is entitled to participate, including waiving notice of any meeting,
or voting or participating at a meeting. Every proxy must be signed by the
Limited Partner or such Limited Partner's attorney-in-fact. No proxy shall
be valid after the expiration of eleven (11) months from the date thereof
unless otherwise provided in the proxy. Every proxy shall be revocable at
the pleasure of the Limited Partner executing it, such revocation to be
effective upon the Partnership's receipt of written notice of such revocation
from the Limited Partner executing such proxy.
D. Each meeting of the Partners shall be conducted by the
General Partner or such other Person as the General Partner may appoint
pursuant to such rules for the conduct of the meeting as the General Partner
or such other Person deems appropriate.
ARTICLE 15
General Provisions
15.1 Addresses and Notice. Any notice, demand, request, or report
required or permitted to be given or made to a Partner or Assignee under this
Agreement shall be in writing and shall be deemed given or made when
delivered in person or three business days after being sent by first class
United States mail or one business day after being sent by nationally
recognized overnight delivery service or, upon receipt, when sent by
facsimile transmission to the Partner or Assignee at the address set forth in
Exhibit A or such other address of which the Partner shall notify the General
Partner in writing.
15.2 Titles and Captions. All article or section titles or
captions in this Agreement are for convenience only. They shall not be
deemed part of this Agreement and in no way define, limit, extend, or
describe the scope or intent of any provisions hereof.
15.3 Certain Terms. Whenever the context may require, any pronoun
used in this Agreement shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns, pronouns and verbs shall
include the plural and vice versa. References to the "sole discretion" of
the General Partner or Liquidator mean the sole and absolute discretion of
the General Partner or Liquidator, as the case may be.
15.4 Further Action. The parties shall execute and deliver all
documents, provide all information, and take or refrain from taking action as
may be necessary or appropriate to achieve the purposes of this Agreement.
15.5 Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their heirs, executors,
administrators, successors, legal representatives, and permitted assigns.
Any reference to the "Company" herein shall also be deemed to include any
successor thereto in connection with a change in identity, form, or place of
organization of the Company.
15.6 Creditors. Other than as expressly set forth herein with
respect to the Indemnitees, none of the provisions of this Agreement shall be
for the benefit of, or shall be enforceable by, any creditor of the
Partnership.
15.7 Waiver. No failure by any party to insist upon the strict
performance of any covenant, duty, agreement, or condition of this Agreement
or to exercise any right or remedy consequent upon a breach thereof shall
constitute waiver of any such breach or any other covenant, duty, agreement,
or condition.
15.8 Counterparts. This Agreement may be executed in counterparts,
all of which together shall constitute one agreement binding on all of the
parties hereto, notwithstanding that all such parties are not signatories to
the original or the same counterpart. Each party shall become bound by this
Agreement immediately upon affixing its signature hereto.
15.9 Applicable Law. This Agreement shall be construed and
enforced in accordance with and governed by the laws of the State of
Delaware, without regard to the principles of conflicts of laws thereof.
15.10 Invalidity of Provisions. If any provision of this
Agreement is or becomes invalid, illegal, or unenforceable in any respect,
the validity, legality, and enforceability of the remaining provisions
contained herein shall not be affected thereby.
15.11 Entire Agreement. This Agreement contains the entire
understanding and agreement among the Partners with respect to the subject
matter hereof and supersedes any other prior written or oral understandings
or agreements among them with respect thereto.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first written above.
GENERAL PARTNER:
CV GP L.P.
By: CV GP LLC, its General Partner
By: Kramont Operating Partnership, L.P., Sole
Member
By: Kramont Realty Trust, its General
Partner
By:
---------------------------------
- --
Print Name:
Title:
LIMITED PARTNERS:
CV PARTNER HOLDINGS, L.P.
By: CV OP Holdings LLC, its General Partner
By: CV GP L.P., its Sole Member
By: CV GP LLC, its General Partner
By: Kramont Operating Partnership,
L.P., Sole Member
By: Kramont Realty Trust, its
General Partner
By:
----------------------
Print Name:
Title:
CV GP L.P.
By: CV GP LLC, its General Partner
By: Kramont Operating Partnership, L.P., Sole
Member
By: Kramont Realty Trust, its General
Partner
By:
--------------------------------
Print Name:
Title:
<PAGE>
Kramont is executing this
Agreement solely to indicate
its acceptance of the matters
set forth in Sections 4.1B, 8.6B
and 8.6D
KRAMONT REALTY TRUST
By: ___________________________
Name: Louis P. Meshon, Sr.
Title: President and
Chief Executive Officer
<PAGE>
<TABLE>
<CAPTION>
Exhibit A
to the CV
Partnership Agreement
Partners' Contributions and Partnership Interests
Gross Asset
Name and Cash Value of Total Net
Address Contri- Contributed Contri- OP Percentage
of Partner butions Property Liabilities bution Unit Interest
- ---------- -------- ----------- ------------ ---------- ----- -----------
<S> <C> <C> <C> <C> <C> <C>
General Partner
- ---------------
Limited Partners
- ----------------
Exhibit B
to the CV
Partnership
Agreement
Allocations of Partnership Items
1. Allocation of Net Income and Net Loss.
(a) Net Income. Except as otherwise provided in Sections 4.1 and 7.3B
and this Exhibit B, Net Income (or items thereof) for any fiscal year or
other applicable period shall be allocated to the Partners in accordance with
their respective Percentage Interests.
(b) Net Loss. Except as otherwise provided in Section 4.1 and this
Exhibit B, Net Loss (or items thereof) of the Partnership for each fiscal
year or other applicable period shall be allocated to the Partners in
accordance with the Partners' respective Percentage Interests.
Notwithstanding the preceding sentence, to the extent any Net Loss (or items
thereof) allocated to a Partner under this subparagraph (b) would cause such
Partner (hereinafter, a "Restricted Partner") to have an Adjusted Capital
Account Deficit, or increase the amount of an existing Adjusted Capital
Account Deficit, as of the end of the fiscal year or other applicable period
to which such Net Loss relates, such Net Loss shall not be allocated to such
Restricted Partner and instead shall be allocated to the other Partner(s)
(hereinafter, the "Permitted Partners") pro rata in accordance with each
Permitted Partner's Percentage Interest.
(c) Terminating Capital Transaction; Liquidation. Allocations of Net
Income or Net Loss (or items thereof) in connection with a Terminating
Capital Transaction or Liquidation (as defined in Treasury Regulation section
1.704-1(b)(2)(ii)(g)) of the Partnership shall be made so that, to the extent
possible, the Partners' respective Capital Account balances are proportionate
to their Percentage Interests. In the event that the Capital Account balance
of more than one Partner is disproportionate to such Partner's Percentage
Interest, the largest such relative disproportion shall be cured first, until
it is equal, on a relative basis, to the next largest such disproportion, and
so on, to the extent Net Income or Net Loss (or items thereof) are available.
Notwithstanding the preceding sentence, to the extent any Net Loss (or items
thereof) would be allocated to a Restricted Partner under this subparagraph
(c), such Net Loss shall not be allocated to such Restricted Partner and
instead shall be allocated to the Permitted Partners pro rata in accordance
with each Permitted Partner's Percentage Interest.
(d) Rules of Construction.
(1) Capital Account Increases. For purposes of making
allocations pursuant to subparagraph 1(c) of this Exhibit B, a
Partner's Capital Account balance shall be deemed to be increased
by such Partner's share of any Partnership Minimum Gain and
Partner Minimum Gain remaining at the close of the fiscal period
in respect of which such allocations are being made.
(2) Change in Percentage Interests. In the event any
Partner's Percentage Interest changes during a fiscal year for
any reason (except by reason of Section 4.1C), including without
limitation, the Transfer of any interest in the Partnership, the
tax allocations contained in this Exhibit B shall be applied as
necessary to reflect the varying interests of the Partners during
such year. In the event any Partner's Percentage Interest
changes by reason of Section 4.1C, the principles of subparagraph
1(c) of this Exhibit B shall be applied.
2. Special Allocations.
Notwithstanding any provisions of paragraph 1 of this Exhibit B, the
following special allocations shall be made.
(a) Minimum Gain Chargeback (Nonrecourse Liabilities). Except as
otherwise provided in section 1.704-2(f) of the Regulations, if there is a
net decrease in Partnership Minimum Gain for any Partnership fiscal year,
each Partner shall be specially allocated items of Partnership income and
gain for such year (and, if necessary, subsequent years) in an amount equal
to such Partner's share of the net decrease in Partnership Minimum Gain to
the extent required by Regulations section 1.704-2(f). The items to be so
allocated shall be determined in accordance with sections 1.704-2(f) and (i)
of the Regulations. This subparagraph 2(a) is intended to comply with the
minimum gain chargeback requirement in said section of the Regulations and
shall be interpreted consistently therewith. Allocations pursuant to this
subparagraph 2(a) shall be made in proportion to the respective amounts
required to be allocated to each Partner pursuant hereto.
(b) Partner Minimum Gain Chargeback. Except as otherwise provided in
section 1.704-2(i)(4) of the Regulations, if there is a net decrease in
Partner Minimum Gain attributable to a Partner Nonrecourse Debt during any
fiscal year, each Partner who has a share of the Partner Minimum Gain
attributable to such Partner Nonrecourse Debt, determined in accordance with
section 1.704- 2(i)(5) of the Regulations, shall be specially allocated items
of Partnership income and gain for such year (and, if necessary, subsequent
years) in an amount equal to that Partner's share of the net decrease in the
Partner Minimum Gain attributable to such Partner Nonrecourse Debt to the
extent and in the manner required by section 1.704-2(i) of the Regulations.
The items to be so allocated shall be determined in accordance with sections
1.704-2(i)(4) and (j)(2) of the Regulations. This subparagraph 2(b) is
intended to comply with the minimum gain chargeback requirement with respect
to Partner Nonrecourse Debt contained in said section of the Regulations and
shall be interpreted consistently therewith. Allocations pursuant to this
subparagraph 2(b) shall be made in proportion to the respective amounts
required to be allocated to each Partner pursuant hereto.
(c) Qualified Income Offset. In the event a Partner unexpectedly
receives any adjustments, allocations, or distributions described in section
1.704-1(b)(2)(ii)(d)(4), (5), or (6) of the Regulations, and such Partner has
an Adjusted Capital Account Deficit, items of Partnership income (including
gross income) and gain shall be specially allocated to such Partner in an
amount and manner sufficient to eliminate the Adjusted Capital Account
Deficit as quickly as possible as required by the Regulations. This
subparagraph 2(c) is intended to constitute a "qualified income offset" under
section 1.704-1(b)(2)(ii)(d) of the Regulations and shall be interpreted
consistently therewith.
(d) Other Chargeback of Impermissible Negative Capital Account. To
the extent any Partner has an Adjusted Capital Account Deficit at the end of
any Partnership fiscal year, each such Partner shall be specially allocated
items of Partnership income (including gross income) and gain in the amount
of such excess as quickly as possible, provided that an allocation pursuant
to this paragraph 2(d) shall be made if and only to the extent that such
Partner would have an Adjusted Capital Account Deficit after all other
allocations provided for in this Exhibit B have been tentatively made as if
this paragraph 2(d) were not in the Agreement.
(e) Nonrecourse Deductions. Nonrecourse Deductions for any fiscal
year or other applicable period shall be allocated to the Partners in
accordance with their respective Percentage Interests.
(f) Partner Nonrecourse Deductions. Partner Nonrecourse Deductions
for any fiscal year or other applicable period with respect to a Partner
Nonrecourse Debt shall be specially allocated to the Partner that bears the
economic risk of loss for such Partner Nonrecourse Debt (as determined under
sections 1.704-2(b)(4) and 1.704-2(i)(1) of the Regulations).
(g) Intent of Allocations. The parties intend that the allocation
provisions of this Exhibit B shall result in final Capital Account balances
of the Partners that are in proportion to the Partners' respective Percentage
Interests, so that when liquidating distributions are made in accordance with
such final Capital Account balances under Section 13.2A(3), such
distributions will be made in proportion to the Partners' respective
Percentage Interests. To the extent that such final Capital Account balances
would not so reflect the provisions of this Exhibit B, income and loss of the
Partnership for the current year and future years, as computed for book
purposes, shall be allocated among the Partners so as to result in final
Capital Account balances reflecting the provisions of this Exhibit B. This
subparagraph shall control notwithstanding any reallocation of income, loss,
or items thereof, as computed for book purposes, by the Internal Revenue
Service or any other taxing authority.
(h) Section 754 Adjustment. To the extent an adjustment to the
adjusted tax basis of any asset of the Partnership pursuant to section 734(b)
of the Code or section 743(b) of the Code is required, pursuant to section
1.704-1(b)(2)(iv)(m) of the Regulations, to be taken into account in
determining Capital Accounts, the amount of such adjustment to the Capital
Accounts shall be treated as an item of gain (if the adjustment increases the
basis of the asset) or loss (if the adjustment decreases such basis) and such
gain or loss shall be specially allocated among the Partners in a manner
consistent with the manner in which each of their respective Capital Accounts
are required to be adjusted pursuant to such section of the Regulations.
3. Tax Allocations.
(a) Items of Income or Loss. Except as is otherwise provided in this
Exhibit B or in the Code and Regulations, an allocation of Partnership Net
Income or Net Loss to a Partner shall be treated as an allocation to such
Partner of the same share of each item of income, gain, loss, deduction, and
item of tax-exempt income or Code section 705(a)(2)(B) expenditure (or item
treated as such expenditure pursuant to Regulations section
1.704-1(b)(2)(iv)(i)) ("Tax Items") that is taken into account in computing
Net Income or Net Loss. Tax Items with respect to Partnership property that
is subject to Code section 704(c) and/or Regulations section
1.704-1(b)(2)(iv)(f) shall be allocated in accordance with Code section
704(c) and Regulations section 1.704-3.
(b) Section 1245/1250 Recapture. To the extent not otherwise required
by the Code or Regulations, if any portion of gain from the sale of
Partnership assets is treated as gain which is ordinary income by virtue of
the application of Code section 1250 ("Affected Gain"), then such Affected
Gain shall be allocated among the Partners in the same proportion that the
depreciation and amortization deductions giving rise to the Affected Gain
were allocated. This subparagraph 3(b) shall not alter the amount of Net
Income (or items thereof) allocated among the Partners, but merely the
character of such Net Income (or items thereof). For the purposes hereof, in
order to determine the proportionate allocations of depreciation and
amortization deductions for each fiscal year or other applicable period, such
deductions shall be deemed allocated on the same basis as Net Income and Net
Loss for such respective period. Items governed by section 1.1245-1(e) of
the Regulations shall be allocated in accordance with that section.
(c) Excess Nonrecourse Liability Safe Harbor. Pursuant to Regulations
section 1.752-3(a)(3), solely for purposes of determining each Partner's
proportionate share of the "excess nonrecourse liabilities" of the
Partnership (as defined in Regulations section 1.752-3(a)(3)), the Partners'
respective interest in the Partnership profits shall be determined in
accordance with each Partner's Percentage Interest; provided, however, that
each Partner who has contributed an asset to the Partnership shall be
allocated, to the extent possible, a share of "excess nonrecourse
liabilities" of the Partnership which results in such Partner's being
allocated nonrecourse liabilities in an amount which is at least equal to the
amount of income that would otherwise be realized by such Partner pursuant to
section 731 of the Code in connection with the contribution of such asset to
the Partnership or with any reduction in "section 704(c) minimum gain" with
respect thereto prior to the end of the taxable year of the contribution (the
"Liability Shortfall"). In the event there is an insufficient amount of
nonrecourse liabilities to allocate to each Partner an amount of nonrecourse
liabilities equal to the Liability Shortfall, then an amount of nonrecourse
liabilities in proportion to, and to the extent of, the Liability Shortfall
shall be allocated to each Partner.
(d) References to Regulations. Any reference in this Exhibit B or the
Agreement to a provision of proposed and/or temporary Regulations shall, in
the event such provision is modified or renumbered, be deemed to refer to the
successor provision as so modified or renumbered, but only to the extent such
successor provision applies to the Partnership under the effective date rules
applicable to such successor provision.
(e) Successor Partners. For purposes of this Exhibit B, a transferee
of a Partnership Interest shall be deemed to have been allocated the Net
Income, Net Loss, and other items of Partnership income, gain, loss,
deduction, and credit allocable to the transferred Partnership Interest that
previously have been allocated to the transferor Partner pursuant to this
Agreement.
Exhibit C
to the CV
Partnership Agreement
Florida Land
PROPERTY
1. Century Village Administration Building
100 Century Boulevard
West Palm Beach, Florida
2. The Land of the Presidents
West Palm Beach, Florida
3. Village Marina
Griffin Road
Dania Beach, Florida
4. 2 parcels located at the
intersection of Palm Avenue
and Miramar Boulevard
Miramar, Florida
5. Mobil Station
2326 Okeechobee Boulevard
West Palm Beach, Florida
6. Partnership interests in Partnerships owning:
(a) Warehouse
4560 SW 72nd Avenue
Miami, Florida
(b) Warehouse
1547 N. Florida Mang Road
West Palm Beach, Florida
(c) Warehouse
4555 SW 72nd Avenue
Miami, Florida
Exhibit D
to the CV
Partnership
Agreement
Form of Notice of Redemption
To:
CV GP L.P.
580 West Germantown Pike
Plymouth Meeting, PA 19462
1. The undersigned (the "Redeeming Partner") hereby elects to redeem
______ OP Units, pursuant to Section 8.6 of that certain Second Amended and
Restated Agreement of Limited Partnership of Montgomery CV Realty L.P., dated
as of ________, 1999, and entered into by and among CV GP L.P. ("CV GP"), a
Delaware limited liability company, and certain other parties set forth on
Exhibit A thereto (the "Partnership Agreement"). Capitalized terms used in
this Notice of Redemption and not otherwise defined shall have the meanings
given to such terms in the Partnership Agreement.
2. The Redeeming Partner, intending that the Company, CV GP, L.P., their
Affiliates, and Montgomery CV Realty L.P. (the "Partnership") rely on the
representations and warranties in this Notice of Redemption, hereby
represents and warrants as follows:
(i) The Redeeming Partner is the registered holder of ______ OP Units
evidenced by Certificate number(s) _______ enclosed with this Notice of
Redemption (the "Certificate"); (ii) the Redeeming Partner is the sole legal
and beneficial owner (with any exceptions noted below) of the OP Units
evidenced by the Certificate, free and clear of all liens, claims,
encumbrances, restrictions, agreements or rights of third parties of any kind
whatsoever ("Liens"); (iii) the Redeeming Partner has full power and
authority to execute this Certificate and redeem the OP Units to which it
relates and this Certificate is enforceable against the Redeeming Partner in
accordance with its terms.
[State exceptions to full legal and beneficial ownership of the OP Units by
the Redeeming Partner, free and clear of Liens, if any:
_____________________________________________________________________________
_____________________________________________________________________________
__________________________________________________
3. The Redeeming Partner understands that, upon receipt of this Notice by
the Partnership, General Partner may, in its sole and absolute discretion,
elect (the "Payment Election") to assume directly and satisfy the Redemption
Right being exercised herewith either by paying to the Redeeming Partner the
Cash Amount or, with certain qualifications more fully detailed in the
Partnership Agreement, issuing to the Redeeming Partner the Shares Amount.
4. In order for the General Partner to make an informed decision regarding
the Payment Election, the Redeeming Partner hereby confirms, acknowledges,
represents, and warrants that assuming the Redeeming Partner were to receive
Shares in lieu of the Cash Amount:
A. the Redeeming Partner understands that, subject to certain
registration rights in the Partnership Agreement, offer and sale of the
Shares are restricted under the Federal securities laws;
B. the Redeeming Partner will not offer, sell, or otherwise transfer
the Shares without registration under the Securities Act or an exemption
therefrom and compliance with and any applicable state securities laws;
C. the Redeeming Partner is not domiciled in nor a resident of
California (nor is any direct or indirect owner of the Redeeming Partner
domiciled in or a resident of California);
D. the Redeeming Partner is not a "benefit plan investor" within the
meaning of 29 C.F.R. Section 2510.3-101;
E. the Redeeming Partner is able to bear the economic risk attendant
with the ownership of the Shares;
F. the Redeeming Partner agrees that the following legend or a
substantially similar legend may be placed on the certificates representing
the Shares and a stop transfer order may be placed with respect thereto:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND CAN NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT WHICH, IN THE OPINION OF COUNSEL
FOR THE HOLDER, IS AVAILABLE, WHICH COUNSEL AND OPINION ARE REASONABLY
SATISFACTORY TO COUNSEL FOR THIS CORPORATION.";
G. No provision of the Redeeming Partner's certificate of
incorporation or by-laws, or of any agreement, instrument, or understanding
to which the Redeeming Partner is a party or by which it is bound, has been
or would be violated by the execution and delivery of this Notice of
Redemption or the transactions contemplated hereby, and all requisite
corporate and other authorizations for such execution, delivery, performance,
and satisfaction of this Notice of Redemption or the transactions
contemplated hereby shall have been, at or prior to the delivery of this
Notice of Redemption, duly obtained;
H. If the General Partner shall transfer Shares to the Redeeming
Partner in satisfaction of the Redemption Right and the Redeeming Partner
shall be entitled to include such Shares under a Registration Statement of
the Company, the Redeeming Partner:
[check whichever is applicable]
___ Does
___ Does Not
intend to offer and to sell the Shares received under such Registration
Statement and will provide such information and sign such documents as the
Company shall reasonably request with respect to inclusion of the sale of
such Shares in such Registration Statement.
4. If the General Partner elects to satisfy the Redemption Rights which
are the subject of this Notice of Redemption by paying to the Redeeming
Partner the Shares Amount, please issue a certificate or certificates
representing the Shares Amount such Redeeming Partner is entitled receive in
the name of the Redeeming Partner.
5. Please issue a new certificate of OP Unit ownership evidencing the
number of OP Units owned by the Redeeming Partner subsequent to the
redemption which is the subject of this Notice of Redemption.
6. The Redeeming Partner hereby agrees to indemnify and save the General
Partner and its Affiliates harmless from and defend it from and against any
and all demands, claims, actions, liabilities, losses, costs, damages or
expenses whatsoever (including, but not limited to, any and all expenses
whatsoever reasonably incurred in investigating, preparing or defending
against any litigation commenced or threatened or any claim whatsoever)
arising out of or based upon any inaccuracy or breach of any representation
or warranty of the Redeeming Partner contained in this Notice of Redemption.
Dated: ______________
For Corporate, Partnership, Limited For Individual Investors:
Liability Company, Trust, Employee
Benefit Plan or Other Entity Redeeming
Partner:
_______________________________ ______________________________
(Print Name of Entity) (Signature)
By: ___________________________ Print Name: ___________________
(Signature)
Print Name: ____________________
Title: _________________________
Exhibit E
to the CV
Partnership
Agreement
Properties to Which
Section 7.1A(3)(a) Is Applicable
Property Individuals
Date
- ---------------------- ---------------------- --------
Chesterbrook Shopping Paul Cohen July 31, 2002
Center Louis P. Meshon, Sr.
Woodbourne Square Paul Cohen August 1, 2000
Shopping Center Louis P. Meshon, Sr.
Rio Grande Shopping Louis P. Meshon, Sr. January 1, 2000
Center
The rights under Section 7.1A(3) and the final sentence of Section 10.1
granted to the persons listed on this Exhibit E shall terminate as to any
such person when such person no longer owns, directly or indirectly (giving
effect to the principles of section 267(c)(1) of the Code), any interest in
the Partnership.
Exhibit F
to the CV
Partnership Agreement
Form of Letter
[Montgomery CV Realty] L.P.
580 West Germantown Pike
Plymouth Meeting, PA 19462
Kramont Operating Partnership, L.P.
580 West Germantown Pike
Plymouth Meeting, PA 19462
Gentlemen:
This letter is being issued pursuant to Section 8.6A(i) of the
Second Amended and Restated Agreement of Limited Partnership (the
"Partnership Agreement") of Montgomery CV Realty L.P. (the "Partnership"),
dated as of ____________, 1999, under which the General Partner of the
Partnership has consented to reduce, from one year to ___ months, the period
of time following which I, as a holder of OP Units, may elect to exercise the
Redemption right provided under Section 8.6A of the Partnership Agreement, on
condition that I provide to the Partnership, the General Partner, and their
respective Affiliates certain representations and indemnities relating to
such consent. (Unless otherwise indicated, all capitalized terms used herein
shall have the same meaning as contained in the Partnership Agreement.)
Accordingly, I hereby acknowledge that my exercise of the
Redemption Right pursuant to Section 8.6A of the Partnership Agreement is
being undertaken with full knowledge and understanding of the income tax
consequences of such exercise and that no representations or warranties have
been or are being made to me with respect to my ability to maintain my tax
basis in the property contributed by me to the Partnership or to avoid the
recognition of gain and the incurrence of tax liability in connection with
the structure or completion of any of the transactions contemplated by the
Partnership Agreement (including but not limited to the granting by the
General Partner of the consent referred to in the preceding paragraph). I
hereby agree that neither the Partnership, the General Partner, nor any of
their respective Affiliates (including the Company), nor any of their
respective general partners, limited partners, members, trustees, officers,
directors, or employees shall have any liability or obligations in connection
with any such occurrences and I hereby agree to protect, defend, indemnify,
and hold harmless each of such Persons from and against any and all claims,
demands, losses, expenses, and other damages (including without limitation
taxes, fines and penalties, legal fees, and expenses) incurred by them, or
any of them, as a result of any such liability or obligation or otherwise
arising out of the reduction of such time period or such exercise.
Very truly yours,
Appendix B
[LETTERHEAD OF SALOMON SMITH BARNEY INC.]
December 10, 1999
The Board of Directors
CV Reit, Inc.
100 Century Boulevard
West Palm Beach, Florida 33417
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of the common stock of CV Reit, Inc. ("CV Reit") of the
CV Reit Exchange Ratio (defined below) provided for in the Agreement and Plan
of Reorganization and Merger, dated as of December 10, 1999 (the
"Agreement"), among Kranzco Realty Trust ("Kranzco"), KRT Trust, a wholly
owned subsidiary of Kranzco ("KRT Trust"), CV Reit and Kramont Realty Trust
("Kramont"). As more fully described in the Agreement, (i) CV Reit will be
merged with and into Kramont (the "CV Merger") pursuant to which each
outstanding share of the common stock, par value $0.01 per share, of CV Reit
(the "CV Reit Common Stock") will be converted into 1.0 (the "CV Reit
Exchange Ratio") common share of beneficial interest, par value $0.01 per
share, of Kramont (the "Kramont Common Shares") and (ii) KRT Trust will be
merged with and into Kramont (the "KRT Trust Merger" and, together with the
CV Merger, the "Reorganization") pursuant to which each outstanding common
share of beneficial interest, par value $0.01 per share, of KRT Trust (the
"KRT Trust Common Shares") will be converted into 1.0 Kramont Common Share
and each series of the outstanding preferred shares of beneficial interest of
KRT Trust will be converted into a series of preferred shares of the
beneficial interest of Kramont having such terms, rights and preferences as
are designated in the Kramont Amended and Restated Declaration of Trust. The
Agreement further provides that (A) prior to the Reorganization, (i) Kranzco
will undertake a series of transactions as a result of which the shareholders
of Kranzco will become shareholders of KRT Trust and the assets of Kranzco
will be transferred to a limited partnership ("KRT Partnership") of which KRT
Trust will own, directly or indirectly, 100% of the interests (such series of
transactions, the "Kranzco Reorganization") and (ii) Montgomery CV Realty
Trust, a wholly owned subsidiary of CV Reit ("CV Trust"), will be merged with
and into CV Reit (the "CV Trust Merger"), (B) in connection with the
Reorganization, KRT Partnership will offer each holder of units of limited
partnership interest in Montgomery CV Realty L.P. (the "CV OP Units"), other
than CV Trust, the right to exchange the CV OP Units held by such holder for
units of limited partnership interest in KRT Partnership (the "Kramont OP
Units") or, in the case of the holders of units of limited partnership
interest in CV Partner Holdings, L.P., a partnership whose sole assets will
be CV OP Units, the right to exchange such units of limited partnership
interest for Kramont OP Units (collectively, the "Partnership Contribution"
and, together with the Kranzco Reorganization and the CV Trust Merger, the
"Related Transactions") and (C) immediately following the Reorganization,
Kramont will exchange the CV OP Units held by Kramont for additional Kramont
OP Units.
In arriving at our opinion, we reviewed the Agreement and certain related
agreements and held discussions with certain senior officers, directors and
other representatives and advisors of CV Reit and certain senior officers and
other representatives and advisors of Kranzco concerning the businesses,
operations and prospects of CV Reit and Kranzco. We examined certain
publicly available business and financial information relating to CV Reit and
Kranzco as well as certain financial forecasts and other information and data
for CV Reit and Kranzco which were provided to or otherwise discussed with us
by the respective managements of CV Reit and Kranzco, including information
relating to certain strategic implications and operational benefits
anticipated to result from the Reorganization. We reviewed the financial
terms of the Reorganization as set forth in the Agreement in relation to,
among other things: current and historical market prices and trading volumes
of the CV Reit Common Stock and the common stock of Kranzco; the historical
and projected earnings and other operating data of CV Reit and Kranzco; and
the capitalization and financial condition of CV Reit and Kranzco. We
analyzed certain financial, stock market and other publicly available
information relating to the businesses of other companies whose operations we
considered relevant in evaluating those of CV Reit and Kranzco. We also
evaluated the potential pro forma financial impact of the Reorganization on
CV Reit and Kranzco. In addition to the foregoing, we conducted such other
analyses and examinations and considered such other financial, economic and
market criteria as we deemed appropriate in arriving at our opinion.
In rendering our opinion, we have assumed and relied, without independent
verification, upon the accuracy and completeness of all financial and other
information and data publicly available or furnished to or otherwise reviewed
by or discussed with us. With respect to financial forecasts and other
information and data provided to or otherwise reviewed by or discussed with
us, we have been advised by the managements of CV Reit and Kranzco that such
forecasts and other information and data were reasonably prepared on bases
reflecting the best currently available estimates and judgments of the
managements of CV Reit and Kranzco as to the future financial performance of
CV Reit and Kranzco and the strategic implications and operational benefits
anticipated to result from the Reorganization. We have assumed, with your
consent, that the Reorganization will be treated as a tax-free reorganization
for federal income tax purposes and that the Related Transactions will be
consummated in all material respects in accordance with their terms. We also
have assumed, with your consent, that CV Reit and Kranzco were organized and
have operated in conformity with the requirements for qualification as a real
estate investment trust ("REIT") for federal income tax purposes and that
none of the Reorganization, the Related Transactions or the transactions
contemplated thereby will adversely affect the REIT status or operations of
Kramont. Our opinion, as set forth herein, relates to the relative values of
CV Reit and Kranzco and the exchange ratio provided for in the CV Merger of
CV Reit Common Stock for Kramont Common Shares. We are not expressing any
opinion as to what the value of the Kramont Common Shares actually will be
when issued to CV Reit stockholders pursuant to the Reorganization or the
price at which the Kramont Common Shares will trade subsequent to the
Reorganization. We have not made or been provided with an independent
evaluation or appraisal of the assets or liabilities (contingent or
otherwise) of CV Reit or Kranzco nor have we made any physical inspection of
the properties or assets of CV Reit or Kranzco. In connection with our
engagement, we were not requested to, and we did not, solicit third party
indications of interest in the acquisition of all or a part of CV Reit. We
express no view as to, and our opinion does not address, the relative merits
of the Reorganization as compared to any alternative business strategies that
might exist for CV Reit or the effect of any other transaction in which CV
Reit might engage. Our opinion is necessarily based upon information
available to us, and financial, stock market and other conditions and
circumstances existing and disclosed to us, as of the date hereof.
Salomon Smith Barney Inc. has acted as financial advisor to CV Reit in
connection with the proposed Reorganization and will receive a fee for such
services, a significant portion of which is contingent upon the consummation
of the Reorganization. We also will receive a fee upon delivery of this
opinion. We and our affiliates have in the past provided certain financial
services to Kranzco unrelated to the proposed Reorganization, including the
issuance of a credit facility and a mortgage to Kranzco, for which services
we and our affiliates have received compensation. In the ordinary course of
our business, we and our affiliates may actively trade or hold the securities
of CV Reit and Kranzco for our own account or for the account of our
customers and, accordingly, may at any time hold a long or short position in
such securities. In addition, we and our affiliates (including Citigroup
Inc. and its affiliates) may maintain relationships with CV Reit, Kranzco and
their respective affiliates.
Our advisory services and the opinion expressed herein are provided for the
information of the Board of Directors of CV Reit in its evaluation of the
proposed Reorganization, and our opinion is not intended to be and does not
constitute a recommendation to any stockholder as to how such stockholder
should vote on any matter relating to the CV Merger.
Based upon and subject to the foregoing, our experience as investment
bankers, our work as described above and other factors we deemed relevant, we
are of the opinion that, as of the date hereof, the CV Reit Exchange Ratio is
fair, from a financial point of view, to the holders of CV Reit Common Stock.
Very truly yours,
/s/ Salomon Smith Barney Inc.
- -----------------------------
SALOMON SMITH BARNEY INC.
Appendix C
[LETTERHEAD OF ING BARINGS LLC]
December 10, 1999
Board of Trustees
Kranzco Realty Trust
128 Fayette Street
Conshohocken, PA 19428
Gentlemen:
Kranzco Realty Trust, a Maryland real estate investment trust
("Kranzco"), KRT Trust, a Maryland real estate investment trust and a wholly
owned subsidiary of Kranzco ("KRT Trust"), CV Reit, Inc., a Delaware
corporation ("CV Reit"), and Kramont Realty Trust, a Maryland real estate
investment trust ("Kramont") propose to enter into an Agreement and Plan of
Reorganization and Merger (the "Proposed Transaction") pursuant to which each
of Kranzco and CV Reit would merge into Kramont and the holder of each share
of common stock of CV Reit shall be entitled to receive one common share of
beneficial interest of Kramont and the holder of each common share of
beneficial interest of Kranzco shall be entitled to receive one common share
of beneficial interest of Kramont (the "Exchange Ratio") and the holder of
each preferred share of beneficial interest of Kranzco shall be entitled to
receive one preferred share of Kramont having the same rights, preferences
and privileges as the preferred share of Kranzco held by it.
You have requested our opinion as to the fairness of the Exchange Ratio,
from a financial point of view, to Kranzco and the holders of its common
shares of beneficial interest, par value $0.01 per share, in the Proposed
Transaction.
We have acted as financial advisor to the Board of Trustees of Kranzco
in connection with the Proposed Transaction and will receive a fee for our
services. In December 1998 ING Barings acted as financial advisor to Kranzco
in connection with adopting a Shareholder Rights Plan and it continues to
render certain investment banking and financial advisory services to Kranzco.
In conducting our analysis and arriving at our opinion as expressed
herein, we have reviewed and analyzed, among other things, the following:
(i) certain documents which have been filed with the Securities and
Exchange Commission by Kranzco and CV Reit, including the Kranzco
Annual Report on Form 10-K for the fiscal year ended December 31,
1998 and the CV Reit Annual Report on Form 10-K for the fiscal
year ended December 31, 1998 as well as each of Kranzco and CV
Reit's Form 10-Q for the period ended September 30, 1999;
(ii) selected other publicly available information concerning Kranzco,
CV Reit and the trading markets for their securities;
(iii) selected publicly available information, including research
reports, regarding certain other companies engaged in businesses
we believe to be comparable to that of Kranzco and CV Reit, and
the recent financial position, operating results and trading
markets for the securities of such companies;
(iv) certain non-public information relating to the businesses and
prospects of Kranzco and CV Reit furnished to us by Kranzco and
CV Reit;
(v) the financial terms of selected recent mergers and acquisitions
which we believe to be relevant;
(vi) discussions with selected members of senior management of Kranzco
and CV Reit concerning their business, operations, assets,
present condition and future prospects; and
(vii) such other analyses, examinations and procedures, review of such
other agreements and documents, and consideration of such other
factors, as we have deemed relevant in our sole judgment, to be
necessary, appropriate or relevant to render an opinion.
In arriving at our opinion, we have assumed and relied upon the accuracy
and completeness of the financial and other information used by us and have
not attempted independently to verify such information, nor do we assume any
responsibility to do so. We have assumed that forecasts and projections
provided to or reviewed by us have been reasonably prepared based on the best
current estimates and judgment of the management of Kranzco and CV Reit as to
the future financial condition and results of operations of their companies.
We have visited but have not conducted a physical inspection of the
properties and facilities of Kranzco and CV Reit, nor have we made or
obtained any independent evaluation or appraisal of such properties and
facilities. We have also taken into account our assessment of general
economic, market and financial conditions and our experience in similar
transactions, as well as our experience in securities valuation in general.
Our opinion necessarily is based upon economic, market, financial and other
conditions as they exist and can be evaluated on the date hereof and we
assume no responsibility to update or revise our opinion based upon events or
circumstances occurring after the date hereof. We reserve, however, the right
to withdraw, revise or modify our opinion based upon additional information
which may be provided to or obtained by us, which suggests, in our judgment,
a material change in the assumptions upon which our opinion is based.
This letter and the opinion expressed herein are for the use of the
Board of Trustees of Kranzco. This opinion does not address Kranzco's
underlying business decision to approve the Proposed Transaction or
constitute a recommendation to the holders of its common shares of beneficial
interest, par value $0.01 per share, as to how such shareholders should vote
or as to any other action such shareholders should take regarding the
Proposed Transaction. This opinion may not be reproduced, summarized,
excerpted from or otherwise publicly referred to or disclosed in any manner
without our prior written consent, except Kranzco may include this opinion in
its entirety in any proxy statement or information statement relating to the
transaction sent to the holders of Kranzco's common shares of beneficial
interest.
Based upon and subject to the foregoing, it is our opinion as investment
bankers that the Exchange Ratio is fair to Kranzco and the holders of common
shares of beneficial interest of Kranzco from a financial point of view.
Very truly yours,
/s/ ING BARINGS LLC
-------------------------
ING BARINGS LLC
Appendix D
KRAMONT REALTY TRUST
ARTICLES OF AMENDMENT AND RESTATEMENT
FIRST: Kramont Realty Trust, a Maryland real estate investment trust
(the "Trust") formed under Title 8 of the Corporations and Associations
Article of the Annotated Code of Maryland (the "Maryland REIT Law" or "MRL"),
desires to amend and restate its Declaration of Trust as currently in effect
and as hereinafter amended.
SECOND: The following provisions are all the provisions of the
Declaration of Trust currently in effect and as hereinafter amended:
ARTICLE I
FORMATION
The Trust is a real estate investment trust within the meaning of the
Maryland REIT Law. The Trust is a separate legal person and shall not be
deemed to be a general partnership, limited partnership, joint venture, joint
stock company or a corporation but nothing herein shall preclude the Trust
from being treated for tax purposes as an association under the Internal
Revenue Code of 1986, as amended (the "Code").
ARTICLE II
NAME
The name of the trust (hereinafter called the "Trust") is:
Kramont Realty Trust
Under circumstances in which the Board of Trustees of the Trust (the
"Board of Trustees" or "Board") determines that the use of the name Kramont
Realty Trust is not practicable, the Trust may use any other designation or
name for the Trust.
ARTICLE III
PURPOSES AND POWERS
Section 3.1 Purposes. The purposes for which the Trust is formed are
to invest in and to acquire, hold, manage, administer, control and dispose of
property, including, without limitation or obligation, engaging in business
as a real estate investment trust under the Code.
Section 3.2 Powers. The Trust shall have all of the powers granted to
real estate investment trusts by the MRL and all other powers which are not
inconsistent with law and are appropriate to promote and attain the purposes
set forth in the Declaration of Trust.
ARTICLE IV
RESIDENT AGENT
The name of the resident agent of the Trust in the State of Maryland is
James J. Hanks, Jr., whose post office address is c/o Ballard Spahr Andrews &
Ingersoll, LLP, 300 East Lombard Street, Baltimore, Maryland 21202. The
resident agent is a citizen of and resides in the State of Maryland. The
Trust may have such offices or places of business within or outside the State
of Maryland as the Board of Trustees may from time to time determine.
ARTICLE V
BOARD OF TRUSTEES
Section 5.1 Powers. Subject to any express limitations contained in
the Declaration of Trust or in the Bylaws, (a) the business and affairs of
the Trust shall be managed under the direction of the Board of Trustees and
(b) the Board shall have full, exclusive and absolute power, control and
authority over any and all property of the Trust. The Board may take any
action as in its sole judgment and discretion is necessary or appropriate to
conduct the business and affairs of the Trust. The Declaration of Trust
shall be construed with the presumption in favor of the grant of power and
authority to the Board. Any construction of the Declaration of Trust or
determination made in good faith by the Board concerning its powers and
authority hereunder shall be conclusive. The enumeration and definition of
particular powers of the Trustees included in the Declaration of Trust or in
the Bylaws shall in no way be construed or deemed by inference or otherwise
in any manner to exclude or limit the powers conferred upon the Board or the
Trustees under the general laws of the State of Maryland or any other
applicable laws.
The Board, without any action by the shareholders of the Trust, shall
have and may exercise, on behalf of the Trust, without limitation, the power
to terminate the status of the Trust as a real estate investment trust under
the Code; to determine that compliance with any restriction or limitations on
ownership and transfers of shares of the Trust's beneficial interest set
forth in Article VII of the Declaration of Trust is no longer required in
order for the Trust to qualify as a REIT; to adopt, amend and repeal Bylaws;
to elect officers in the manner prescribed in the Bylaws; to solicit proxies
from holders of shares of beneficial interest of the Trust; and to do any
other acts and deliver any other documents necessary or appropriate to the
foregoing powers.
Section 5.2 Number. The number of Trustees (hereinafter the
"Trustees") initially shall be seven, which number may be increased or
decreased pursuant to the Bylaws of the Trust. The Trustees shall be elected
in the manner provided in the Bylaws. The names and addresses of the
Trustees who shall serve until their successors are duly elected and qualify
and the class of Trustees to which each is assigned are:
Name Address Class
---- ------- -----
Norman M. Kranzdorf c/o Kramont Realty Trust I
Plymouth Plaza
580 West Germantown Pike
Plymouth Meeting, Pennsylvania 19462
Louis P. Meshon, Sr. c/o Kramont Realty Trust II
Plymouth Plaza
580 West Germantown Pike
Plymouth Meeting, Pennsylvania 19462
E. Donald Shapiro c/o Kramont Realty Trust III
Plymouth Plaza
580 West Germantown Pike
Plymouth Meeting, Pennsylvania 19462
Bernard J. Korman c/o Kramont Realty Trust I
Plymouth Plaza
580 West Germantown Pike
Plymouth Meeting, Pennsylvania 19462
H. Irwin Levy c/o Kramont Realty Trust III
Plymouth Plaza
580 West Germantown Pike
Plymouth Meeting, Pennsylvania 19462
Alan Schulman c/o Kramont Realty Trust II
Plymouth Plaza
580 West Germantown Pike
Plymouth Meeting, Pennsylvania 19462
Milton S. Schneider c/o Kramont Realty Trust II
Plymouth Plaza
580 West Germantown Pike
Plymouth Meeting, Pennsylvania 19462
The Trustees may increase the number of Trustees and fill any vacancy,
whether resulting from an increase in the number of Trustees or otherwise, on
the Board of Trustees prior to the first annual meeting of shareholders in
the manner provided in the Bylaws. It shall not be necessary to list in the
Declaration of Trust the names and addresses of any Trustees hereafter
elected.
The Trustees (other than any Trustee elected solely by holders of one or
more classes or series of Preferred Shares) shall be classified, with respect
to the terms for which they severally hold office, into three classes, as
nearly equal in number as possible, one class to hold office initially for a
term expiring at the annual meeting of shareholders in 2001, another class to
hold office initially for a term expiring at the annual meeting of
shareholders in 2002 and another class to hold office initially for a term
expiring at the annual meeting of shareholders in 2003, with the Trustees of
each class to hold office until their successors are duly elected and
qualify. At each annual meeting of shareholders, the successors to the class
of Trustees whose term expires at such meeting shall be elected to hold
office for a term expiring at the annual meeting of shareholders held in the
third year following the year of their election and until their successors
are duly elected and qualify.
Section 5.3 Resignation, Removal or Death. Any Trustee may resign
by written notice to the Board, effective upon execution and delivery to the
Trust of such written notice or upon any future date specified in the notice.
Subject to the rights of holders of one or more classes or series of
Preferred Shares to elect or remove one or more Trustees, a Trustee may be
removed at any time, only for cause, at a meeting of the shareholders, by the
affirmative vote of not less than two-thirds of all the votes entitled to be
cast generally in the election of Trustees. Upon the resignation or removal
of any Trustee, or his otherwise ceasing to be a Trustee, he shall
automatically cease to have any right, title or interest in and to the Trust
Property and shall execute and deliver such documents as the remaining
Trustees require for the conveyance of any Trust Property held in his name,
and shall account to the remaining Trustees as they require for all property
which he holds as Trustee. Upon the incapacity or death of any Trustee, his
legal representative shall perform those acts.
Section 5.4 REIT Qualification. If the Trust elects to qualify
for federal income tax treatment as a REIT, the Board of Trustees shall use
its reasonable best efforts to take such actions as are necessary or
appropriate to preserve the status of the Trust as a REIT; however, if the
Board of Trustees determines that it is no longer in the best interests of
the Trust to continue to be qualified as a REIT, the Board of Trustees may
revoke or otherwise terminate the Trust REIT election pursuant to Section
856(g) of the Code. The Board of Trustees also may determine that compliance
with any restriction or limitation on stock ownership and transfers set forth
in Article VII is no longer required for REIT qualification.
ARTICLE VI
SHARES OF BENEFICIAL INTEREST
Section 6.1 Authorized Shares. The beneficial interest of the
Trust shall be divided into shares of beneficial interest (the "Shares").
The Trust has authority to issue a total of 100,000,000 Shares, $.01 par
value per share, consisting of 96,683,845 common shares of beneficial
interest and 3,316,155 preferred shares of beneficial interest. Of such
3,316,155 preferred shares, 11,155 shall be designated as Series A-1
Increasing Rate Cumulative Convertible Preferred Shares (the "Series A-1
Increasing Rate Preferred Shares"), 1,235,000 shall be designated as Series
B-1 Cumulative Convertible Preferred Shares (the "Series B-1 Preferred
Shares") and 2,070,000 shall be designated as Series D Cumulative Redeemable
Preferred Shares (the "Series D Preferred Shares"). If shares of one class
are reclassified into shares of another class of shares pursuant to this
Article VI, the number of authorized shares of the former class shall be
automatically decreased and the number of shares of the latter class shall be
automatically increased, in each case by the number of shares so classified
or reclassified, so that the aggregate number of shares of beneficial
interest of all classes that the Trust has authority to issue shall not be
more than the total number of shares of beneficial interest set forth in the
second sentence of this paragraph. The Board of Trustees, without any action
by the shareholders of the Trust, may amend the Declaration of Trust from
time to time to increase or decrease the aggregate number of Shares or the
number of Shares of any class or series that the Trust has authority to
issue.
Section 6.2 Common Shares. Each common share of beneficial
interest of the Trust (each a "Common Share," and collectively "Common
Shares") shall entitle the holder thereof to one vote (on a non-cumulative
basis) on each matter upon which holders of Common Shares are entitled to
vote pursuant to Section 8.2. The Board of Trustees may reclassify any
unissued Common Shares from time to time into one or more classes or series
of Shares.
Section 6.3 Preferred Shares. The Board of Trustees may classify
any unissued preferred shares of beneficial interest of the Trust (each a
"Preferred Share," and collectively "Preferred Shares") and reclassify any
previously classified but unissued Preferred Shares of any series from time
to time, in one or more classes or series of Shares.
Section 6.4 Classified or Reclassified Shares. Prior to issuance
of classified or reclassified Shares of any class or series, the Board of
Trustees by resolution shall (a) designate that class or series to
distinguish it from all other classes and series of Shares; (b) specify the
number of Shares to be included in the class or series; (c) set, subject to
the provisions of Article VII and subject to the express terms of any class
or series of Shares outstanding at the time, the preferences, conversion or
other rights, voting powers, restrictions, limitations as to dividends or
other distributions, qualifications and terms and conditions of redemption
for each class or series; and (d) cause the Trust to file articles
supplementary with the State Department of Assessments and Taxation of
Maryland (the "SDAT"). Any of the terms of any class or series of Shares set
pursuant to clause (c) of this Section 6.4 may be made dependent upon facts
ascertainable outside the Declaration of Trust (including, without
limitation, the occurrence of any event and the contents of any document) and
may vary among holders thereof, provided that the manner in which such facts
or variations shall operate upon the terms of such class or series of Shares
is clearly and expressly set forth in the articles supplementary or other
charter document filed with the SDAT.
Section 6.5 Authorization by Board of Share Issuance. The Board
of Trustees may authorize the issuance from time to time of Shares of any
class or series, whether now or hereafter authorized, or securities or rights
convertible into Shares of any class or series, whether now or hereafter
authorized, for such consideration (whether in cash, property, past or future
services, obligation for future payment or otherwise) as the Board of
Trustees may deem advisable (or without consideration in the case of a Share
split, Share dividend or charitable contribution), subject to such
restrictions or limitations, if any, as may be set forth in the Declaration
of Trust or the Bylaws of the Trust.
Section 6.6 Dividends and Distributions. The Board of Trustees
may from time to time authorize the Trust to declare and pay to shareholders
such dividends or distributions, in cash or other assets of the Trust or in
securities of the Trust or from any other source as the Board of Trustees
shall determine. The Board of Trustees shall endeavor to authorize the
declaration and payment of such dividends and distributions as shall be
necessary for the Trust to qualify as a real estate investment trust under
the Code; however, shareholders shall have no right to any dividend or
distribution unless and until authorized by the Board and declared by the
Trust. The exercise of the powers and rights of the Board of Trustees
pursuant to this Section 6.6 shall be subject to the provisions of any class
or series of Shares at the time outstanding. No determination shall be made
by the Board of Trustees nor shall any transaction be entered into by the
Trust which would cause any Shares or other beneficial interest in the Trust
not to constitute "transferable shares" or "transferable certificates of
beneficial interest" under Section 856(a)(2) of the Code or which would cause
any distribution to constitute a preferential dividend as described in
Section 562(c) of the Code.
Section 6.7 General Nature of Shares. All Shares shall be
personal property entitling the shareholders only to those rights provided in
the Declaration of Trust. The shareholders shall have no interest in the
property of the Trust and shall have no right to compel any partition,
division, dividend or distribution of the Trust or of the property of the
Trust. The death of a shareholder shall not terminate the Trust. The Trust
is entitled to treat as shareholders only those persons in whose names Shares
are registered as holders of Shares on the share ledger of the Trust.
Section 6.8 Fractional Shares. The Trust may, without the consent
or approval of any shareholder, issue fractional Shares, eliminate a fraction
of a Share by rounding up or down to a full Share, arrange for the
disposition of a fraction of a Share by the person entitled to it, or pay
cash for the fair value of a fraction of a Share.
Section 6.9 Declaration and Bylaws. All shareholders are subject
to the provisions of the Declaration of Trust and the Bylaws of the Trust.
Section 6.10 Divisions and Combinations of Shares. Subject to an
express provision to the contrary in the terms of any class or series of
beneficial interest hereafter authorized, the Board of Trustees shall have
the power to divide or combine the outstanding shares of any class or series
of beneficial interest, without a vote of shareholders.
ARTICLE VII
RESTRICTION ON TRANSFER AND OWNERSHIP OF SHARES
Section 7.1 Definitions. For the purpose of this Article VII, the
following terms shall have the following meanings:
Aggregate Share Ownership Limit. The term "Aggregate Share
Ownership Limit" shall mean not more than 9.8 percent in value of the
aggregate of the outstanding Equity Shares. The value of the outstanding
Equity Shares shall be determined by the Board of Trustees in good faith,
which determination shall be conclusive for all purposes hereof.
Beneficial Ownership. The term "Beneficial Ownership" shall mean
ownership of Equity Shares by a Person, whether the interest in Equity Shares
is held directly or indirectly (including by a nominee), and shall include
interests that would be treated as owned through the application of
Section 544 of the Code, as modified by Section 856(h)(1)(B) of the Code.
The terms "Beneficial Owner," "Beneficially Owns" and "Beneficially Owned"
shall have the correlative meanings.
Business Day. The term "Business Day" shall mean any day, other
than a Saturday or Sunday, that is neither a legal holiday nor a day on which
banking institutions in New York City are authorized or required by law,
regulation or executive order to close.
Charitable Beneficiary. The term "Charitable Beneficiary" shall
mean one or more beneficiaries of the Charitable Trust as determined pursuant
to Section 7.3.6, provided that each such organization must be described in
Section 501(c)(3) of the Code and contributions to each such organization
must be eligible for deduction under each of Sections 170(b)(1)(A), 2055 and
2522 of the Code.
Charitable Trust. The term "Charitable Trust" shall mean any trust
provided for in Section 7.3.1.
Code. The term "Code" shall mean the Internal Revenue Code of
1986, as amended from time to time.
Common Share Ownership Limit. The term "Common Share Ownership
Limit" shall mean not more than 9.8 percent (in value or in number of shares,
whichever is more restrictive) of the aggregate number of the outstanding
Common Shares. The number and value of outstanding Common Shares shall be
determined by the Board of Trustees in good faith, which determination shall
be conclusive for all purposes hereof.
Constructive Ownership. The term "Constructive Ownership" shall
mean ownership of Equity Shares by a Person, whether the interest in Equity
Shares is held directly or indirectly (including by a nominee), and shall
include interests that would be treated as owned through the application of
Section 318(a) of the Code, as modified by Section 856(d)(5) of the Code.
The terms "Constructive Owner," "Constructively Owns" and "Constructively
Owned" shall have the correlative meanings.
Declaration of Trust. The term "Declaration of Trust" shall mean
these Articles of Amendment and Restatement as accepted for record by the
SDAT, as hereafter amended and supplemented.
Equity Shares. The term "Equity Shares" shall mean Shares of all
classes or series, including, without limitation, Common Shares and Preferred
Shares.
Excepted Holder. The term "Excepted Holder" shall mean any
shareholder of the Trust for whom an Excepted Holder Limit is created by this
Article VII or by the Board of Trustees pursuant to Section 7.2.7.
Excepted Holder Limit. The term "Excepted Holder Limit" shall
mean, provided that the affected Excepted Holder agrees to comply with the
requirements established by the Board of Trustees pursuant to Section 7.2.7,
and subject to adjustment pursuant to Section 7.2.8, the percentage limit
established by the Board of Trustees pursuant to Section 7.2.7.
Initial Date. The term "Initial Date" shall mean the date upon
which these Articles of Amendment and Restatement containing this Article VII
are accepted for record by the SDAT.
Market Price. The term "Market Price" on any date shall mean, with
respect to any class or series of outstanding Equity Shares, the Closing
Price for such Equity Shares on such date. The "Closing Price" on any date
shall mean the last sale price for such Equity Shares, regular way, or, in
case no such sale takes place on such day, the average of the closing bid and
asked prices, regular way, for such Equity Shares, in either case as reported
in the principal consolidated transaction reporting system with respect to
securities listed or admitted to trading on the NYSE or, if such Equity
Shares are not listed or admitted to trading on the NYSE, as reported on the
principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange on which such
Equity Shares are listed or admitted to trading or, if such Equity 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 high bid and low
asked 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 in use, the principal other automated quotation
system that may then be in use or, if such Equity 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 a market in such Equity
Shares selected by the Board of Trustees or, in the event that no trading
price is available for such Equity Shares, the fair market value of Equity
Shares, as determined in good faith by the Board of Trustees.
NYSE. The term "NYSE" shall mean the New York Stock Exchange.
Person. The term "Person" shall mean an individual, corporation,
partnership, estate, trust (including a trust qualified under Sections 401(a)
or 501(c)(17) of the Code), a portion of a trust permanently set aside for or
to be used exclusively for the purposes described in Section 642(c) of the
Code, association, private foundation within the meaning of
Section 509(a) of the Code, joint stock company or other entity and also
includes a group as that term is used for purposes of Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended, and a group to which an Excepted
Holder Limit applies.
Prohibited Owner. The term "Prohibited Owner" shall mean, with
respect to any purported Transfer, any Person who, but for the provisions of
Section 7.2.1, would Beneficially Own or Constructively Own Equity Shares,
and if appropriate in the context, shall also mean any Person who would have
been the record owner of Equity Shares that the Prohibited Owner would have
so owned.
REIT. The term "REIT" shall mean a real estate investment trust
within the meaning of Section 856 of the Code.
Restriction Termination Date. The term "Restriction Termination
Date" shall mean the first day after the Initial Date on which the Board of
Trustees determines that it is no longer in the best interests of the Trust
to attempt to, or continue to, qualify as a REIT or that compliance with the
restrictions and limitations on Beneficial Ownership, Constructive Ownership
and Transfers of Equity Shares set forth herein is no longer required in
order for the Trust to qualify as a REIT.
SDAT. The term "SDAT" shall mean the State Department of
Assessments and Taxation of Maryland.
Transfer. The term "Transfer" shall mean any issuance, sale,
transfer, gift, assignment, devise or other disposition, as well as any other
event that causes any Person to acquire Beneficial Ownership or Constructive
Ownership, or any agreement to take any such actions or cause any such
events, of Equity Shares or the right to vote or receive dividends on Equity
Shares, including (a) the granting or exercise of any option (or any
disposition of any option), (b) any disposition of any securities or rights
convertible into or exchangeable for Equity Shares or any interest in Equity
Shares or any exercise of any such conversion or exchange right and (c)
Transfers of interests in other entities that result in changes in Beneficial
or Constructive Ownership of Equity Shares; in each case, whether voluntary
or involuntary, whether owned of record, Constructively Owned or Beneficially
Owned and whether by operation of law or otherwise. The terms "Transferring"
and "Transferred" shall have the correlative meanings.
Trustee. The term "Trustee" shall mean the Person unaffiliated
with the Trust and a Prohibited Owner, that is appointed by the Trust to
serve as trustee of the Charitable Trust.
Section 7.2 Equity Shares.
Section 7.2.1 Ownership Limitations. During the period
commencing on the Initial Date and prior to the Restriction Termination Date:
(a) Basic Restrictions.
(i) (1) No Person, other than an Excepted Holder,
shall Beneficially Own or Constructively Own Equity Shares in excess of the
Aggregate Share Ownership Limit, (2) no Person, other than an Excepted
Holder, shall Beneficially Own or Constructively Own Common Shares in excess
of the Common Share Ownership Limit and (3) no Excepted Holder shall
Beneficially Own or Constructively Own Equity Shares in excess of the
Excepted Holder Limit for such Excepted Holder.
(ii) No Person shall Beneficially or Constructively
Own Equity Shares to the extent that such Beneficial or Constructive
Ownership of Equity Shares would result in the Trust being "closely held"
within the meaning of Section 856(h) of the Code (without regard to whether
the ownership interest is held during the last half of a taxable year), or
otherwise failing to qualify as a REIT (including, but not limited to,
Beneficial or Constructive Ownership that would result in the Trust owning
(actually or Constructively) an interest in a tenant that is described in
Section 856(d)(2)(B) of the Code if the income derived by the Trust from such
tenant would cause the Trust to fail to satisfy any of the gross income
requirements of Section 856(c) of the Code).
(iii) Notwithstanding any other provisions contained
herein, any Transfer of Equity Shares (whether or not such Transfer is the
result of a transaction entered into through the facilities of the NYSE or
any other national securities exchange or automated inter-dealer quotation
system) that, if effective, would result in Equity Shares being beneficially
owned by less than 100 Persons (determined under the principles of
Section 856(a)(5) of the Code) shall be void ab initio, and the intended
transferee shall acquire no rights in such Equity Shares.
(b) Transfer in Trust. If any Transfer of Equity Shares
(whether or not such Transfer is the result of a transaction entered into
through the facilities of the NYSE or any other national securities exchange
or automated inter-dealer quotation system) occurs which, if effective, would
result in any Person Beneficially Owning or Constructively Owning Equity
Shares in violation of Section 7.2.1(a)(i) or (ii),
(i) then that number of Equity Shares the
Beneficial or Constructive Ownership of which otherwise would cause such
Person to violate Section 7.2.1(a)(i) or (ii)(rounded to the nearest whole
share) shall be automatically transferred to a Charitable Trust for the
benefit of a Charitable Beneficiary, as described in Section 7.3, effective
as of the close of business on the Business Day prior to the date of such
Transfer, and such Person shall acquire no rights in such Equity Shares; or
(ii) if the transfer to the Charitable Trust
described in clause (i) of this sentence would not be effective for any
reason to prevent the violation of Section 7.2.1(a)(i) or (ii), then the
Transfer of that number of Equity Shares that otherwise would cause any
Person to violate Section 7.2.1(a)(i) or (ii) shall be void ab initio, and
the intended transferee shall acquire no rights in such Equity Shares.
Section 7.2.2 Remedies for Breach. If the Board of Trustees
or any duly authorized committee thereof shall at any time determine in good
faith that a Transfer or other event has taken place that results in a
violation of Section 7.2.1 or that a Person intends to acquire or has
attempted to acquire Beneficial or Constructive Ownership of any Equity
Shares in violation of Section 7.2.1 (whether or not such violation is
intended), the Board of Trustees or a committee thereof shall take such
action as it deems advisable to refuse to give effect to or to prevent such
Transfer or other event, including, without limitation, causing the Trust to
redeem Equity Shares, refusing to give effect to such Transfer on the books
of the Trust or instituting proceedings to enjoin such Transfer or other
event; provided, however, that any Transfer or attempted Transfer or other
event in violation of Section 7.2.1 shall automatically result in the
transfer to the Charitable Trust described above, and, where applicable, such
Transfer (or other event) shall be void ab initio as provided above
irrespective of any action (or non-action) by the Board of Trustees or a
committee thereof.
Section 7.2.3 Notice of Restricted Transfer. Any Person who
acquires or attempts or intends to acquire Beneficial Ownership or
Constructive Ownership of Equity Shares that will or may violate
Section 7.2.1(a) or any Person who would have owned Equity Shares that
resulted in a transfer to the Charitable Trust pursuant to the provisions of
Section 7.2.1(b) shall immediately give written notice to the Trust of such
event, or in the case of such a proposed or attempted transaction, give at
least 15 days prior written notice, and shall provide to the Trust such other
information as the Trust may request in order to determine the effect, if
any, of such Transfer on the Trust's status as a REIT.
Section 7.2.4 Owners Required To Provide Information. From
the Initial Date and prior to the Restriction Termination Date:
(a) every owner of more than five percent (or such lower
percentage as required by the Code or the Treasury Regulations promulgated
thereunder) of the outstanding Equity Shares, within 30 days after the end of
each taxable year, shall give written notice to the Trust stating the name
and address of such owner, the number of Equity Shares and other Equity
Shares Beneficially Owned and a description of the manner in which such
shares are held. Each such owner shall provide to the Trust such additional
information as the Trust may request in order to determine the effect, if
any, of such Beneficial Ownership on the Trust's status as a REIT and to
ensure compliance with the Aggregate Share Ownership Limit; and
(b) each Person who is a Beneficial or Constructive
Owner of Equity Shares and each Person (including the shareholder of record)
who is holding Equity Shares for a Beneficial or Constructive Owner shall
provide to the Trust such information as the Trust may request, in good
faith, in order to determine the Trust's status as a REIT and to comply with
requirements of any taxing authority or governmental authority or to
determine such compliance.
Section 7.2.5 Remedies Not Limited. Subject to Section 5.1
of the Declaration of Trust, nothing contained in this Section 7.2 shall
limit the authority of the Board of Trustees to take such other action as it
deems necessary or advisable to protect the Trust and the interests of its
shareholders in preserving the Trust's status as a REIT.
Section 7.2.6 Ambiguity. In the case of an ambiguity in the
application of any of the provisions of this Section 7.2, Section 7.3 or any
definition contained in Section 7.1, the Board of Trustees shall have the
power to determine the application of the provisions of this Section 7.2 or
Section 7.3 or any such definition with respect to any situation based on the
facts known to it. In the event Section 7.2 or 7.3 requires an action by the
Board of Trustees and the Declaration of Trust fails to provide specific
guidance with respect to such action, the Board of Trustees shall have the
power to determine the action to be taken so long as such action is not
contrary to the provisions of Sections 7.1, 7.2 or 7.3.
Section 7.2.7 Exceptions.
(a) Subject to Section 7.2.1(a)(ii), the Board of
Trustees, in its sole discretion, may exempt a Person from the Aggregate
Share Ownership Limit and the Common Share Ownership Limit, as the case may
be, and may establish or increase an Excepted Holder Limit for such Person
if:
(i) the Board of Trustees obtains such
representations and undertakings from such Person as are reasonably necessary
to ascertain that no individual's Beneficial or Constructive Ownership of
such Equity Shares will violate Section 7.2.1(a)(ii);
(ii) such Person does not and represents that it
will not own, actually or Constructively, an interest in a tenant of the
Trust (or a tenant of any entity owned or controlled by the Trust) that would
cause the Trust to own, actually or Constructively, more than a 9.9% interest
(as set forth in Section 856(d)(2)(B) of the Code) in such tenant and the
Board of Trustees obtains such representations and undertakings from such
Person as are reasonably necessary to ascertain this fact (for this purpose,
a tenant from whom the Trust (or an entity owned or controlled by the Trust)
derives (and is expected to continue to derive) a sufficiently small amount
of revenue such that, in the opinion of the Board of Trustees, rent from such
tenant would not adversely affect the Trust's ability to qualify as a REIT,
shall not be treated as a tenant of the Trust); and
(iii) such Person agrees that any violation or
attempted violation of such representations or undertakings (or other action
which is contrary to the restrictions contained in Sections 7.2.1 through
7.2.6) will result in such Equity Shares being automatically transferred to a
Charitable Trust in accordance with Sections 7.2.1(b) and 7.3.
(b) Prior to granting any exception pursuant to
Section 7.2.7(a), the Board of Trustees may require a ruling from the
Internal Revenue Service, or an opinion of counsel, in either case in form
and substance satisfactory to the Board of Trustees in its sole discretion,
as it may deem necessary or advisable in order to determine or ensure the
Trust's status as a REIT. Notwithstanding the receipt of any ruling or
opinion, the Board of Trustees may impose such conditions or restrictions as
it deems appropriate in connection with granting such exception.
(c) Subject to Section 7.2.1(a)(ii), an underwriter
which participates in a public offering or a private placement of Equity
Shares (or securities convertible into or exchangeable for Equity Shares) may
Beneficially Own or Constructively Own Equity Shares (or securities
convertible into or exchangeable for Equity Shares) in excess of the
Aggregate Share Ownership Limit, the Common Share Ownership Limit or both
such limits, but only to the extent necessary to facilitate such public
offering or private placement.
(d) The Board of Trustees may only reduce the Excepted
Holder Limit for an Excepted Holder: (1) with the written consent of such
Excepted Holder at any time, or (2) pursuant to the terms and conditions of
the agreements and undertakings entered into with such Excepted Holder in
connection with the establishment of the Excepted Holder Limit for that
Excepted Holder. No Excepted Holder Limit shall be reduced to a percentage
that is less than the Common Share Ownership Limit.
Section 7.2.8 Increase in Aggregate Share Ownership and
Common Share Ownership Limits. The Board of Trustees may from time to time
increase the Common Share Ownership Limit and the Aggregate Share Ownership
Limit.
Section 7.2.9 Legend. Each certificate for Equity Shares
shall bear substantially the following legend:
The shares represented by this certificate are subject to
restrictions on Beneficial and Constructive Ownership and
Transfer for the purpose, among others, of the Trust's
maintenance of its status as a Real Estate Investment
Trust (a "REIT") under the Internal Revenue Code of 1986,
as amended (the "Code"). Subject to certain further
restrictions and except as expressly provided in the
Trust's Declaration of Trust, (i) no Person may
Beneficially or Constructively Own Common Shares of the
Trust in excess of 9.8 percent (in value or number of
shares) of the outstanding Common Shares of the Trust
unless such Person is an Excepted Holder (in which case
the Excepted Holder Limit shall be applicable); (ii) no
Person may Beneficially or Constructively Own Equity
Shares of the Trust in excess of 9.8 percent of the value
of the total outstanding Equity Shares of the Trust,
unless such Person is an Excepted Holder (in which case
the Excepted Holder Limit shall be applicable); (iii) no
Person may Beneficially or Constructively Own Equity
Shares that would result in the Trust being "closely
held" under Section 856(h) of the Code or otherwise cause
the Trust to fail to qualify as a REIT; and (iv) no
Person may Transfer Equity Shares if such Transfer would
result in Equity Shares of the Trust being owned by fewer
than 100 Persons. Any Person who Beneficially or
Constructively Owns or attempts to Beneficially or
Constructively Own Equity Shares which cause or will
cause a Person to Beneficially or Constructively Own
Equity Shares in excess or in violation of the above
limitations must immediately notify the Trust. If any of
the restrictions on transfer or ownership are violated,
the Equity Shares represented hereby will be
automatically transferred to a Trustee of a Charitable
Trust for the benefit of one or more Charitable
Beneficiaries. In addition, upon the occurrence of
certain events, attempted Transfers in violation of the
restrictions described above may be void ab initio. All
capitalized terms in this legend have the meanings
defined in the Trust's Declaration of Trust, as the same
may be amended from time to time, a copy of which,
including the restrictions on transfer and ownership,
will be furnished to each holder of Equity Shares of the
Trust on request and without charge.
Instead of the foregoing legend, the certificate may state
that the Trust will furnish a full statement about certain restrictions on
transferability to a shareholder on request and without charge.
Section 7.3 Transfer of Equity Shares in Trust.
Section 7.3.1 Ownership in Trust. Upon any purported
Transfer or other event described in Section 7.2.1(b) that would result in a
transfer of Equity Shares to a Charitable Trust, such Equity Shares shall be
deemed to have been transferred to the Trustee as trustee of a Charitable
Trust for the exclusive benefit of one or more Charitable Beneficiaries,
whether or not previously designated by the Trust pursuant to Section 7.3.6.
Such transfer to the Trustee shall be deemed to be effective as of the close
of business on the Business Day prior to the purported Transfer or other
event that results in the transfer to the Charitable Trust pursuant to
Section 7.2.1(b). The Trustee shall be appointed by the Trust and shall be a
Person unaffiliated with the Trust and any Prohibited Owner. Each Charitable
Beneficiary shall be designated by the Trust as provided in Section 7.3.6.
If the Trust has not designated a Charitable Beneficiary before the date of
the transfer referred to in this Section 7.3.1, the Trust shall promptly do
so thereafter.
Section 7.3.2 Status of Shares Held by the Trustee. Equity
Shares held by the Trustee shall be issued and outstanding Equity Shares of
the Trust. The Prohibited Owner shall have no rights in the shares held by
the Trustee. The Prohibited Owner shall not benefit economically from
ownership of any shares held in trust by the Trustee, shall have no rights to
dividends or other distributions and shall not possess any rights to vote or
other rights attributable to the shares held in the Charitable Trust.
Section 7.3.3 Dividend and Voting Rights. The Trustee shall
have all voting rights and rights to dividends or other distributions with
respect to Equity Shares held in the Charitable Trust, which rights shall be
exercised for the exclusive benefit of the Charitable Beneficiary. Any
dividend or other distribution paid prior to the discovery by the Trust that
Equity Shares have been transferred to the Trustee shall be paid with respect
to such Equity Shares to the Trustee upon demand and any dividend or other
distribution authorized but unpaid shall be paid when due to the Trustee.
Any dividends or distributions so paid over to the Trustee shall be held in
trust for the Charitable Beneficiary. The Prohibited Owner shall have no
voting rights with respect to shares held in the Charitable Trust and,
subject to Maryland law, effective as of the date that Equity Shares have
been transferred to the Trustee, the Trustee shall have the authority (at the
Trustee's sole discretion) (i) to rescind as void any vote cast by a
Prohibited Owner prior to the discovery by the Trust that Equity Shares have
been transferred to the Trustee and (ii) to recast such vote in accordance
with the desires of the Trustee acting for the benefit of the Charitable
Beneficiary; provided, however, that if the Trust has already taken
irreversible trust action, then the Trustee shall not have the authority to
rescind and recast such vote. Notwithstanding the provisions of this Article
VII, until the Trust has received notification that Equity Shares have been
transferred into a Charitable Trust, the Trust shall be entitled to rely on
its share transfer and other shareholder records for purposes of preparing
lists of shareholders entitled to vote at meetings, determining the validity
and authority of proxies and otherwise conducting votes of shareholders.
Section 7.3.4 Sale of Shares by Trustee. Within 20 days of
receiving notice from the Trust that Equity Shares have been transferred to
the Charitable Trust, the Trustee of the Charitable Trust shall sell the
shares held in the Charitable Trust to a person, designated by the Trustee,
whose ownership of the shares will not violate the ownership limitations set
forth in Section 7.2.1(a). Upon such sale, the interest of the Charitable
Beneficiary in the shares sold shall terminate and the Trustee shall
distribute the net proceeds of the sale to the Prohibited Owner and to the
Charitable Beneficiary as provided in this Section 7.3.4. The Prohibited
Owner shall receive the lesser of (1) the price paid by the Prohibited Owner
for the shares or, if the Prohibited Owner did not give value for the shares
in connection with the event causing the shares to be held in the Charitable
Trust (e.g., in the case of a gift, devise or other such transaction), the
Market Price of the shares on the day of the event causing the shares to be
held in the Charitable Trust and (2) the price per share received by the
Trustee from the sale or other disposition of the shares held in the
Charitable Trust. Any net sales proceeds in excess of the amount payable to
the Prohibited Owner shall be immediately paid to the Charitable Beneficiary.
If, prior to the discovery by the Trust that Equity Shares have been
transferred to the Trustee, such shares are sold by a Prohibited Owner, then
(i) such shares shall be deemed to have been sold on behalf of the Charitable
Trust and (ii) to the extent that the Prohibited Owner received an amount for
such shares that exceeds the amount that such Prohibited Owner was entitled
to receive pursuant to this Section 7.3.4, such excess shall be paid to the
Trustee upon demand.
Section 7.3.5 Purchase Right in Shares Transferred to the
Trustee. Equity Shares transferred to the Trustee shall be deemed to have
been offered for sale to the Trust, or its designee, at a price per share
equal to the lesser of (i) the price per share in the transaction that
resulted in such transfer to the Charitable Trust (or, in the case of a
devise or gift, the Market Price at the time of such devise or gift) and (ii)
the Market Price on the date the Trust, or its designee, accepts such offer.
The Trust shall have the right to accept such offer until the Trustee has
sold the shares held in the Charitable Trust pursuant to Section 7.3.4. Upon
such a sale to the Trust, the interest of the Charitable Beneficiary in the
shares sold shall terminate and the Trustee shall distribute the net proceeds
of the sale to the Prohibited Owner.
Section 7.3.6 Designation of Charitable Beneficiaries. By
written notice to the Trustee, the Trust shall designate one or more
nonprofit organizations to be the Charitable Beneficiary of the interest in
the Charitable Trust such that (i) Equity Shares held in the Charitable Trust
would not violate the restrictions set forth in Section 7.2.1(a) in the hands
of such Charitable Beneficiary and (ii) each such organization must be
described in Section 501(c)(3) of the Code and contributions to each such
organization must be eligible for deduction under each of Sections
170(b)(1)(A), 2055 and 2522 of the Code.
Section 7.4 NYSE Transactions. Nothing in this Article VII shall
preclude the settlement of any transaction entered into through the
facilities of the NYSE or any other national securities exchange or automated
inter-dealer quotation system. The fact that the settlement of any
transaction occurs shall not negate the effect of any provision of this
Article VII and any transferee in such a transaction shall be subject to all
of the provisions and limitations set forth in this Article VII.
Section 7.5 Enforcement. The Trust is authorized specifically to
seek equitable relief, including injunctive relief, to enforce the provisions
of this Article VII for any purpose, including, without limitation,
protection of the Trust's status as a REIT.
Section 7.6 Non-Waiver. No delay or failure on the part of the
Trust or the Board of Trustees in exercising any right hereunder shall
operate as a waiver of any right of the Trust or the Board of Trustees, as
the case may be, except to the extent specifically waived in writing.
ARTICLE VIII
SHAREHOLDERS
Section 8.1 Meetings. There shall be an annual meeting of the
shareholders, to be held on proper notice at such time (after the delivery of
the annual report) and convenient location as shall be determined by or in
the manner prescribed in the Bylaws, for the election of the Trustees, if
required, and for the transaction of any other business within the powers of
the Trust. Except as otherwise provided in the Declaration of Trust, special
meetings of shareholders may be called in the manner provided in the Bylaws.
If there are no Trustees, the officers of the Trust shall promptly call a
special meeting of the shareholders entitled to vote for the election of
successor Trustees. Any meeting may be adjourned and reconvened as the
Trustees determine or as provided in the Bylaws.
Section 8.2 Voting Rights. Subject to the provisions of any class
or series of Shares then outstanding, the shareholders shall be entitled to
vote only on the following matters: (a) election of Trustees as provided in
Section 5.2 and the removal of Trustees as provided in Section 5.3; (b)
amendment of the Declaration of Trust as provided in Section 10.3; (c)
termination of the Trust as provided in Section 12.2; (d) merger or
consolidation of the Trust, or the sale or disposition of substantially all
of the property of the Trust, as provided in Article XI; and (e) such other
matters with respect to which the Board of Trustees has adopted a resolution
declaring that a proposed action is advisable and directing that the matter
be submitted to the shareholders for approval or ratification. Except with
respect to the foregoing matters, no action taken by the shareholders at any
meeting shall in any way bind the Board of Trustees.
Section 8.3 Preemptive and Appraisal Rights. Except as may be
provided by the Board of Trustees in setting the terms of classified or
reclassified Shares pursuant to Section 6.4, or as may otherwise be provided
by contract, no holder of Shares shall, as such holder, (a) have any
preemptive right to purchase or subscribe for any additional Shares of the
Trust or any other security of the Trust which it may issue or sell or (b),
except as expressly required by the MRL, have any right to require the Trust
to pay such holder the fair value of his Shares in an appraisal or similar
proceeding.
Section 8.4 Extraordinary Actions. Except as specifically
provided in Section 5.3 (relating to removal of Trustees) and in Section 10.3
and Article XI, notwithstanding any provision of law permitting or requiring
any action to be taken or approved by the affirmative vote of the holders of
shares entitled to cast a greater number of votes, any such action shall be
effective and valid if taken or approved by the affirmative vote of holders
of Shares entitled to cast a majority of all the votes entitled to be cast on
the matter.
Section 8.5 Board Approval. The submission of any action to the
shareholders for their consideration shall first be approved by the Board of
Trustees.
Section 8.6 Action By Shareholders without a Meeting. The Bylaws
of the Trust may provide that any action required or permitted to be taken by
the shareholders may be taken without a meeting by the written consent of the
shareholders entitled to cast such number of votes as would be required to
approve the matter at a meeting of the shareholders as required by statute,
the Declaration of Trust or the Bylaws of the Trust, as the case may be.
ARTICLE IX
LIABILITY LIMITATION, INDEMNIFICATION
AND TRANSACTIONS WITH THE TRUST
Section 9.1 Limitation of Shareholder Liability. No shareholder
shall be liable for any debt, claim, demand, judgment or obligation of any
kind of, against or with respect to the Trust by reason of being a
shareholder, nor shall any shareholder be subject to any personal liability
whatsoever, in tort, contract or otherwise, to any person in connection with
the property or the affairs of the Trust by reason of being a shareholder.
Section 9.2 Limitation of Trustee and Officer Liability. To the
maximum extent that Maryland law in effect from time to time permits
limitation of the liability of trustees and officers of a real estate
investment trust, no Trustee or officer of the Trust shall be liable to the
Trust or to any shareholder for money damages. Neither the amendment nor
repeal of this Section 9.2, nor the adoption or amendment of any other
provision of the Declaration of Trust inconsistent with this Section 9.2,
shall apply to or affect in any respect the applicability of the preceding
sentence with respect to any act or failure to act which occurred prior to
such amendment, repeal or adoption. In the absence of any Maryland statute
limiting the liability of trustees and officers of a Maryland real estate
investment trust for money damages in a suit by or on behalf of the Trust or
by any shareholder, no Trustee or officer of the Trust shall be liable to the
Trust or to any shareholder for money damages except to the extent that (a)
the Trustee or officer actually received an improper benefit or profit in
money, property or services, for the amount of the benefit or profit in
money, property or services actually received or (b) a judgment or other
final adjudication adverse to the Trustee or officer is entered in a
proceeding based on a finding in the proceeding that the Trustee's or
officer's action or failure to act was the result of active and deliberate
dishonesty and was material to the cause of action adjudicated in the
proceeding.
Section 9.3 Indemnification. The Trust shall have the power, to
the maximum extent permitted by Maryland law in effect from time to time, to
obligate itself to indemnify, and to pay or reimburse reasonable expenses in
advance of final disposition of a proceeding to, (a) any individual who is a
present or former shareholder, Trustee or officer of the Trust or (b) any
individual who, while a Trustee of the Trust and at the request of the Trust,
serves or has served as a director, officer, partner, trustee, manager,
employee or agent of another real estate investment trust, corporation,
partnership, limited liability company, joint venture, trust, employee
benefit plan or any other enterprise from and against any claim or liability
to which such person may become subject or which such person may incur by
reason of such status as a present or former shareholder, Trustee or officer
of the Trust, or director, officer, partner, trustee, manager, employee or
agent of such other real estate investment trust, corporation, partnership,
limited liability company, joint venture, trust, employee benefit plan or
enterprise. The Trust shall have the power, with the approval of its Board
of Trustees, to provide such indemnification and advancement of expenses to a
person who served a predecessor of the Trust in any of the capacities
described in (a) or (b) above and to any employee or agent of the Trust or a
predecessor of the Trust.
Section 9.4 Transactions Between the Trust and its Trustees,
Officers, Employees and Agents. Subject to any express restrictions in the
Declaration of Trust or adopted by the Trustees in the Bylaws or by
resolution, the Trust may enter into any contract or transaction of any kind
with any person, including any Trustee, officer, employee or agent of the
Trust or any person affiliated with a Trustee, officer, employee or agent of
the Trust, whether or not any of them has a financial interest in such
transaction.
ARTICLE X
AMENDMENTS
Section 10.1 General. The Trust reserves the right from time to
time to make any amendment to the Declaration of Trust, now or hereafter
authorized by law, including any amendment altering the terms or contract
rights, as expressly set forth in the Declaration of Trust, of any Shares.
All rights and powers conferred by the Declaration of Trust on shareholders,
Trustees and officers are granted subject to this reservation. All
references to the Declaration of Trust shall include all amendments thereto.
Section 10.2 By Trustees. The Trustees may amend the Declaration
of Trust from time to time, in the manner provided by the MRL, without any
action by the shareholders, to qualify as a real estate investment trust
under the Code or under the MRL and as otherwise provided in the Declaration
of Trust.
Section 10.3 By Shareholders. Any amendment to the Declaration of
Trust shall be valid only if approved by the affirmative vote of a majority
of all the votes entitled to be cast on the matter, except (i) as otherwise
provided in this Declaration of Trust, (ii) where approval of the
shareholders is not required by the MRL or would not be required if the Trust
were a Maryland corporation and (iii) any amendment to Section 5.2, Section
5.3 or Article XI or to this sentence of the Declaration of Trust, which
amendments shall be valid only if approved by the affirmative vote of two-
thirds of all the votes entitled to be cast on the matter.
ARTICLE XI
MERGER, CONSOLIDATION OR SALE OF TRUST PROPERTY
Subject to the provisions of any class or series of Shares at the time
outstanding, the Trust may (a) merge the Trust with or into another entity,
(b) consolidate the Trust with one or more other entities into a new entity
or (c) sell, lease, exchange or otherwise transfer all or substantially all
of the property of the Trust. Any such action must be approved by the Board
of Trustees and, after notice to all shareholders entitled to vote on the
matter, by the affirmative vote of a majority of all the votes entitled to be
cast on the matter except where approval of the shareholders is not required
by the MRL or would not be required if the Trust were a Maryland corporation.
ARTICLE XII
DURATION AND TERMINATION OF TRUST
Section 12.1 Duration. The Trust shall continue perpetually
unless terminated pursuant to Section 12.2 or pursuant to any applicable
provision of the MRL.
Section 12.2 Termination.
(a) Upon the termination of the Trust:
(i) The Trust shall carry on no business except for the
purpose of winding up its affairs.
(ii) The Trustees shall proceed to wind up the affairs of
the Trust and all of the powers of the Trustees under the Declaration of
Trust shall continue, including the powers to fulfill or discharge the
Trust's contracts, collect its assets, sell, convey, assign, exchange,
transfer or otherwise dispose of all or any part of the remaining property of
the Trust to one or more persons at public or private sale for consideration
which may consist in whole or in part of cash, securities or other property
of any kind, discharge or pay its liabilities and do all other acts
appropriate to liquidate its business.
(iii) After paying or adequately providing for the
payment of all liabilities, and upon receipt of such releases, indemnities
and agreements as they deem necessary for their protection, the Trustees may
distribute the remaining property of the Trust among the shareholders so that
after payment in full or the setting apart for payment of such preferential
amounts, if any, to which the holders of any Shares at the time outstanding
shall be entitled, the remaining property of the Trust shall, subject to any
participating or similar rights of Shares at the time outstanding, be
distributed ratably among the holders of Common Shares at the time
outstanding.
(b) After termination of the Trust, the liquidation of its
business and the distribution to the shareholders as herein provided, a
majority of the Trustees shall execute and file with the Trust's records a
document certifying that the Trust has been duly terminated, and the Trustees
shall be discharged from all liabilities and duties hereunder, and the rights
and interests of all shareholders shall cease.
ARTICLE XIII
MISCELLANEOUS
Section 13.1 Governing Law. The Declaration of Trust is executed
by the undersigned Trustees and delivered in the State of Maryland with
reference to the laws thereof, and the rights of all parties and the
validity, construction and effect of every provision hereof shall be subject
to and construed according to the laws of the State of Maryland without
regard to conflicts of laws provisions thereof.
Section 13.2 Reliance by Third Parties. Any certificate shall be
final and conclusive as to any person dealing with the Trust if executed by
the Secretary or an Assistant Secretary of the Trust or a Trustee, and if
certifying to: (a) the number or identity of Trustees, officers of the Trust
or shareholders; (b) the due authorization of the execution of any document;
(c) the action or vote taken, and the existence of a quorum, at a meeting of
the Board of Trustees or shareholders; (d) a copy of the Declaration of Trust
or of the Bylaws as a true and complete copy as then in force; (e) an
amendment to the Declaration of Trust; (f) the termination of the Trust; or
(g) the existence of any fact relating to the affairs of the Trust. No
purchaser, lender, transfer agent or other person shall be bound to make any
inquiry concerning the validity of any transaction purporting to be made by
the Trust on its behalf or by any officer, employee or agent of the Trust.
Section 13.3 Severability.
(a) The provisions of the Declaration of Trust are severable,
and if the Board of Trustees shall determine, with the advice of counsel,
that any one or more of such provisions (the "Conflicting Provisions") are in
conflict with the Code, the MRL or other applicable federal or state laws,
the Conflicting Provisions, to the extent of the conflict, shall be deemed
never to have constituted a part of the Declaration of Trust, even without
any amendment of the Declaration of Trust pursuant to Article X and without
affecting or impairing any of the remaining provisions of the Declaration of
Trust or rendering invalid or improper any action taken or omitted prior to
such determination. No Trustee shall be liable for making or failing to make
such a determination. In the event of any such determination by the Board of
Trustees, the Board shall amend the Declaration of Trust in the manner
provided in Section 10.2.
(b) If any provision of the Declaration of Trust shall be
held invalid or unenforceable in any jurisdiction, such holding shall apply
only to the extent of any such invalidity or unenforceability and shall not
in any manner affect, impair or render invalid or unenforceable such
provision in any other jurisdiction or any other provision of the Declaration
of Trust in any jurisdiction.
Section 13.4 Construction. In the Declaration of Trust, unless
the context otherwise requires, words used in the singular or in the plural
include both the plural and singular and words denoting any gender include
all genders. The title and headings of different parts are inserted for
convenience and shall not affect the meaning, construction or effect of the
Declaration of Trust. In defining or interpreting the powers and duties of
the Trust and its Trustees and officers, reference may be made by the Board
of Trustees or officers, to the extent appropriate and not inconsistent with
the Code or the MRL, to Titles 1 through 3 of the Corporations and
Associations Article of the Annotated Code of Maryland. In furtherance and
not in limitation of the foregoing, in accordance with the provisions of
Title 3, Subtitles 6 and 7, of the Corporations and Associations Article of
the Annotated Code of Maryland, the Trust shall be included within the
definition of "corporation" for purposes of such provisions.
Section 13.5 Recordation. The Declaration of Trust and any
amendment hereto shall be filed for record with the SDAT and may also be
filed or recorded in such other places as the Trustees deem appropriate, but
failure to file for record the Declaration of Trust or any amendment hereto
in any office other than in the State of Maryland shall not affect or impair
the validity or effectiveness of the Declaration of Trust or any amendment
hereto. A restated Declaration of Trust shall, upon filing, be conclusive
evidence of all amendments contained therein and may thereafter be referred
to in lieu of the original Declaration of Trust and the various amendments
thereto.
ARTICLE XIV
SERIES A-1 INCREASING RATE CUMULATIVE
CONVERTIBLE PREFERRED SHARES
Section 14.1 Distributions.
(a) The holders of shares of the Series A-1 Increasing Rate
Preferred Shares will be entitled to receive, when, as and if authorized by
the Board of Trustees out of assets of the Company legally available therefor
(and subject to the limitation described in the last sentence of this
paragraph), cumulative cash distributions on the Series A-1 Increasing Rate
Preferred Shares from April 1, 2000 (such date, the "Initial Payment Period
Commencement Date"), notwithstanding that no Series A-1 Increasing Rate
Preferred Shares had been issued on such date, at the per share annual rates
set forth below:
Annual Rate per
Series A-1 Increasing Period Covered By
Rate Preferred Share Annual Rate
-------------------- ------------------
60.00 April 19, 1999 through April 18, 2000
62.50 April 19, 2000 through April 18, 2001
65.00 Thereafter
Distributions shall be payable quarterly on January 1, April 1, July 1
and October 1 of each year, commencing on July 1, 2000, with the initial
distribution being computed from the Initial Payment Period Commencement
Date, and shall be cumulative from the Initial Payment Period Commencement
Date, notwithstanding that no Series A-1 Increasing Rate Preferred Shares had
been issued on such date. If, for any taxable year, the Corporation elects
to designate as "capital gain dividends" (as defined in Section 857 of the
Code) any portion (the "Capital Gains Amount") of the distributions paid or
made available for the year to holders of all classes of stock (the "Total
Distributions"), then the portion of the Capital Gains Amount that shall be
allocable to holders of the Series A-1 Preferred Increasing Rate Shares shall
be the Capital Gains Amount multiplied by a fraction, the numerator of which
shall be the total distributions paid or made available to the holders of the
Series A-1 Increasing Rate Preferred Shares for the year and the denominator
of which shall be the Total Distributions. Each distribution shall be paid to
the holders of record of the Series A-1 Increasing Rate Preferred Shares as
they appear on the share register of the Company on such record date, not
more than 90 days preceding the distribution payment date thereof, as shall
be fixed by the Board of Trustees or a duly authorized committee thereof;
provided, however, if a holder converts Series A-1 Increasing Rate Preferred
Shares into Common Shares (as hereinafter defined), then such holder, in
addition to all accrued and unpaid distributions with respect to prior
quarters, shall be entitled to receive a pro rata portion of the distribution
which would have been payable on such converted Series A-1 Increasing Rate
Preferred Shares had such shares been outstanding for the entire such quarter
determined by multiplying the amount of the distribution which would have
been payable on such converted Series A-1 Increasing Rate Preferred Shares
had such shares been outstanding for the entire such quarter by a fraction
the numerator of which is the number of days in such quarter elapsed through
the day immediately preceding the date of conversion of such converted Series
A-1 Increasing Rate Preferred Shares and the denominator of which is the
total number of days in such quarter; provided, further, that such converting
holder will be required to pay to the Company (and the Company shall be
entitled to deduct from the pro rata distribution which such holder is
entitled to receive with respect to the converted Series A-1 Increasing Rate
Preferred Shares for such quarter) at the time of such conversion a pro rata
portion of the distribution which such converting holder is expected to
receive on the Common Shares into which his Series A-1 Increasing Rate
Preferred Shares were converted for such quarter determined by multiplying
the amount of the distribution which would have been payable on such Common
Shares for the immediately preceding quarter by a fraction the numerator of
which is the number of days in such quarter elapsed through the day
immediately preceding the date of conversion of such converted Series A-1
Increasing Rate Preferred Shares and the denominator of which is the total
number of days in such quarter. In the event that the distribution on the
Common Shares for the quarter in which the Series A-1 Increasing Rate
Preferred Shares are converted to Common Shares is less than the distribution
on the Common Shares for the immediately preceding quarter, the Company will
pay such holder an amount equal to the difference between (i) the pro rata
portion of the distribution on the Common Shares which the holder was
expected to receive and which was deducted by the Company pursuant to the
last proviso of the preceding sentence and (ii) the pro rata portion of the
distribution on the Common Shares which the holder actually received.
(b) No distribution or other payment with respect to redemption,
purchase or other acquisition of the Common Shares or of any other shares of
beneficial interest of the Company ranking junior to the Series A-1
Increasing Rate Preferred Shares as to distribution rights and the
liquidation preference (other than distributions in shares of Common Shares
or in any other shares of beneficial interest of the Company ranking junior
to the Series A-1 Increasing Rate Preferred Shares as to distribution rights
and the liquidation preference) shall be declared or paid or set apart for
payment or other distribution upon the Common Shares or upon any other shares
of beneficial interest of the Company ranking junior to the Series A-1
Increasing Rate Preferred Shares with respect to distributions or the
liquidation preference, unless full cumulative distributions on the Series A-
1 Increasing Rate Preferred Shares have been paid or declared and a sum
sufficient for such full payment on the next distribution date set apart in
trust for payment for all past distribution periods. Holders of the Series
A-1 Increasing Rate Preferred Shares shall not be entitled to any
distributions, whether payable in cash, property or shares of beneficial
interest, in excess of full accrued and cumulative distributions as herein
provided other than liquidating distributions. No interest or sum of money
in lieu of interest shall be payable in respect of any distribution payment
or payments on the Series A-1 Increasing Rate Preferred Shares that may be in
arrears.
The terms "accrued distributions," "distributions accrued" and
"distributions in arrears," whenever used herein with reference to shares of
preferred shares of beneficial interest, shall be deemed to mean an amount
which shall be equal to distributions thereon at the annual distribution
rates per share for the respective series thereof from the date or dates on
which such distributions commence to accrue to the end of the then current
quarterly distribution period for such preferred shares (or, in the case of
redemption or conversion, to the date of redemption or conversion, as the
case may be), less the amount of all distributions paid, or declared in full
and set aside for the payment thereof, upon such shares of preferred shares.
(c) Distributions payable on the Series A-1 Increasing Rate
Preferred Shares for any period less than a full quarterly distribution
period shall be computed on the basis of a 360-day year and the actual number
of days elapsed. Quarterly distributions payable on the Series A-1
Increasing Rate Preferred Shares shall be computed by dividing the annual
distribution rate by four.
Section 14.2 Trustees' Right to Refuse to Transfer Series A-1
Increasing Rate Preferred Shares; Limitation on Holdings.
(a) The terms and provisions of this Section 14.2 shall apply in
addition to, and not in limitation of, the terms and provisions of Article
VII hereof.
(b) Each Person (as defined in Section 1.5 hereof) who owns
directly or indirectly more than 5% in number or value of the total Series A-
1 Increasing Rate Preferred Shares outstanding shall, within 30 days after
January 1 of each year, give written notice to the Company stating the
Person's name and address, the number of Series A-1 Increasing Rate Preferred
Shares directly or indirectly owned by such Person, and a description of the
capacity in which such Series A-1 Increasing Rate Preferred Shares are held.
For purposes of this Article XIV, the value of the total Series A-1
Increasing Rate Preferred Shares outstanding shall be determined by the Board
of Trustees in good faith, which determination shall be conclusive for all
purposes hereunder. In addition, each direct or indirect holder of Series A-
1 Increasing Rate Preferred Shares, irrespective of such shareholder's
percentage ownership of outstanding Series A-1 Increasing Rate Preferred
Shares, shall upon demand disclose to the Company in writing such information
with respect to the direct or indirect ownership of Series A-1 Increasing
Rate Preferred Shares as the Board of Trustees deems reasonably necessary
from time to time to enable the Board of Trustees to determine whether the
Company complies with the REIT Provisions of the Code (as defined in Section
1.5 hereof), to comply with the requirements of any taxing authority or
governmental agency or to determine any such compliance.
(c) If, in the opinion of the Board of Trustees, which shall be
binding upon any prospective transferor or acquiror of Series A-1 Increasing
Rate Preferred Shares, any proposed transfer or issuance of Series A-1
Increasing Rate Preferred Shares would jeopardize the status of the Company
as a real estate investment trust under the REIT Provisions of the Code, the
Board of Trustees shall have the right, but not the duty, to refuse to permit
such transfer or issuance of refuse to give effect to such transfer or
issuance and to take any action to void any such issuance or cause any such
transfer not to occur.
(d) As a condition to any transfer and/or registration of transfer
on the books of the Company of any Series A-1 Increasing Rate Preferred
Shares which could result in direct or indirect ownership (as hereinafter
defined) of Series A-1 Increasing Rate Preferred Shares exceeding 75% of the
lesser of the number or the value of the total Series A-1 Increasing Rate
Preferred Shares outstanding (the "Excess Preferred Shares") by a Person
other than a Preferred Excepted Person (as defined in Section 14.2(e) below),
such prospective transferee shall give written notice to the Company of the
proposed transfer and shall furnish such opinions of counsel, affidavits,
undertakings, agreements and information as may be reasonably required by the
Board of Trustees no later than the 15th day prior to any transfer which, if
consummated, would result in such ownership.
(e) Any transfer of Series A-1 Increasing Rate Preferred Shares
that would (i) create a direct or indirect owner of Excess Preferred Shares
other than a Preferred Excepted Person; or (ii) result in the Company being
"closely held" within the meaning of Section 856(h) of the Code, shall be
void ab initio and the prospective acquiror shall not be entitled to any
rights afforded to owners of Series A-1 Increasing Rate Preferred Shares
hereunder and shall be deemed never to have had an interest therein. Any
issuance of Series A-1 Increasing Rate Preferred Shares that would (i) create
a direct or indirect owner of Excess Preferred Shares other than a Preferred
Excepted Person; or (ii) result in the Company being "closely held" within
the meaning of Section 856(h) of the Code, shall be void ab initio and the
prospective acquiror shall not be entitled to any rights afforded to owners
of Series A-1 Increasing Rate Preferred Shares hereunder and shall be deemed
never to have had an interest therein.
"Preferred Excepted Person" shall mean David H. Hillman and any other
Person approved by the Board of Trustees, at their option and in their sole
discretion, provided, however, that such approval shall not be granted to any
Person whose ownership of in excess of 75% of the lesser of the number or the
value of the total Series A-1 Increasing Rate Preferred Shares outstanding
would result, directly, indirectly or as a result of attribution of
ownership, in termination of the status of the Company as a real estate
investment trust under the REIT Provisions of the Code.
(f) The Company, by notice to the holder thereof, may purchase any
or all Series A-1 Increasing Rate Preferred Shares that are proposed to be
transferred or are the subject of an attempted transfer which is void
pursuant to Section 14.2(e) or 14.2(h) hereof pursuant to which, in the
opinion of the Board of Trustees, which shall be binding upon any proposed
transferor or transferee of Series A-1 Increasing Rate Preferred Shares, a
transfer would result in any Person acquiring Excess Preferred Shares, or
would otherwise jeopardize the status of the Company as a real estate
investment trust under the REIT Provisions of the Code. The Company shall
have the power, by lot or other means deemed equitable by the Board of
Trustees in their sole discretion, to purchase such Excess Preferred Shares
from the prospective transferor or from any purported transferee of an
attempted transfer which is void pursuant to Section 14.2(e) or 14.2(h)
hereof. The purchase price for any Excess Preferred Shares shall be equal to
the fair market value of the Series A-1 Increasing Rate Preferred Shares on
the last trading day immediately preceding the day on which notice of such
proposed transfer is sent or the date of the attempted transfer which is void
pursuant to Section 14.2(e) or 14.2(h) hereof, as the case may be, as
reflected in the closing sale price for the Series A-1 Increasing Rate
Preferred Shares, if then listed on a national securities exchange, or such
price for the Series A-1 Increasing Rate Preferred Series on the principal
exchange if then listed on more than one national securities exchange, or if
the Series A-1 Increasing Rate Preferred Shares are not then listed on a
national securities exchange, the latest bid quotation for the Series A-1
Increasing Rate Preferred Shares if then traded over-the-counter, or, if no
such closing sales prices or quotations are available, then the purchase
price shall be equal to the fair market value of such Series A-1 Increasing
Rate Preferred Shares as determined by the Board of Trustees in good faith.
Prompt payment of the purchase price shall be made in cash by the Company in
such manner as may be determined by the Board of Trustees. From and after
the date fixed for purchase by the Board of Trustees, and so long as payment
of the purchase price for the Series A-1 Increasing Rate Preferred Shares to
be so redeemed shall have been made or duly provided for, the holder of any
Excess Preferred Shares so called for purchase shall cease to be entitled to
dividends, distributions, voting rights and other benefits with respect to
such Series A-1 Increasing Rate Preferred Shares, excepting only the right to
payment of the purchase price fixed as aforesaid. Any dividend or
distribution paid to a proposed transferee of Excess Preferred Shares prior
to the discovery by the Company that the Series A-1 Increasing Rate Preferred
Shares have been transferred in violation of this Section 14.2 shall be
repaid to the Company upon demand.
(g) Notwithstanding any other provision in this Declaration of
Trust or the Bylaws, Sections 14.2(e), (f), (g) and (h) may not be amended or
repealed without the affirmative vote of the holders of not less than two-
thirds of the Series A-1 Increasing Rate Preferred Shares then outstanding
and entitled to vote. If Section 14.2(e), (f), (g) or (h) is determined to
be void or invalid by virtue of any legal decision, statute, rule or
regulation, then the acquiror of Series A-1 Increasing Rate Preferred Shares
in violation of such Sections shall be deemed, at the option of the Company,
to have acted as agent on behalf of the Company in acquiring such Series A-1
Increasing Rate Preferred Shares on behalf of the Company.
(h) Subject to Section 14.2(l), notwithstanding any other
provision of this Article XIV to the contrary, any purported transfer, sale
or acquisition of Series A-1 Increasing Rate Preferred Shares (whether such
purported transfer, sale or acquisition results from the direct or indirect
acquisition of ownership of Series A-1 Increasing Rate Preferred Shares)
which would result in the termination of the status of the Company as a real
estate investment trust under the REIT Provisions of the Code shall be null
and void ab initio. Any such Series A-1 Increasing Rate Preferred Shares may
be treated by the Board of Trustees in the manner prescribed for Excess
Preferred Shares in subsection (f) of this Section 14.2.
(i) Subject to Section 14.2(l), nothing contained in this Section
14.2 or in any other provision of this Article XIV shall limit the authority
of the Board of Trustees to take such other action as they deem necessary or
advisable to protect the Company and the interests of the shareholders by
preservation of the Company's status as a real estate investment trust under
the REIT Provisions of the Code.
(j) If any provision of this Section 14.2 or any application of
any such provision is determined to be invalid by any federal or state court
having jurisdiction over the issues, the validity of the remaining provisions
shall not be affected and other applications of such provision shall be
affected only to the extent necessary to comply with the determination of
such court. To the extent this Section 14.2 may be inconsistent with any
other provision of this Article XIV, this Section 14.2 shall be controlling.
(k) For purposes of this Article XIV, Series A-1 Increasing Rate
Preferred Shares not owned directly shall be deemed to be owned indirectly by
a person if that person or a group of which he is a member would be the
beneficial owner of such Series A-1 Increasing Rate Preferred Shares, as
defined in Rule 13d-3 under the Securities Exchange Act of 1934, and/or would
be considered to own such Series A-1 Increasing Rate Preferred Shares by
reason of the REIT Provisions of the Code.
(l) Notwithstanding any other provision of Section 14.2, nothing
in this Article XIV shall preclude the settlement of transactions entered
into through the facilities of the New York Stock Exchange, Inc. The fact
that the settlement of any transaction is permitted shall not negate the
effect of any other provision of this Section 14.2 and any transferee in such
a transaction shall be subject to all of the provisions and limitations set
forth in this Section 14.2.
Section 14.3 Redemption at the Option of the Company.
(a) The Series A-1 Increasing Rate Preferred Shares may be redeemed at
the option of the Company by resolution of its Board of Trustees, in whole or
from time to time in part, subject to the limitations set forth below, at the
redemption price per share of One Thousand Dollars ($1,000) (the "Call
Price"), plus, in each case, all distributions accrued and unpaid on the
shares of the Series A-1 Increasing Rate Preferred Shares up to the date of
such redemption, upon giving notice as provided below:
(b) If fewer than all of the outstanding Series A-1 Increasing Rate
Preferred Shares are to be redeemed, the shares to be redeemed shall be
determined pro rata unless the holders of more than 50% of the then
outstanding Series A-1 Increasing rate Preferred Shares agree to another
manner of selection reasonably acceptable to the Board of Trustees. In the
event that such redemption is to be by lot, if as a result of such redemption
any holder of Series A-1 Increasing Rate Preferred Shares (an "Excess
Holder") would become a holder of in excess of 75% of the lesser of the
number or the value of the total Series A-1 Increasing Rate Preferred Shares
outstanding because such Excess Holder's Series A-1 Increasing Rate Preferred
Shares were not redeemed, or were only redeemed in part, then the Company
shall either, at its election (i) redeem the requisite number of Series A-1
Increasing Rate Preferred Shares of such Excess Holder or (ii) redeem a fewer
number of Series A-1 Increasing Rate Preferred Shares from other shareholders
of Series A-1 Increasing Rate Preferred Shares, as determined by and in the
sole discretion of the Board of Trustees, such that such Excess Holder will
not hold in excess of 75% of the lesser of the number or the value of the
total Series A-1 Increasing Rate Preferred Shares outstanding subsequent to
such redemption, unless the Excess Holder is a Preferred Excepted Person (as
defined in Section 14.2(e) hereof), in which event the Company shall have the
option to redeem or not redeem, as described above, such requisite number of
Series A-1 Increasing Rate Preferred Shares, as determined in the sole
discretion of the Board of Trustees.
(c) At least 30 days but not more than 90 days prior to the date fixed
for the redemption of the Series A-1 Increasing Rate Preferred Shares, the
Company shall mail a written notice to each holder of record of the Series A-
1 Increasing Rate Preferred Shares to be redeemed in a postage prepaid
envelope addressed to such holder at his address as shown on the records of
the Company, notifying such holder of the election of the Company to redeem
such shares, stating the date fixed for redemption thereof (the "Redemption
Date"), the redemption price, the number of shares to be redeemed (and, if
fewer than all the Series A-1 Increasing Rate Preferred Shares are to be
redeemed, the number of shares to be redeemed from such holder) and the
place(s) where the certificate(s) representing such shares are to be
surrendered for payment. On or after the Redemption Date each holder of the
Series A-1 Increasing Rate Preferred Shares to be redeemed shall present and
surrender his certificate or certificates for such shares to the Company at
the place designated in such notice and thereupon the Call Price of such
shares and all accrued and unpaid distributions up to the Redemption Date pro
rated in the manner provided for in the second paragraph of Section 14.1(b)
hereof shall be paid to or on the order of the person whose name appears on
such certificate or certificates as the owner thereof and each surrendered
certificate shall be canceled. In the event that fewer than all the shares
represented by any such certificate are redeemed, a new certificate shall be
issued representing the unredeemed shares. From and after the Redemption
Date (unless default shall be made by the Company in payment of the Call
Price and all accrued and unpaid distributions up to the Redemption Date pro
rated in the manner provided for in the second paragraph of Section 14.1(b)
hereof), all distributions on the Series A-1 Increasing Rate Preferred Shares
designated for redemption in such notice shall cease to accrue, and all
rights of the holders thereof as shareholders of the Company, except the
right to receive the Call Price of such shares upon the surrender of
certificates representing the same and all accrued and unpaid distributions
up to the Redemption Date pro rated in the manner provided for in the second
paragraph of Section 14.1(b) hereof, shall cease and terminate and such
shares shall not thereafter be transferred (except with the consent of the
Company) on the books of the Company, and such shares shall not be deemed to
be outstanding for any purpose whatsoever. At its election, the Company
prior to the Redemption Date may irrevocably deposit the Call Price and all
accrued and unpaid distributions up to the Redemption Date pro rated in the
manner provided for in the second paragraph of Section 14.1(b) hereof of the
Series A-1 Increasing Rate Preferred Shares so called for redemption in trust
for the holders thereof with a bank or trust company (having a capital
surplus and undivided profits aggregating not less than $50,000,000) in the
City of Philadelphia, Commonwealth of Pennsylvania, or Borough of Manhattan,
City and State of New York, or in any city in which the Company at the time
shall maintain a transfer agency with respect to such shares, in which case
the aforesaid notice to holders of the Series A-1 Increasing Rate Preferred
Shares to be redeemed shall state the date of such deposit, shall specify the
office of such bank or trust company as the place of payment of the Call
Price and all accrued and unpaid distributions up to the Redemption Date pro
rated in the manner provided for in the second paragraph of Section 14.1(b)
hereof, and shall call upon such holders to surrender the certificates
representing such shares at such place on or after the date fixed in such
redemption notice (which shall not be later than the Redemption Date) against
payment of the Call Price and all accrued and unpaid distributions up to the
Redemption Date pro rated in the manner provided for in the second paragraph
of Section 14.1(b) hereof). Any interest accrued on such funds shall be paid
to the Company from time to time. Any moneys so deposited which shall remain
unclaimed by the holders of the Series A-1 Increasing Rate Preferred Shares
at the end of two years after the Redemption Date shall be returned by such
bank or trust company to the Company.
If a notice of redemption has been given pursuant to this Section 14.3
and any holder of Series A-1 Increasing Rate Preferred Shares shall, prior to
the close of business on the last business day preceding the Redemption Date,
give written notice to the Company pursuant to Section 14.6 below of the
conversion of any or all of the shares to be redeemed held by such holder
(accompanied by a certificate or certificates for such shares, duly endorsed
or assigned to the Company, and any necessary transfer tax payment, as
required by Section 14.6 below), then such redemption shall not become
effective as to such shares to be converted, such conversion shall become
effective as provided in Section 14.6 below and any moneys set aside by the
Company for the redemption of such shares of converted Series A-1 Increasing
Rate Preferred Shares shall revert to the general funds of the Company.
Notwithstanding the foregoing, unless full cumulative distributions on
all outstanding Series A-1 Increasing Rate Preferred Shares have been paid on
or before the Redemption Date for all past distribution periods and the then
current distribution period, no Series A-1 Increasing Rate Preferred Shares
shall be redeemed unless all outstanding Series A-1 Increasing Rate Preferred
Shares are simultaneously redeemed; provided, however, that the foregoing
shall not prevent the purchase or acquisition of Series A-1 Increasing Rate
Preferred Shares pursuant to a purchase or exchange offer made on the same
terms to holders of all outstanding Series A-1 Increasing Rate Preferred
Shares. The Company shall not purchase or otherwise acquire directly or
indirectly any Series A-1 Increasing Rate Preferred Shares or any shares of
beneficial interest of the Company ranking junior to the Series A-1
Increasing Rate Preferred Shares as to distribution rights and the
liquidation preference (except by conversion into or exchange for shares of
beneficial interest of the Company ranking junior to the Series A-1
Increasing Rate Preferred Shares as to distribution rights or the liquidation
preference), unless full cumulative distributions on all outstanding Series
A-1 Increasing Rate Preferred Shares have been paid or declared and a sum
sufficient for the payment thereof on the next distribution date set apart in
trust for payment for all past distribution periods and the then current
distribution period.
(d) The Series A-1 Increasing Rate Preferred Shares redeemed,
repurchased or retired pursuant to the provisions of this Section 14.3 or
surrendered to the Company upon conversion shall thereupon be retired and may
not be reissued as Series A-1 Increasing Rate Preferred Shares but shall
thereafter have the status of authorized but unissued shares of beneficial
interest.
Section 14.4 Voting Rights.
The holders of Series A-1 Increasing Rate Preferred Shares shall not be
entitled to vote on any matter except (i) as provided in Section 14.8, and
(ii) as required by law.
Section 14.5 Liquidation Preference.
(a) In the event of any liquidation, dissolution or winding up of the
affairs of the Company, whether voluntary or otherwise, after payment or
provision for payment of the debts and other liabilities of the Company, the
holders of Series A-1 Increasing Rate Preferred Shares shall be entitled to
receive, in cash, out of the remaining assets of the Company legally
available therefor, the amount of One Thousand Dollars ($1,000.00) for each
Series A-1 Increasing Rate Preferred Share, plus an amount equal to all
distributions accrued and unpaid on each such share up to the date of such
distribution of assets, before any distribution shall be made to the holders
of Common Shares or any other shares of beneficial interest of the Company
ranking (as to any such distribution of assets) junior to the Series A-1
Increasing Rate Preferred Shares. If upon any liquidation, dissolution or
winding up of the Company, the assets distributable among the holders of
Series A-1 Increasing Rate Preferred Shares and all other classes and series
of preferred shares ranking (as to any such distribution of assets) on a
parity with the Series A-1 Increasing Rate Preferred Shares are insufficient
to permit the payment in full to the holders of all such shares of all
preferential amounts payable to all such holders, then the entire assets of
the Company thus distributable shall be distributed ratably among the holders
of Series A-1 Increasing Rate Preferred Shares and such other classes and
series of preferred shares ranking (as to any such distribution of assets) on
a parity with the Series A-1 Increasing Rate Preferred Shares in proportion
to the respective amounts that would be payable per share if such assets were
sufficient to permit payment in full.
(b) For purposes of this Section 14.5, a distribution of assets in any
dissolution, winding up or liquidation shall not include (i) any
consolidation of merger of the Company with or into any other corporation,
(ii) any dissolution, liquidation, winding up or reorganization of the
Company immediately followed by incorporation of another corporation to which
such assets are distributed or (iii) a sale or other disposition of all or
substantially all of the Company's assets to another corporation; provided,
however, that, in each case, effective provision is made in the charter of
the resulting and surviving corporation or otherwise for the recognition,
preservation and protection of the rights of the holders of Series A-1
Increasing Rate Preferred Shares.
(c) After the payment of the full preferential amounts provided for
herein to the holders of Series A-1 Increasing Rate Preferred Shares or funds
necessary for such payment have been set aside in trust for the holders
thereof, such holders shall be entitled to no other or further participation
in the distribution of the assets of the Company.
(d) In determining whether a distribution by dividend, redemption or
other acquisition of Shares or otherwise is permitted under Maryland law, no
effect shall be given to amounts that would be needed, if the Company were to
be dissolved at the time of the distribution, to satisfy the preferential
rights upon dissolution of shareholders whose preferential rights on
dissolution are superior to those receiving the distribution; provided,
however, if the Company were to be dissolved at the time of the distribution
and, after giving effect to amounts that would be needed to satisfy the
preferential rights upon dissolution of shareholders whose preferential
rights on dissolution are superior to those receiving the distribution, the
Company would not have been permitted to make such distribution by dividend,
redemption or other acquisition of Shares or otherwise under the Maryland
General Corporation Law if such law were applicable to the Company, then the
holders of the Series A-1 Increasing Rate Preferred Shares shall have the
right to immediately convert all or any of the Series A-1 Increasing Rate
Preferred Shares into Common Shares in accordance with the provisions of
Section 14.6 below.
Section 14.6 Conversion.
(a) Holders of Series A-1 Increasing Rate Preferred Shares shall have
the right, exercisable at any time and from time to time, subject, however,
to the next sentence of this Section 14.6(a), after April 18, 1999 and prior
to 5:00 p.m. on April 18, 2009, except in the case of the Series A-1
Increasing Rate Preferred Shares called for redemption as set forth below, to
convert all or any portion of such Series A-1 Increasing Rate Preferred
Shares into such number of Common Shares as would then receive aggregate
annual cash distributions based on the last quarterly distribution paid to
holders of such Common Shares equal to the then aggregate annual cash
distributions such holders of the Series A-1 Increasing Rate Preferred Shares
are entitled to receive on the number of Series A-1 Increasing Rate Preferred
Shares which such-holders elect to convert into Common Shares in accordance
herewith. Notwithstanding the foregoing, (i) in no event shall the aggregate
number of Common Shares into which each share of Series A-1 Increasing Rate
Preferred Shares is convertible exceed the greater of (A) the number of
Common Shares equal to the quotient of 500,000 divided by 11,155 or (B) the
number of Common Shares equal to the quotient of the number of Common Shares
representing 5% of all of the outstanding Common Shares at the time of
conversion divided by 11,155 and (ii) not more than the following number of
Series A-1 Increasing Rate Preferred Shares may be converted during the
following periods (commencing at 9:30 a.m. on the first day of each period
and ending at 5:00 p.m. on the last day of each period):
Number of New Shares Maximum Number of Shares
Period Convertible Convertible During Period
------ -------------------- -------------------------
April 19, 1999 to
April 18, 2000 1,860 1,860
April 19, 2000 to
April 18, 2001 1,860 3,720
April 19, 2001 to
April 18, 2002 1,860 5,578
April 19, 2002 to
April 18, 2003 1,860 5,578
April 19, 2003 to
April 18, 2004 1,860 5,578
April 19, 2004 to
April 18, 2005 1,855 5,578
April 19, 2005 to
April 18, 2009 0 5,578
In the event that the aggregate number of Common Shares into which each
share of Series A-1 Increasing Rate Convertible Preferred Shares otherwise is
convertible exceeds the greater of the numbers computed in accordance with
clauses (A) and (B) of the foregoing sentence, shares of Series A-1
Increasing Rate Convertible Preferred Shares shall, at the election of the
holder, be convertible into the maximum number of Common Shares permitted
pursuant to such clauses. In the event that the holders of Series A-1
Increasing Rate Preferred Shares elect to convert more than the number of
Series A-1 Increasing Rate Preferred Shares set forth above during any
period, then each such holder electing to convert shall only be entitled to
convert on a pro rata basis with all other holders electing to convert based
upon the relative number of Series A-1 Increasing Rate Preferred Shares each
holder elected to convert. In the case of Series A-1 Increasing Rate
Preferred Shares called for redemption, all shares of Series A-1 Increasing
Rate Preferred Shares called for redemption may be immediately converted to
Common Shares in accordance with this Section 14.6 and such conversion right
will expire at the close of business on the last business day preceding the
Redemption Date. Notice of redemption at the option of the Company must be
mailed not less than 30 days and not more than 90 days prior to the
Redemption Date as provided in Section 14.3(c) hereof. Upon conversion, such
holders shall be entitled to receive cash distributions payable on the number
of Series A-1 Increasing Rate Preferred Shares which such holders elect to
convert into Common Shares in accordance with Section 14.1 hereof.
(b) Any holder of one or more Series A-1 Increasing Rate Preferred
Shares electing to convert such share or shares shall deliver the certificate
or certificates therefor to the principal office of any transfer agent for
the Common Shares, with the form of notice of election to convert as the
Company shall prescribe fully completed and duly executed and (if so required
by the Company or any conversion agent) accompanied by instruments of
transfer in form satisfactory to the Company and to any conversion agent,
duly executed by the registered holder or his duly authorized attorney, and
transfer taxes, stamps or funds therefor or evidence of payment thereof if
required pursuant to Section 14.6(a) or 14.6(d) hereof. The conversion right
with respect to any such shares shall be deemed to have been exercised at the
date upon which the certificates therefor accompanied by such duly executed
notice of election and instruments of transfer and such taxes, stamps, funds
or evidence of payment shall have been so delivered, and the person or
persons entitled to receive the shares of the Common Shares issuable upon
such conversion shall be treated for all purposes as the record holder or
holders of such shares of the Common Shares upon said date.
(c) No fractional Common Share or scrip representing a fractional share
shall be issued upon conversion of Series A-1 Increasing Rate Preferred
Shares. If more than one Series A-1 Convertible Preferred Share shall be
surrendered for conversion at one time by the same holder, the number of full
Common Shares which shall be issuable upon conversion thereof shall be
computed on the basis of the aggregate number of Series A-1 Increasing Rate
Preferred Shares so surrendered. Instead of any fractional Common Share
which would otherwise be issuable upon conversion of any Series A-1
Increasing Rate Preferred Shares, the Company shall pay a cash adjustment in
respect of such fraction in an amount equal to the same fraction of the
closing price for the Common Shares on the last trading day preceding the
date of conversion. The closing price for such day shall be the last
reported sales price regular way or, in case no such reported sale takes
place on such date, the average of the reported closing bid and asked prices
regular way, in either case on the New York Stock Exchange, or if the Common
Shares are not listed or admitted to trading on such Exchange, on the
principal national securities exchange on which the Common Shares are listed
or admitted to trading or, if not listed or admitted to trading on any
national securities exchange, the closing sale price of the Common Shares or
in case no reported sale takes place, the average of the closing bid and
asked prices, on NASDAQ or any comparable system. If the Common Shares are
not quoted on NASDAQ or any comparable system, the Board of Trustees shall in
good faith determine the current market price on the basis of such quotation
as it considers appropriate.
(d) If a holder converts Series A-1 Increasing Rate Preferred Shares,
the Company shall pay any documentary, stamp or similar issue or transfer tax
due on the issuance of Common Shares upon the conversion. The holder,
however, shall pay to the Company the amount of any tax which is due (or
shall establish to the satisfaction of the Company payment thereof) if the
shares are to be issued in a name other than the name of such holder and
shall pay to the Company any amount required by the last sentence of Section
14.6(a) hereof.
(e) The Company shall reserve and shall at all times have reserved out
of its authorized but unissued Common Shares a sufficient number of Common
Shares to permit the conversion of the then outstanding Series A-1 Increasing
Rate Preferred Shares. All Common Shares which may be issued upon conversion
of Series A-1 Increasing Rate Preferred Shares shall be validly issued, fully
paid and nonassessable, and not subject to preemptive or other similar
rights. In order that the Company may issue Common Shares upon conversion of
Series A-1 Increasing Rate Preferred Shares, the Company will endeavor to
comply with all applicable Federal and State securities laws and will
endeavor to list such Common Shares to be issued upon conversion on each
securities exchange on which the Common Shares are listed.
Section 14.7 Ranking.
(a) With regard to rights to receive distributions and amounts payable
upon liquidation, dissolution or winding up of the Company, the Series A-1
Increasing Rate Preferred Shares shall rank senior to the Common Shares but
shall not rank senior to or on a parity with any other preferred shares
issued by the Company, unless the terms of such other preferred shares so
provide. Nothing contained herein shall be deemed a limitation on the right
of the Company to increase the number of authorized or issued Common Shares
of any class or series. In the event the Company shall issue any class or
series of, or rights to subscribe to or acquire, any security convertible
into, any class or series of shares of beneficial interest ranking as to
distribution rights or the liquidation preference, senior to the Series A-1
Increasing Rate Preferred Shares, then notwithstanding the limitations in
Section 14.6(a) above the holders of the Series A-1 Increasing Rate Preferred
Shares shall have the right to immediately convert all or any of the Series
A-1 Increasing Rate Preferred Shares into Common Shares in accordance with
the provisions of Section 14.6 above.
(b) So long as any Series A-1 Increasing Rate Preferred Shares are
outstanding, the Company shall not, without the affirmative vote, or the
written consent as provided by law, of the holders of at least a majority of
the total number of outstanding shares of Series A-1 Increasing Rate
Preferred Shares, voting as a class, authorize, create or issue to any seller
of real property to the Company in consideration of the purchase price for
such real property, any class or series of, or rights to subscribe to or
acquire, any security convertible into, any class or series of shares of
beneficial interest ranking as to distribution rights or the liquidation
preference, senior to the Series A-1 Increasing Rate Preferred Shares.
Section 14.8 Limitation on Amending this Article XIV. In addition to
any other rights provided by applicable law, so long as any Series A-1
Increasing Rate Preferred Shares are outstanding, the Company shall not,
without the affirmative vote, or the written consent as provided by law, of
the holders of at least a majority of the total number of outstanding Series
A-1 Increasing Rate Preferred Shares, voting as a class, amend any of the
provisions of this Article XIV so as to materially adversely affect the
preferences, rights or powers of the Series A-1 Increasing Rate Preferred
Shares; provided, however, that no such vote or written consent of the
holders of the Series A-1 Increasing Rate Preferred Shares shall be required
if, at or prior to the time when such change is to take effect, the Company
has mailed a notice of redemption as provided for in Section 14.3(c) above
and sufficient funds have been deposited in trust for the redemption of all
of the then outstanding Series A-1 Increasing Rate Preferred Shares on the
Redemption Date set forth in such notice.
Section 14.9 No Preemptive Rights. No holder of Series A-1 Increasing
Rate Preferred Shares will possess any preemptive rights to subscribe for or
acquire any unissued shares of beneficial interest of the Company (whether
now or hereafter authorized) or securities of the Company convertible into or
carrying a right to subscribe to or acquire shares of beneficial interest of
the Company.
Section 14.10 Notice of Taking Certain Actions. In the event:
(a) the Company shall declare any cash distribution on its Common
Shares as a result of which holders would have the right to convert their
shares of Series A-1 Increasing Rate Preferred Shares to Common Shares
pursuant to Section 14.5(d) hereof; or
(b) the Company shall authorize the granting to holders of Common
Shares of rights to subscribe for or purchase any shares of beneficial
interest of any class or of any other rights; or
(c) of any capital reorganization or reclassification of the shares of
beneficial interest of the Company or of any consolidation, merger, or
statutory share exchange of the Company with another corporation, or of the
sale of all or substantially all of its assets to another corporation which
is to be effected in such a way that holders of Common Shares shall be
entitled to receive stock, securities or other assets with respect to or in
exchange for Common Shares; or
(d) of the voluntary or involuntary dissolution, liquidation or winding
up of the Company; or
(e) of the issuance by the Company of any class or series of, or rights
to subscribe to or acquire, any security convertible into, any class or
series of shares of beneficial interest ranking as to distribution rights or
the liquidation preference, senior to the Series A-1 Increasing Rate
Preferred Shares; or
(f) of the amendment of these Articles Supplementary so as to
materially adversely affect the preferences, rights or powers of the Series
A-1 Increasing Rate Preferred Shares;
then the Company shall provide to the holders of the Series A-1 Increasing
Rate Preferred Shares, at least 10 days prior to the applicable date
therefor, a notice stating (1) the date on which a record is to be taken for
the purpose of such distribution or subscription rights, or, if a record is
not to be taken, the date as of which the holders of Common Shares of record
would be entitled to such distribution or subscription rights, (2) the date
on which such capital reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation, winding up or transfer is expected to
become effective, or the date as of which it is elected that the holders of
Common Shares of record shall be entitled to exchange their Common Shares for
securities or other assets deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation,
winding up or transfer, (3) the date of the issuance of shares of beneficial
interest of the Company ranking senior to the Series A-1 Increasing Rate
Preferred Shares or (4) the date of amendment of this Article XIV.
Section 14.11 Deposits in Trust. Whenever the Company is required or
elects to set apart in trust (a) in the case of distributions, a sum
sufficient for the payment of cumulative distributions on the outstanding
Series A-1 Increasing Rate Preferred Shares under this Article XIV or (b) in
the case of redemption, a sum sufficient for the payment of the Call Price
and all accrued and unpaid distributions through the Redemption Date as
described in Section 14.3(c) hereof, the Company shall irrevocably deposit
such sum in cash in trust for the holders of the Series A-1 Increasing Rate
Preferred Stock and shall have conveyed all right, title and interest to such
sum for the benefit of the holders of the Series A-1 Increasing Rate
Preferred Shares, under the terms of an irrevocable trust agreement in
customary form, as trust funds in trust solely for the benefit of such
holders with a bank or trust company (having a capital surplus and undivided
profits aggregating not less than $50,000,000).
ARTICLE XV
9.75% SERIES B-1 CUMULATIVE CONVERTIBLE PREFERRED SHARES
Section 15.1 Certain Definitions.
Unless the context otherwise requires, the terms defined in this Section
15.1 shall have, for all purposes of the provisions of the Declaration of
Trust in respect of the Series B-1 Preferred Shares, the meanings herein
specified (with terms defined in the singular having comparable meanings when
used in the plural):
Additional Common Equity. The term "Additional Common Equity" shall
have the meaning set forth in Section 15.4(f)(ii).
Adjustment Event. The term "Adjustment Event" shall mean any event
described in Section 15.4(f).
Board of Trustees. The term "Board of Trustees" shall mean the Board of
Trustees of the Company.
Business Day. The term "Business Day" shall mean any day, other than a
Saturday or a Sunday, that is neither a legal holiday nor a day on which
banking institutions in New York City are authorized or required by law to
close.
Call Price. The term "Call Price" shall have the meaning set forth in
Section 15.7(a).
Capital Gains Amount. The term "Capital Gains Amount" shall have the
meaning set forth in Section 15.2(g).
Code. The term "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
Common Equity. The term "Common Equity" shall mean all shares now or
hereafter authorized of any class or series of common shares of beneficial
interest of the Company, including the Common Shares, and any other shares,
howsoever designated, which have the right (subject always to prior rights of
any class or series of preferred shares of beneficial interest) to
participate in the distribution of the assets and earnings of the Company
without limit as to per share amount.
Common Share Distribution. The term "Common Share Distribution" shall
have the meaning set forth in Section 15.4(a).
Common Share Distribution Period. The term "Common Share Distribution
Period" shall have the meaning set forth in Section 15.4(a).
Common Share Equivalent. The term "Common Share Equivalent" shall have
the meaning set forth in Section 15.4(f)(ii).
Common Shares. The term "Common Shares" shall mean the Common Shares of
Beneficial Interest, $.01 par value per share, of the Company.
Company Affiliate. The term "Company Affiliate" shall have the meaning
set forth in Section 15.4(f)(ii).
Converted Series B-1 Preferred Share Distribution. The term "Converted
Series B-1 Preferred Share Distribution" shall have the meaning set forth in
Section 15.4(a).
Convertible Securities. The term "Convertible Securities" shall have
the meaning set forth in Section 15.4(f)(ii).
Current Market Price per Common Share. The term "Current Market Price
per Common Share" shall mean the average of the closing prices for a Common
Share for the thirty trading days preceding the tenth trading day prior to
the relevant date of determination. The closing price for such days shall be
the last reported sale price regular way or, in case no such reported sale
takes place on such date, the average of the reported closing bid and asked
prices regular way, in either case on the New York Stock Exchange, Inc., or
if the Common Shares are not listed or admitted to trading on the New York
Stock Exchange, Inc., on the principal national securities exchange on which
the Common Shares are listed or admitted to trading or, if not listed or
admitted to trading on any national securities exchange, the closing sale
price of the Common Shares or in case no reported sale takes place, the
average of the closing bid and asked prices, on NASDAQ or any comparable
system. If the Common Shares are not quoted on NASDAQ or any comparable
system, the Board of Trustees shall in good faith determine the current
market price on such basis as it considers appropriate.
Current Market Price per Kranzco Common Share. The term "Current Market
Price per Kranzco Common Share" shall mean the average of the closing prices
for a Kranzco Common Share for the thirty trading days preceding the tenth
trading day prior to the relevant date of determination. The closing price
for such days shall be the last reported sale price regular way or, in case
no such reported sale took place on such date, the average of the reported
closing bid and asked prices regular way, in either case on the New York
Stock Exchange, Inc.
Distribution. The term "Distribution" or "Distributions" shall mean any
cash or other property paid or payable on or with respect to any share of
beneficial interest, common or preferred, including, without limitation, any
dividend or other distribution, whether in liquidation or otherwise.
Distribution Payment Date. The term "Distribution Payment Date" shall
have the meaning set forth in Section 15.2(b).
Distribution Period. The term "Distribution Period" shall mean the
period from and including the Initial Payment Period Commencement Date,
notwithstanding that no Series B-1 Preferred Shares had been issued on such
date, to, but not including, the first Distribution Payment Date and
thereafter, each quarterly period from and including any Distribution Payment
Date to, but not including, the next Distribution Payment Date.
Distributions Accrued and Accrued Distributions. The terms
"Distributions Accrued" and "Accrued Distributions" shall mean, with respect
to any class or series of preferred shares of beneficial interest, an amount
which shall be equal to distributions thereon at the annual distribution
rates per share for the respective class or series thereof from the date or
dates on which such distributions commence to accrue to the end of the then
current distribution period for such preferred shares, less the amount of all
distributions paid, with respect to such preferred shares for such period
from the date such distributions commenced to accrue.
Excess Amount. The term "Excess Amount" shall have the meaning set
forth in Section 15.4(a).
Excess Shares. The term "Excess Shares" shall have the meaning set
forth in Section 15.6(d).
Four Quarter Preferential Distribution Non-Payment. The term "Four
Quarter Preferential Distribution Non-Payment" shall have the meaning set
forth in Section 15.5(a)(ii).
Initial Payment Period Commencement Date. The term "Initial Payment
Period Commencement Date" shall mean April 20, 2000.
Junior Shares. The term "Junior Shares" shall mean, as the case may be,
(i) the Common Equity and any other class or series of Shares which is not
entitled to receive any distributions in any Distribution Period unless all
distributions required to have been paid or declared and set apart for
payment on the Series B-1 Preferred Shares shall have been so paid or
declared and set apart for payment or (ii) the Common Equity and any other
class or series of Shares which is not entitled to receive any assets upon
liquidation, dissolution or winding up of the affairs of the Company until
the Series B-1 Preferred Shares shall have received the entire amount to
which such Class B Preferred Shares is entitled upon such liquidation,
dissolution or winding up.
Kranzco. The term "Kranzco" shall mean Kranzco Realty Trust, a Maryland
real estate investment trust.
Kranzco Additional Common Equity. The term "Kranzco Additional Common
Equity" shall mean all Kranzco Common Equity issued by Kranzco except: (1)
the Kranzco Common Shares issued upon conversion of the Kranzco Series B-1
Preferred Shares; (2) the Kranzco Common Equity issued upon conversion of any
Kranzco Senior Shares, Kranzco Parity Shares, Kranzco Common Share
Equivalents or any other shares of beneficial interest of Kranzco which, by
their terms, were convertible into Kranzco Common Equity and (a) which were
outstanding on November 12, 1996, (b) for which no adjustment pursuant to
Subparagraph (D)(6) of the Kranzco Articles Supplementary Classifying
1,235,000 Shares of Beneficial Interest as 9.75% Series B-1 Cumulative
Convertible Preferred Shares of Beneficial Interest (the "Kranzco Articles
Supplementary") was required at the time of issuance or the time of any
amendment or change thereto or (c) for which an adjustment was provided in
another provision of Paragraph (D)(6) of the Kranzco Articles Supplementary;
(3) up to an aggregate of 250,000 shares of Kranzco Common Equity and shares
of Kranzco Common Equity into which Kranzco Common Share Equivalents were
exercisable, exchangeable or convertible, in each case issued to Affiliates
of Kranzco, at a price per share less than the Current Market Price per
Kranzco Common Share then in effect on the date of such issuance, including,
without limitation, shares of Kranzco Common Equity or Kranzco Common Share
Equivalents issued to directors, officers, employees, or trustees of Kranzco
or any Kranzco Subsidiary and those issued pursuant to stock option, stock
purchase, performance or other remuneration plans adopted by the Board of
Trustees of Kranzco from time to time (including, without limitation,
Kranzco's 1992 Employee Share Option Plan, Kranzco's 1992 Trustee Share
Option Plan and Kranzco's 1995 Management Incentive Plan); (4) the issuance
of shares of Kranzco Common Equity under any circumstances for which an
adjustment was provided in Subparagraph (D)(6)(i) of the Kranzco Articles
Supplementary; or (5) Kranzco Common Equity issued pursuant to a dividend
reinvestment plan or stock purchase plan available to all holders of Kranzco
Common Equity.
Kranzco Affiliate. The term "Kranzco Affiliate" shall mean, with
respect to any issuance of Kranzco Additional Common Equity, (i) any trustee,
director, officer or employee of Kranzco or of any subsidiary of Kranzco,
(ii) any Person that was the direct or indirect owner of more than five
percent of the issued and outstanding Kranzco Common Equity, (iii) any Person
that controlled, was controlled by or was under common control with, Kranzco,
(iv) any trustee, director, officer, employee or family member of any Person
listed in clauses (i), (ii) or (iii) of this definition or (v) any Person
with respect to which any Person listed in clauses (i) through (iv) of this
definition was a director, officer or the direct or indirect owner of more
than ten percent of the issued and outstanding equity securities of such
Person immediately prior to any such issuance.
Kranzco Common Equity. The term "Kranzco Common Equity" shall mean all
shares which were authorized of any class or series of common shares of
beneficial interest of Kranzco, including the Kranzco Common Shares, and any
other shares, howsoever designated, which had the right (subject always to
prior rights of any class or series of preferred shares of beneficial
interest of Kranzco) to participate in the distribution of the assets and
earnings of Kranzco without limit as to per share amount.
Kranzco Common Share Equivalent. The term "Kranzco Common Share
Equivalent" shall mean any evidence of indebtedness, shares of stock or
beneficial interest (other than Kranzco Series B-1 Preferred Shares) or other
securities which were or may have been convertible into or exchangeable for
Kranzco Additional Common Equity ("Kranzco Convertible Securities"), or any
warrant, option or other right to subscribe for any Kranzco Convertible
Securities or for any Kranzco Additional Common Equity.
Kranzco Common Shares. The term "Kranzco Common Shares" shall mean the
Common Shares of Beneficial Interest, $.01 par value per share, of Kranzco.
Kranzco Parity Shares. The term "Kranzco Parity Shares" shall mean, as
the case may be, (i) any class or series of Kranzco Shares which were
entitled to receive payment of distributions on a parity with the Kranzco
Series B-1 Preferred Shares or (ii) any class or series of Kranzco Shares
which were entitled to receive assets upon liquidation, dissolution or
winding up of the affairs of Kranzco on a parity with the Kranzco Series B-1
Preferred Shares.
Kranzco Reorganization. The term "Kranzco Reorganization" shall mean
the merger of Kranzco into KRT Trust II LLC, a Delaware limited liability
company.
Kranzco Senior Shares. The term "Kranzco Senior Shares" shall mean, as
the case may be, (i) any class or series of Kranzco Shares which ranked
senior to the Kranzco Series B-1 Preferred Shares in respect of the right to
receive distributions or (ii) any class or series of Kranzco Shares which
ranked senior to the Kranzco Series B-1 Preferred Shares in respect of the
right to participate in any distribution upon liquidation, dissolution or
winding up of the affairs of Kranzco.
Kranzco Series B-1 Preferred Shares. The term "Kranzco Series B-1
Preferred Shares" shall mean the Series B-1 Cumulative Convertible Preferred
Shares of Beneficial Interest, $.01 par value per share, of Kranzco.
Kranzco Shares. The term "Kranzco Shares" shall mean any transferable
shares of beneficial interest of Kranzco of any class or series.
Kranzco Subsidiary. The term "Kranzco Subsidiary" shall mean any
corporation, partnership or other business entity of which more than 50% of
the total voting securities or equity securities is owned or controlled by
Kranzco.
KRT Trust. The term "KRT Trust" shall mean KRT Trust, a Maryland real
estate investment trust.
KRT Trust Additional Common Equity. The term "KRT Trust Additional
Common Equity" shall mean all KRT Trust Common Equity issued by KRT Trust
except: (1) the KRT Trust Common Shares issued upon conversion of the KRT
Trust Series B-1 Preferred Shares; (2) the KRT Trust Common Equity issued
upon conversion of any KRT Trust Senior Shares, KRT Trust Parity Shares, KRT
Trust Common Share Equivalents or any other shares of beneficial interest of
KRT Trust which, by their terms, were convertible into KRT Trust Common
Equity and (a) which were received in the Kranzco Reorganization in exchange
for Kranzco Senior Shares, Kranzco Parity Shares, Kranzco Common Share
Equivalents or any other shares of beneficial interest of Kranzco issued by
Kranzco prior to November 12, 1996, (b) for which no adjustment pursuant to
Section 12.4(f) of the Declaration of Trust of KRT Trust (the "KRT Trust
Declaration") was required at the time of issuance or the time of any
amendment or change thereto or (c) for which an adjustment was provided in
another provision of Section 12.4(f) of the KRT Trust Declaration; (3) up to
an aggregate of 250,000 shares of KRT Trust Common Equity and shares of KRT
Trust Common Equity into which KRT Trust Common Share Equivalents were
exercisable, exchangeable or convertible, in each case issued to Affiliates
of KRT Trust, at a price per share less than the Current Market Price per
Kranzco Common Share immediately prior to consummation of the Kranzco
Reorganization, including, without limitation, shares of KRT Trust Common
Equity or KRT Trust Common Share Equivalents issued to directors, officers,
employees, or trustees of KRT Trust or any KRT Trust Subsidiary and those
issued pursuant to stock option, stock purchase, performance or other
remuneration plans adopted by the Board of Trustees of KRT Trust from time to
time; (4) the issuance of shares of KRT Trust Common Equity under any
circumstances for which an adjustment was provided in Section 12.4(f)(i) of
the KRT Trust Declaration; or (5) KRT Trust Common Equity issued pursuant to
a dividend reinvestment plan or stock purchase plan available to all holders
of KRT Trust Common Equity.
KRT Trust Affiliate. The term "KRT Trust Affiliate" shall mean, with
respect to any issuance of KRT Trust Additional Common Equity, (i) any
trustee, director, officer or employee of KRT Trust or of any subsidiary of
KRT Trust, (ii) any Person that was the direct or indirect owner of more than
five percent of the issued and outstanding KRT Trust Common Equity, (iii) any
Person that controlled, was controlled by or was under common control with,
KRT Trust, (iv) any trustee, director, officer, employee or family member of
any Person listed in clauses (i), (ii) or (iii) of this definition or (v) any
Person with respect to which any Person listed in clauses (i) through (iv) of
this definition was a director, officer or the direct or indirect owner of
more than ten percent of the issued and outstanding equity securities of such
Person immediately prior to any such issuance.
KRT Trust Common Equity. The term "KRT Trust Common Equity" shall mean
all shares which were authorized of any class or series of common shares of
beneficial interest of KRT Trust, including the KRT Trust Common Shares, and
any other shares, howsoever designated, which had the right (subject always
to prior rights of any class or series of preferred shares of beneficial
interest of KRT Trust) to participate in the distribution of the assets and
earnings of KRT Trust without limit as to per share amount.
KRT Trust Common Share Equivalent. The term "KRT Trust Common Share
Equivalent" shall mean any evidence of indebtedness, shares of stock or
beneficial interest (other than KRT Trust Series B-1 Preferred Shares) or
other securities which were or may have been convertible into or exchangeable
for KRT Trust Additional Common Equity ("KRT Trust Convertible Securities"),
or any warrant, option or other right to subscribe for any KRT Trust
Convertible Securities or for any KRT Trust Additional Common Equity.
KRT Trust Common Shares. The term "KRT Trust Common Shares" shall mean
the Common Shares of Beneficial Interest, $.01 par value per share, of KRT
Trust.
KRT Trust Parity Shares. The term "KRT Trust Parity Shares" shall mean,
as the case may be, (i) any class or series of KRT Trust Shares which were
entitled to receive payment of distributions on a parity with the KRT Trust
Series B-1 Preferred Shares or (ii) any class or series of KRT Trust Shares
which were entitled to receive assets upon liquidation, dissolution or
winding up of the affairs of KRT Trust on a parity with the KRT Trust Series
B-1 Preferred Shares.
KRT Trust Senior Shares. The term "KRT Trust Senior Shares" shall mean,
as the case may be, (i) any class or series of KRT Trust Shares which ranked
senior to the KRT Trust Series B-1 Preferred Shares in respect of the right
to receive distributions or (ii) any class or series of KRT Trust Shares
which ranked senior to the KRT Trust Series B-1 Preferred Shares in respect
of the right to participate in any distribution upon liquidation, dissolution
or winding up of the affairs of KRT Trust.
KRT Trust Series B-1 Preferred Shares. The term "KRT Trust Series B-1
Preferred Shares" shall mean the Series B-1 Cumulative Convertible Preferred
Shares of Beneficial Interest, $.01 par value per share, of KRT Trust.
KRT Trust Shares. The term "KRT Trust Shares" shall mean any
transferable shares of beneficial interest of KRT Trust of any class or
series.
KRT Trust Subsidiary. The term "KRT Trust Subsidiary" shall mean any
corporation, partnership or other business entity of which more than 50% of
the total voting securities or equity securities is owned or controlled by
KRT Trust.
Liquidation Preference. The term "Liquidation Preference" shall mean
$25.00 per share.
Merger. The term "Merger" shall mean the merger of KRT Trust into the
Company.
Notice of Redemption. The term "Notice of Redemption" shall have the
meaning set forth in Section 15.7(b).
Overlapping Period. The term "Overlapping Period" shall have the
meaning set forth in Section 15.4(a).
Parity Shares. The term "Parity Shares" shall mean, as the case may be,
(i) any class or series of Shares which is entitled to receive payment of
distributions on a parity with the Series B-1 Preferred Shares or (ii) any
class or series of Shares which is entitled to receive assets upon
liquidation, dissolution or winding up of the affairs of the Company on a
parity with the Series B-1 Preferred Shares.
Person. The term "Person" shall mean an individual, corporation,
partnership, estate, trust (including a trust classified under Section 401(a)
or 501(c)(17) of the Code), a portion of a trust permanently set aside for or
to be used exclusively for the purposes described in Section 642(c) of the
Code, association, private foundation within the meaning of Section 509(a) of
the Code, joint stock company, limited liability company or other entity, and
also includes a group as that term is used for purposes of Section 13(d)(3)
of the Securities Exchange Act of 1934, as amended, but does not include an
underwriter which participates in a public offering of the Series B-1
Preferred Shares (or who participated in a public offering of the Kranzco
Series B-1 Preferred Shares or the KRT Trust Series B-1 Preferred Shares);
provided, that such ownership by such underwriter would not result in the
Company being "closely held" within the meaning of Section 856(h) of the
Code, or otherwise result in the Company failing to qualify as a REIT (or
would not have resulted in Kranzco or KRT Trust, respectively, being "closely
held" within the meaning of Section 856(h) of the Code, or otherwise have
resulted in Kranzco or KRT Trust, respectively, failing to qualify as a
REIT).
Preferential Distribution Non-Payment. The term "Preferential
Distribution Non-Payment" shall have the meaning set forth in Section
15.5(a)(ii).
Preferred Shares Trustee. The term "Preferred Shares Trustee" shall
have the meaning set forth in Section 15.5(a)(ii).
Record Date. The term "Record Date" shall mean the date designated by
the Board of Trustees at the time a distribution is declared; provided, that
such Record Date shall be the first day of the calendar month in which the
applicable Distribution Payment Date falls or such other date designated by
the Board of Trustees for the payment of distributions that is not more than
ninety (90) days prior to such Distribution Payment Date.
Redemption Date. The term "Redemption Date" shall have the meaning set
forth in Section 15.7(b).
Redemption Distributions. The term "Redemption Distributions" shall
have the meaning set forth in Section 15.7(a).
REIT. The term "REIT" shall mean a real estate investment trust under
Section 856 of the Code.
Senior Shares. The term "Senior Shares" shall mean, as the case may be,
(i) any class or series of Shares ranking senior to the Series B-1 Preferred
Shares in respect of the right to receive distributions or (ii) any class or
series of Shares ranking senior to the Series B-1 Preferred Shares in respect
of the right to participate in any distribution upon liquidation, dissolution
or winding up of the affairs of the Company.
Series A-1 Preferred Shares. The term "Series A-1 Preferred Shares"
shall mean the Series A-1 Increasing Rate Cumulative Convertible Preferred
Shares of Beneficial Interest, $.01 par value per share, of the Company.
Series A-1 Preferred Share Conversion Limit. The term "Series A
Preferred Share Conversion Limit" shall have the meaning set forth in Section
15.4(f).
Series B-1 Conversion Price. The term "Series B-1 Conversion Price"
shall have the meaning set forth in Section 15.4(a).
Series B-1 Excepted Person. The term "Series B-1 Excepted Person" shall
have the meaning set forth in Section 15.6(e).
Series B-1 Excess Shares. The term "Series B-1 Excess Shares" shall
have the meaning set forth in Section 15.6(d).
Shares. The term "Shares" shall mean any transferable shares of
beneficial interest of the Company of any class or series.
Six Quarter Preferential Distribution Non-Payment. The term "Six
Quarter Preferential Distribution Non-Payment" shall have the meaning set
forth in Section 15.5(a)(ii).
Subsidiary. The term "Subsidiary" shall mean any corporation,
partnership or other business entity of which more than 50% of the total
voting securities or equity securities is owned or controlled by the Company.
Total Distributions. The term "Total Distributions" shall have the
meaning set forth in Section 15.2(g).
Section 15.2 Distributions.
(a) The record holders of Series B-1 Preferred Shares shall be entitled
to receive from the Initial Payment Period Commencement Date, notwithstanding
that no Series B-1 Preferred Shares had been issued on such date, when, as
and if authorized by the Board of Trustees, out of assets legally available
for payment of distributions, cumulative cash distributions at a rate of
9.75% per annum of the Liquidation Preference per Series B-1 Preferred Share,
computed on the basis of a 360-day year consisting of twelve 30-day months.
(b) Distributions on the Series B-1 Preferred Shares shall accrue and
be cumulative from the Initial Payment Period Commencement Date,
notwithstanding that no Series B-1 Preferred Shares had been issued on such
date. Distributions shall be payable quarterly in arrears for each
Distribution Period when, as and if authorized by the Board of Trustees, on
January 20, April 20, July 20 and October 20 of each year (each, a
"Distribution Payment Date"), commencing on July 20, 2000. If any
Distribution Payment Date occurs on a day that is not a Business Day, any
accrued distributions otherwise payable on such Distribution Payment Date
shall be paid on the next succeeding Business Day. The amount of
distributions payable on Series B-1 Preferred Shares for each full
Distribution Period shall be computed by dividing by four the annual
distribution rate set forth in Section 15.2(a). Distributions payable in
respect of any Distribution Period which is less than a full Distribution
Period in length will be computed on the basis of a 360-day year consisting
of twelve 30-day months. Subject to Section 15.4(a), distributions shall be
paid to the record holders of the Series B-1 Preferred Shares as their names
shall appear on the share records of the Company at the close of business on
the Record Date for such distribution. Subject to Section 15.4(a),
distributions in respect of any past Distribution Periods that are in arrears
may be authorized, declared, set apart for payment and paid at any time to
record holders on the Record Date therefor. Any distribution payment made on
Series B-1 Preferred Shares shall be first credited against the earliest
accrued but unpaid distribution due which remains payable. Upon issuance,
the Series B-1 Preferred Shares will rank on a parity as to distributions
with the Series A-1 Preferred Shares.
(c) Except as provided in the next sentence, if any Series B-1
Preferred Shares are outstanding, no distributions (other than in Junior
Shares or Common Shares) shall be authorized, declared, set apart for payment
or paid on any class or series of Junior Shares or Parity Shares unless all
accrued distributions on the Series B-1 Preferred Shares for all prior
Distribution Periods and the then current Distribution Period have been or
contemporaneously are authorized, declared, set apart for payment or paid.
When distributions are not so paid in full (or a sum sufficient for such full
payment is not so set apart for payment) upon the Series B-1 Preferred Shares
and any other class or series of Parity Shares, all distributions authorized
or declared upon the Series B-1 Preferred Shares and any such class or series
of Parity Shares shall be authorized or declared pro rata so that the amount
of distributions authorized or declared per share on the Series B-1 Preferred
Shares and such class or series of Parity Shares shall in all cases bear to
each other the same ratio that accrued and unpaid distributions per share on
the Series B-1 Preferred Shares and such class or series of Parity Shares
bear to each other.
(d) Except as provided in Section 15.2(c), unless all accrued
distributions on the Series B-1 Preferred Shares have been or
contemporaneously are authorized, declared, set apart for payment or paid for
all prior Distribution Periods and the then current Distribution Period, no
Junior Shares or Parity Shares shall be redeemed, purchased or otherwise
acquired for any consideration (or any moneys be paid to or made available
for a sinking fund for the redemption of any such Shares) by the Company
(except by conversion into or exchange for Junior Shares or Common Shares).
Holders of the Series B-1 Preferred Shares shall not be entitled to any
distributions, whether payable in cash, property or Shares, in excess of
accrued and cumulative distributions as herein provided. No interest or sum
of money in lieu of interest shall be payable in respect of any distribution
payment or payments on the Series B-1 Preferred Shares that may be in
arrears.
(e) No distribution on Series B-1 Preferred Shares shall be required to
be authorized, declared, set apart for payment or paid by the Company to the
extent such authorization, declaration, setting apart for payment or payment
shall be restricted or prohibited by law. Notwithstanding that any
distributions on Series B-1 Preferred Shares are restricted or prohibited by
law, such distributions shall accrue and be cumulative.
(f) Distributions on the Series B-1 Preferred Shares, if not paid on
the applicable Distribution Payment Date, will accrue whether or not
distributions are authorized or declared for such Distribution Payment Date,
whether or not the Company has earnings and whether or not there are assets
legally available for the payment of such distributions.
(g) If, for any taxable year, the Board of Trustees elects to designate
as "capital gain dividends" (as defined in Section 857 of the Code) any
portion (the "Capital Gains Amount") of the distributions paid or made
available for the year to holders of all classes of Shares (the "Total
Distributions"), then the portion of the Capital Gains Amount that shall be
allocable to holders of the Series B-1 Preferred Shares shall be the Capital
Gains Amount multiplied by a fraction, the numerator of which shall be the
total distributions paid or made available to the holders of the Series B-1
Preferred Shares for the year and the denominator of which shall be the Total
Distributions.
Section 15.3 Distributions Upon Liquidation, Dissolution or Winding
Up.
(a) Upon any voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Company, before any distribution shall be
made to the holders of any Junior Shares, and subject to the payment or
provision or reserve for payment of the debts and liabilities (whether
absolute, accrued, asserted or unasserted, contingent or otherwise) and the
preferences of Senior Shares, if any, of the Company, the holders of Series
B-1 Preferred Shares shall be entitled to receive, out of the assets of the
Company legally available for payment of distributions, liquidating
distributions in cash (or property at its fair market value as determined in
good faith by the Board of Trustees (or a combination thereof)) in the amount
of the Liquidation Preference for each Series B-1 Preferred Share plus an
amount equal to all accrued and unpaid distributions pursuant to Section 15.2
(whether or not authorized or declared, and whether or not there would be
assets legally available for the payment of such distributions) to the date
of such liquidation, dissolution or winding up. After payment of the full
amount of the liquidating distributions to which they are entitled pursuant
to this Section 15.3(a), the holders of Series B-1 Preferred Shares will have
no right or claim to any of the remaining assets of the Company and shall not
be entitled to any other distribution.
(b) Notwithstanding any provision in Section 15.3(a) to the contrary,
in the event that, upon any such voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Company, the assets legally
available for payment of distributions are insufficient to pay (x) the full
amount of the liquidating distributions to which holders of Series B-1
Preferred Shares would otherwise be entitled pursuant to Section 15.3(a) and
(y) the corresponding amounts of the liquidating distributions to which
holders of Parity Shares would be entitled upon liquidation, dissolution or
winding up of the affairs of the Company, then the holders of the Series B-1
Preferred Shares and the holders of the Parity Shares shall share ratably in
any such distribution of assets in proportion to the full liquidating
distributions to which they otherwise would be respectively entitled. Upon
issuance, the Series B-1 Preferred Shares will rank on a parity with the
Series A-1 Preferred Shares as to the distribution of assets upon any
liquidation, dissolution or winding up of the affairs of the Company.
Section 15.4 Conversion.
(a) Holders of Series B-1 Preferred Shares shall have the right, at any
time and from time to time, to convert all or any Series B-1 Preferred Shares
(except that upon any dissolution, liquidation or winding up of the affairs
of the Company the right of conversion shall terminate at the close of
business on the Business Day fixed for payment of the liquidating
distributions to which holders of Series B-1 Preferred Shares are entitled)
into such number of fully paid Common Shares as is obtained by: (i)
multiplying the number of Series B-1 Preferred Shares to be converted by
$25.00 and (ii) dividing the result by the conversion price listed below that
will be in effect during the corresponding date of conversion listed below:
Date of Conversion Conversion Price
- ------------------ ----------------
At any time after the issuance of Series B-1
Preferred Shares $ 17.7125
At any time after Notice of Redemption pursuant
to Section 15.7 hereof $ 16.2500
If, and each time, a conversion price listed above then in effect (the
"Series B-1 Conversion Price") shall be adjusted pursuant to the terms of
these Sections 15.1 through 15.14, all of the conversion prices listed above
shall be so adjusted as though such conversion prices were in effect on the
date of adjustment. The Series B-1 Conversion Price shall be the conversion
price as last adjusted and then in effect. Notwithstanding anything else to
the contrary, holders of Series B-1 Preferred Shares shall have the right,
exercisable at any time, to convert, in accordance with the terms of this
Section 15.4, all or any such Series B-1 Preferred Shares (except that upon
any dissolution, liquidation or winding up of the affairs of the Company the
right of conversion shall terminate at the close of business on the Business
Day fixed for payment of the liquidating distributions to which holders of
Series B-1 Preferred Shares are entitled) into such number of fully paid
Common Shares as is obtained by: (x) multiplying the number of Series B-1
Preferred Shares to be converted by $25.00 and (y) dividing the result by
$17.7125, as adjusted pursuant to this Section 15.4.
Notwithstanding the surrender of Series B-1 Preferred Shares for
conversion into Common Shares, all accrued distributions with respect to such
Series B-1 Preferred Shares for any past Distribution Periods that are in
arrears at the time of such conversion shall be paid to the registered holder
of such Series B-1 Preferred Shares in the same manner as if such registered
holder continued to be the registered holder of such converted Series B-1
Preferred Shares following such conversion or, if upon conversion of such
Series B-1 Preferred Shares there will be no more Series B-1 Preferred Shares
outstanding, then at the time of such conversion. In addition, if any holder
surrenders Series B-1 Preferred Shares for conversion into Common Shares,
such holder shall be entitled to receive a distribution on such Series B-1
Preferred Shares converted for the portion of the current Distribution Period
such holder owned the Series B-1 Preferred Shares surrendered for conversion,
notwithstanding that the record date for the distribution payable for the
current Distribution Period may not have occurred, in an amount per Series
B-1 Preferred Share converted equal to the product of (i) the distribution
payable on each Series B-1 Preferred Share converted for the current
Distribution Period, multiplied by (ii) a fraction, the numerator of which is
the number of calendar days in such Distribution Period elapsed to (but not
including) the date of conversion and the denominator of which is the total
number of calendar days in such Distribution Period.
If any holder surrenders Series B-1 Preferred Shares for conversion into
Common Shares and as a result thereof such holder is or will be entitled to
receive distributions with respect to both such Series B-1 Preferred Shares
converted and such Common Shares into which such Series B-1 Preferred Shares
were converted for the same period of time (the "Overlapping Period"), then,
at the time of and as a condition precedent to such conversion (or, if at the
time of such conversion the amount of the distribution with respect to such
Common Shares has not yet been determined, at the time of such
determination), the Company shall withhold from any distribution payable on
such Series B-1 Preferred Shares converted, an amount equal to the Excess
Amount (defined below), if any. If the amount of any distribution payable on
such Series B-1 Preferred Shares converted shall not be sufficient to pay any
Excess Amount, such holder hereby authorizes the Company to withhold from any
distribution payable to such holder on any Series B-1 Preferred Shares owned
by such holder or, to the extent permissible, on any Common Shares owned by
such holder, an amount equal to the Excess Amount. "Excess Amount" shall
mean an amount equal to the product of (i) the sum of the distributions
payable on each Common Share into which such Series B-1 Preferred Shares were
converted for the distribution period relating to the Common Shares in which
the Overlapping Period occurs, multiplied by (ii) a fraction, the numerator
of which is the number of calendar days in the Overlapping Period and the
denominator of which is the total number of calendar days in such
distribution period relating to the Common Shares in which the Overlapping
Period occurs.
(b) Any holder of one or more Series B-1 Preferred Shares electing to
convert such Share or Shares shall deliver the certificate or certificates
therefor to the principal office of the transfer agent for the Common Shares,
with the form of notice of election to convert prescribed by the Company
fully completed and duly executed and (if so required by the Company or any
conversion agent) accompanied by instruments of transfer in form reasonably
satisfactory to the Company and to any conversion agent, duly executed by the
registered holder or his duly authorized attorney, and any payments (or
evidence of payment) required pursuant to Section 15.4(d). The conversion
right with respect to any such Series B-1 Preferred Shares shall be deemed to
have been exercised on the date upon which the last of the conditions for
conversion provided in this Section 15.4(b) have been satisfied by the holder
of such Series B-1 Preferred Shares, and the Person or Persons entitled to
receive the Common Shares issuable upon such conversion shall be treated for
all purposes as the record holder or holders of such Common Shares on such
date.
(c) No fractional Common Share or scrip representing a fractional
Common Share shall be issued upon conversion of Series B-1 Preferred Shares.
If more than one Series B-1 Preferred Share shall be surrendered for
conversion on any day by the same holder, the number of full Common Shares
which shall be issuable upon conversion thereof shall be computed on the
basis of the aggregate number of Series B-1 Preferred Shares so surrendered
by such holder on such day. Instead of any fractional Common Share which
would otherwise be issuable upon conversion of any Series B-1 Preferred
Shares, the Company shall pay a cash adjustment in respect of such fraction
in an amount equal to the same fraction of the Current Market Price per
Common Share.
(d) If a holder converts Series B-1 Preferred Shares, the Company shall
pay, at the time of and as a condition precedent to conversion, any
documentary, stamp or similar issue or transfer tax due on the issuance of
Common Shares upon the conversion. The holder, however, shall pay to the
Company the amount of any tax which is due (or shall establish to the
satisfaction of the Company payment thereof) if the shares are to be issued
in a name other than the name of the Person in whose name such Series B-1
Preferred Shares are registered.
(e) The Company shall reserve and shall at all times keep reserved out
of its authorized but unissued Common Shares a sufficient number of Common
Shares to permit the conversion of the then outstanding Series B-1 Preferred
Shares that may then be converted. All Common Shares which may be issued
upon conversion of Series B-1 Preferred Shares shall be validly issued and
fully paid, and not subject to preemptive or other similar rights. In order
that the Company may issue Common Shares upon conversion of Series B-1
Preferred Shares, the Company will endeavor to comply with all applicable
Federal and State securities laws and will endeavor to list such Common
Shares to be issued upon conversion on each securities exchange on which the
Common Shares are listed.
The Series B-1 Preferred Shares converted pursuant to the provisions of
this Section 15.4 shall thereupon be retired and may not be reissued as
Series B-1 Preferred Shares but shall thereafter have the status of
authorized but unissued Shares.
(f) The conversion rate in effect at any time shall be subject to
adjustment from time to time upon the happening of certain events as follows:
(i) Distribution of Common Shares; Reclassification; Subdivision;
Combination. In case the Company shall (1) pay a dividend payable in,
effect a split up of, or make any other distribution in, Common Shares
to holders of the Common Shares, (2) reclassify the outstanding Common
Shares into Shares of some other class or series of Shares, (3)
subdivide the outstanding Common Shares into a greater number of Common
Shares or (4) combine the outstanding Common Shares into a smaller
number of Common Shares, the conversion rate immediately prior to such
action shall be adjusted so that the holder of any Series B-1 Preferred
Shares thereafter surrendered for conversion shall be entitled to
receive the number of Common Shares which he would have owned
immediately following such action had such Series B-1 Preferred Shares
been converted immediately prior thereto. An adjustment made pursuant
to this Section 15.4(f)(i) shall become effective immediately after the
record date in the case of a distribution and shall become effective
immediately after the effective date in the case of a reclassification,
subdivision or combination.
(ii) Issuance of Additional Common Equity. (A) If the Company
shall issue to a Person who is not a Company Affiliate (as defined
below) at the time of issuance any Additional Common Equity (as defined
below) at a price per share less than 85% of the Current Market Price
per Common Share then in effect on the date of such issuance, then the
number of Common Shares into which each Series B-1 Preferred Share shall
be convertible shall be adjusted so that the same shall be equal to the
number determined by multiplying the number of Common Shares into which
such Series B-1 Preferred Share was convertible immediately prior to
such issuance by a fraction of which the numerator shall be the number
of shares of Common Equity outstanding immediately prior to such
issuance plus the number of shares of Additional Common Equity offered,
and of which the denominator shall be the number of shares of Common
Equity outstanding immediately prior to such issuance plus the number of
shares of Common Equity which the aggregate offering price of the
Additional Common Equity offered would purchase at such Current Market
Price per Share. Such adjustments shall become effective immediately
after such issuance.
(B) If the Company shall issue to a Person who is a Company
Affiliate at the time of issuance, in any one or a series of related
transactions, any Additional Common Equity at a price per share less
than the Current Market Price per Common Share then in effect on the
date of such issuance, then the number of Common Shares into which each
Series B-1 Preferred Share shall be convertible shall be adjusted so
that the same shall be equal to the number determined by multiplying the
number of Common Shares into which such Series B-1 Preferred Share was
convertible immediately prior to such issuance by a fraction of which
the numerator shall be the number of shares of Common Equity outstanding
immediately prior to such issuance plus the number of shares of
Additional Common Equity offered, and of which the denominator shall be
the number of shares of Common Equity outstanding immediately prior to
such issuance plus the number of shares of Common Equity which the
aggregate offering price of the Additional Common Equity offered would
purchase at such Current Market Price per Share. Such adjustments shall
become effective immediately after such issuance.
"Additional Common Equity" shall mean all Common Equity issued by the
Company except: (1) the Common Shares issued upon conversion of the
Series B-1 Preferred Shares; (2) the Common Equity issued upon
conversion of any Senior Shares, Parity Shares, Common Share Equivalents
or any other shares of beneficial interest which, by their terms, are
convertible into Common Equity and (a) which were received in the Merger
in exchange for KRT Trust Senior Shares, KRT Trust Parity Shares, KRT
Trust Common Share Equivalents or any other shares of beneficial
interest of KRT Trust which were received in the Kranzco Reorganization
in exchange for Kranzco Senior Shares, Kranzco Parity Shares, Kranzco
Common Share Equivalents or any other shares of beneficial interest of
Kranzco issued by Kranzco prior to November 12, 1996, (b) for which no
adjustment pursuant to this Section 15.4(f) was required at the time of
issuance or the time of any amendment or change thereto or (c) for which
an adjustment is provided in another provision of this Section 15.4(f);
(3) up to an aggregate of 250,000 shares of Common Equity and shares of
Common Equity into which Common Share Equivalents are exercisable,
exchangeable or convertible, in each case issued to Affiliates of the
Company, at a price per share less than the Current Market Price per
Common Share then in effect on the date of such issuance, including,
without limitation, shares of Common Equity or Common Share Equivalents
issued to directors, officers, employees, or trustees of the Company or
any Subsidiary of the Company and those issued pursuant to stock option,
stock purchase, performance or other remuneration plans adopted by the
Board of Trustees from time to time (including, without limitation, the
Company's 2000 Incentive Plan); (4) the issuance of shares of Common
Equity under any circumstances for which an adjustment is provided in
Section 15.4(f)(i); or (5) Common Equity issued pursuant to a dividend
reinvestment plan or stock purchase plan available to all holders of
Common Equity.
"Company Affiliate" shall mean, with respect to any issuance of
Additional Common Equity, (i) any trustee, director, officer or employee
of the Company or of any subsidiary of the Company, (ii) any Person that
is the direct or indirect owner of more than five percent of the issued
and outstanding Common Equity of the Company, (iii) any Person that
controls, is controlled by or is under common control with, the Company,
(iv) any trustee, director, officer, employee or family member of any
Person listed in clauses (i), (ii) or (iii) of this definition or (v)
any Person with respect to which any Person listed in clauses (i)
through (iv) of this definition is a director, officer or the direct or
indirect owner of more than ten percent of the issued and outstanding
equity securities of such Person immediately prior to any such issuance.
"Common Share Equivalent" shall mean any evidence of indebtedness,
shares of stock or beneficial interest (other than Series B-1 Preferred
Shares) or other securities which are or may be convertible into or
exchangeable for Additional Common Equity ("Convertible Securities"), or
any warrant, option or other right to subscribe for any Convertible
Securities or for any Additional Common Equity.
For purposes of this Section 15.4(f)(ii), the number of Common Equity at
any time outstanding shall not include Common Equity held in the
treasury of the Company.
(iii) Issuance of Common Share Equivalents. (A) If the Company
shall issue to a Person who is not a Company Affiliate at the time of
issuance any Common Share Equivalent and the aggregate of the price per
Common Share Equivalent and the price per share for which shares of
Additional Common Equity may be issuable thereafter pursuant to such
Common Share Equivalent shall be below an amount equal to 85% of the
Current Market Price per Common Share on the record date for
determination of the holders of the Common Shares entitled to receive
such issue, or, if, after any such issuance, the price per share for
which shares of Additional Common Equity may be issuable thereafter is
amended or changed and the aggregate of such price, as so amended or
changed, and the price per Common Share Equivalent, shall be below an
amount equal to 85% of the Current Market Price per Common Share at the
effective time of such amendment or change, then the number of Common
Shares into which each Series B-1 Preferred Share shall be convertible
shall be adjusted so that the same shall be equal to the number
determined by multiplying the number of Common Shares into which such
Series B-1 Preferred Share was convertible immediately prior to such
record date by a fraction of which the numerator shall be the number of
Common Shares outstanding on such record date plus the number of Common
Shares into which, or for which, the Common Share Equivalents so offered
are convertible or exercisable, and of which the denominator shall be
the number of Common Shares outstanding on such record date plus the
number of Common Shares which the aggregate offering price of the Common
Shares into which, or for which, the Common Share Equivalents so offered
are convertible or exercisable would purchase at such Current Market
Price per Common Share. Such adjustments shall become effective
immediately after such record date.
(B) If the Company shall issue to a Person who is a Company
Affiliate at the time of issuance, in any one or a series of related
transactions, any Common Share Equivalents and the aggregate of the
price per Common Share Equivalent and the price per share for which
shares of Additional Common Equity may be issuable thereafter pursuant
to such Common Share Equivalent shall be below an amount equal to the
Current Market Price per Common Share on the date of issue, or, if,
after any such issuance, the price per share for which shares of
Additional Common Equity may be issuable thereafter is amended or
changed and the aggregate of such price, as so amended or changed, and
the price per Common Share Equivalent, shall be below an amount equal to
the Current Market Price per Common Share at the effective time of such
amendment or change, then the number of Common Shares into which each
Series B-1 Preferred Share shall be convertible shall be adjusted so
that the same shall be equal to the number determined by multiplying the
number of Common Shares into which such Series B-1 Preferred Share was
convertible immediately prior to such record date by a fraction of which
the numerator shall be the number of Common Shares outstanding on such
record date plus the number of Common Shares into which, or for which,
the Common Share Equivalents so offered are convertible or exercisable,
and of which the denominator shall be the number of Common Shares
outstanding on such record date plus the number of Common Shares which
the aggregate offering price of the Common Shares into which, or for
which, the Common Share Equivalents so offered are convertible or
exercisable would purchase at such Current Market Price per Common
Share. Such adjustments shall become effective immediately after such
issuance.
(iv) Conversion of Series A-1 Preferred Shares. Notwithstanding
anything to the contrary contained in this Section 15.4(f), if the
aggregate number of Common Shares into which the Series A-1 Preferred
Shares are converted exceeds 500,000 Common Shares, subject to
adjustment pursuant to Section 15.4(f)(i) (the "Series A-1 Preferred
Share Conversion Limit"), then the number of Common Shares into which
each Series B-1 Preferred Share shall be convertible shall be adjusted
so that the holder of any Series B-1 Preferred Shares thereafter
surrendered for conversion shall be entitled to receive such number of
Common Shares as would have been received by such holder of Series B-1
Preferred Shares having the same percentage of the then outstanding
Common Shares upon such conversion as such holder would have received
upon conversion if the aggregate number of Common Shares into which the
Series A-1 Preferred Shares were converted equalled the Series A-1
Preferred Share Conversion Limit at the time of conversion of such
Series B-1 Preferred Shares.
(v) Additional Adjustments. In the event that the Company shall
issue to Affiliates of the Company in excess of an aggregate of 250,000
shares of Common Equity and shares of Common Equity into which Common
Share Equivalents are exercisable, exchangeable or convertible, in each
case which are issued at a price per share less than the Current Market
Price per Common Share then in effect on the date of such issuance, then
the calculation of the number of Common Shares into which each Series
B-1 Preferred Share is convertible shall be adjusted pursuant to the
provisions of this Section 15.4(f) for each such shares of Common Equity
and Common Share Equivalents to Affiliates of the Company at a price per
share less than the Current Market Price per Common Share then in effect
on the date of such issuance.
(vi) Limitation of Adjustments. For purposes of this Section
15.4(f), the number of Common Shares or Common Equity at any time
outstanding shall not include Common Shares or Common Equity held in the
treasury of the Company. No adjustment of the Series B-1 Conversion
Price shall be made under Section 15.4(f)(iii), upon the issuance of any
Convertible Security which is issued pursuant to the exercise of any
warrants or rights, if any adjustment shall previously have been made in
the Series B-1 Conversion Price then in effect upon the issuance of such
warrants or other rights pursuant to Section 15.4(f)(iii) or otherwise
pursuant to this Section 15.4(f).
(vii) Additional Distributions. If the Company shall make a
dividend or distribution of securities (other than Common Shares or
Common Share Equivalents) or other property to the holders of Junior
Shares and not to the holders of the Series B-1 Preferred Shares, then,
unless the holders of the Series B-1 Preferred Shares are entitled to
receive such distribution at a later time upon conversion of the Series
B-1 Preferred Shares and such distribution has been set aside for such
later distribution, each holder of Series B-1 Preferred Shares shall
receive at the time of payment or issuance of such dividend or
distribution, without payment or any consideration therefor, such
securities or other property which he would have owned immediately
following such dividend or distribution had such holder's Series B-1
Preferred Shares been converted immediately prior thereto; and an
appropriate provision therefor shall be made a part of any such dividend
or distribution.
(viii) Computation of Consideration. In making adjustments to
the Series B-1 Conversion Price pursuant to this Section 15.4(f), the
consideration received by the Company shall be deemed to be the
following: to the extent that any Additional Common Equity, and Common
Share Equivalents or rights shall be issued for a cash consideration,
the consideration received by the Company therefor, or, if such
Additional Common Equity or Common Share Equivalents are offered by the
Company for subscription, the subscription price paid to and received by
the Company, or, if such Additional Common Equity or Common Share
Equivalents are sold to underwriters or dealers for public offering
without a subscription offering, the initial public offering price, in
each such case excluding any amounts paid or receivable for accrued
interest or accrued dividends and without deduction of any compensation,
discounts, commissions or expenses paid or incurred by the Company for
and in the underwriting of, or otherwise in connection with, the issue
thereof; to the extent that such issuance shall be for a consideration
other than cash, then, except as herein otherwise expressly provided,
the consideration received by the Company shall be the fair market value
of such consideration at the time of such issuance as determined in good
faith by the Board of Trustees. The consideration for any Additional
Common Equity issuable pursuant to any Common Share Equivalents shall be
the consideration received by the Company for issuing such Common Share
Equivalents, plus the additional consideration payable to the Company
upon the exercise, conversion or exchange of such Common Share
Equivalents. In the case of the issuance at any time of any Additional
Common Equity or Common Share Equivalents in payment or satisfaction of
any dividend upon any class of stock other than Common Shares, the
Company shall be deemed to have received for such Additional Common
Equity or Common Share Equivalents a consideration equal to the amount
of such dividend so paid or satisfied. In any case in which the
consideration to be received or paid shall be other than cash, the
amount of the consideration other than cash received by the Company
shall be deemed to be the fair value of such consideration as determined
in good faith by the Board of Trustees, without deduction of any
expenses incurred or any underwriting commissions or concessions paid or
allowed by the Company in connection therewith.
(g) No adjustment in the conversion rate shall be required until
cumulative adjustments result in a change of 1% or more of the conversion
price as in effect prior to the last adjustment of the conversion rate;
provided, that any adjustment which by reason of this Section 15.4(g) is not
required to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Section 15.4 shall be
rounded up to the nearest cent ($.01) or to the nearest one-thousandth
(1/1000) of a share, as the case may be. No adjustment to the conversion
rate shall be made for cash dividends.
(h) In the event that, as a result of an adjustment made pursuant to
Section 15.4(f), the holder of any Series B-1 Preferred Shares thereafter
surrendered for conversion shall become entitled to receive any Shares other
than Common Shares, thereafter the number of such Shares so receivable upon
conversion of any Series B-1 Preferred Shares shall be subject to adjustment
from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Common Shares contained in
this Section 15.4.
(i) The Company may make such increases in the number of Common Shares
to be received upon the conversion of Series B-1 Preferred Shares, in
addition to those required by Section 15.4(f), as is considered to be
advisable by the Board of Trustees in order that any event treated for
Federal income tax purposes as a distribution of shares or share rights shall
not be taxable to the recipients thereof.
(j) Whenever the conversion rate is adjusted, the Company shall, in
addition to any notice required to be delivered pursuant to Section 15.4(a)
or 15.4(k), promptly, but in no event later than ten days following such
adjustment, send notice to all holders of Series B-1 Preferred Shares of the
adjustment and shall cause to be prepared a certificate signed by the
principal financial officer of the Company setting forth, in reasonable
detail, the adjusted conversion rate and a brief statement of the facts
requiring such adjustment and the computation thereof (including a
description of the basis on which the Board of Trustees made any
determination relating to such adjustment); such certificate shall forthwith
be filed with each transfer agent for the Series B-1 Preferred Shares.
(k) Each holder of Series B-1 Preferred Shares shall be entitled to all
notices, including notice of the record dates for any votes with respect to
the Common Shares, delivered to holders of Common Shares. In addition, in
the event that the Company resolves to take any action which, if it were to
occur, would require an adjustment in the conversion rate, or takes such
action, a holder of Series B-1 Preferred Shares, if it has a right to
convert, may convert, at the applicable conversion ratio, some or all of such
shares into Common Shares prior to the record date for, or the effective date
of, the transaction so that it may receive the rights, warrants, securities
or assets which a holder of Common Shares on that date may receive.
Therefore, the Company shall, in addition to any notice required to be
delivered pursuant to Section 15.4(a) or 15.4(j), send notice to all holders
of Series B-1 Preferred Shares stating the proposed record or effective date
of (i) any merger or consolidation of the Company with or into any Person,
unless (A) immediately following such merger or consolidation, more than 50%
of the surviving company's issued and outstanding voting securities are held
by the holders of the Company's issued and outstanding voting securities
immediately prior to such merger or consolidation and (B) effective provision
is made in the charter documents of the surviving Person or otherwise for the
recognition, preservation and protection of the preferences, conversion and
other rights, voting powers, restrictions and limitations as to dividends or
other distributions of the Series B-1 Preferred Shares or (ii) any sale,
lease, transfer, spin-off, or other disposal or distribution of all or
substantially all of the assets of the Company at least 30 days before such
date.
In the event (a) that the Company shall authorize the granting to
holders of Common Shares of rights to subscribe for or purchase any shares of
beneficial interest of any class or of any other rights or (b) of any capital
reorganization or reclassification of the shares of beneficial interest of
the Company, then the Company shall provide to the holders of the Series B-1
Preferred Shares prompt notice stating (i) the date on which a record is to
be taken for the purpose of such distribution or subscription rights, or, if
a record is not to be taken, the date as of which the holders of Common
Shares of record would be entitled to such distribution or subscription
rights or (ii) the date on which a capital reorganization or reclassification
is expected to become effective.
(l) In case of (i) any reclassification of outstanding Common Shares
issuable upon conversion of Series B-1 Preferred Shares, or (ii) any
consolidation or merger of the Company with or into another corporation
(other than a merger with another corporation in which the Company is the
surviving corporation and which does not result in any reclassification of
outstanding Common Shares issuable upon such conversion), the rights of the
holders of the outstanding Series B-1 Preferred Shares shall be adjusted in
the manner described below:
(i) In the event that the Company is the surviving corporation,
each Series B-1 Preferred Share shall, without payment of additional
consideration therefor, be deemed modified so as to provide that upon
conversion of each Series B-1 Preferred Share, the holder thereof shall
receive, in lieu of each Common Share theretofore issuable upon such
conversion, the kind and amount of shares of stock, other securities,
money and property receivable upon such reclassification, consolidation
or merger by the holder of one Common Share issuable upon such
conversion had such conversion occurred immediately prior to such
reclassification, consolidation or merger. Such Series B-1 Preferred
Share shall be deemed to provide for adjustments which shall be as
nearly equivalent as may be practicable to the adjustments provided for
in this Section 15.4(l). The provisions of this Section 15.4(l)(i)
shall similarly apply to successive reclassifications, consolidations
and mergers.
(ii) In the event that the Company is not the surviving
corporation, (A) effective provision shall be made in the charter
documents of the surviving Person or otherwise for the recognition,
preservation and protection of the preferences, conversion and other
rights, voting powers, restrictions and limitations as to dividends or
other distributions of the Series B-1 Preferred Shares or (B) the
surviving corporation shall, without payment of any additional
consideration therefor, issue new Series B-1 Preferred Shares providing
that, upon conversion thereof, the holder thereof shall receive, in lieu
of each Common Share theretofore issuable upon conversion of the Series
B-1 Preferred Shares, the kind and amount of shares of stock, other
securities, money and property receivable upon such reclassification,
consolidation or merger by the holder of one Common Share issuable upon
conversion of the Series B-1 Preferred Shares had such conversion
occurred immediately prior to such reclassification, consolidation or
merger. Such new Series B-1 Preferred Shares shall provide for
adjustments which shall be as nearly equivalent as may be practicable to
the adjustments provided for in this Section 15.4(l)(ii). The provisions
of this Section 15.4(l)(ii) shall similarly apply to successive
reclassifications, consolidations and mergers.
A change in par value, or from par value to no par value, or from no par
value to par value, or a change as a result of a subdivision or combination,
shall not be deemed a reclassification for purposes of these Sections 15.1
through 15.14.
Section 15.5 Voting Rights.
(a) (i) The holders of Series B-1 Preferred Shares shall vote together
with the holders of the Common Shares as a single class on all actions to be
taken by the holders of the Common Shares. Each holder of Series B-1
Preferred Shares shall be entitled to such number of votes as shall equal the
number of Common Shares into which his Series B-1 Preferred Shares are then
convertible, and be entitled to notice of all shareholder meetings with
respect to which the holders of Common Shares are then entitled.
(ii) If the Company shall have failed to authorize and pay or declare
and set apart for payment the distributions accumulated on the outstanding
Series B-1 Preferred Shares (A) for any four quarterly Distribution Periods
(a "Four Quarter Preferential Distribution Non-Payment"), the number of
trustees of the Board of Trustees shall be increased by one and the holders
of the outstanding Series B-1 Preferred Shares, voting together as a separate
class, shall be entitled to elect one additional trustee to the Board of
Trustees (a "Preferred Shares Trustee") and (B) for any six quarterly
Distribution Periods (a "Six Quarter Preferential Distribution Non-Payment";
each of a Six Quarter Preferential Distribution Non-Payment and a Four
Quarter Preferential Distribution Non-Payment shall be referred to herein as
a "Preferential Distribution Non-Payment"), the number of trustees of the
Board of Trustees shall be increased by one additional trustee and the
holders of the outstanding Series B-1 Preferred Shares, voting together as a
separate class, shall be entitled to elect a second Preferred Shares Trustee,
until the full distributions accumulated on all outstanding Series B-1
Preferred Shares for such four or six, as the case may be, quarterly
Distribution Periods have been authorized and paid or declared and set apart
for payment.
The right of the holders of Series B-1 Preferred Shares to elect a
Preferred Shares Trustee may be exercised at any annual meeting of
shareholders, or, within the limitations hereinafter provided, at a special
meeting of holders of Series B-1 Preferred Shares held for such purpose. At
any time after such voting power shall have so vested in the holders of
Series B-1 Preferred Shares, the Board of Trustees shall, at the request of
holders of record of at least 25% of the Series B-1 Preferred Shares then
outstanding, call a special meeting of the holders of Series B-1 Preferred
Shares for the election of the Preferred Shares Trustee to be elected by the
holders of Series B-1 Preferred Shares, to be held within 90 days after such
call and at the place and upon the notice provided by law and in the Bylaws
for the holding of meetings of shareholders; provided, however, that the
Board of Trustees shall not be required to call such special meeting in the
case of any such request received less than 90 days before the date fixed for
any annual meeting of shareholders. At any meeting so called or at any
annual meeting, (a) holders of a majority of the outstanding Series B-1
Preferred Shares, voting together as a separate class, in person or by proxy,
shall be sufficient to constitute a quorum for the election of a Preferred
Shares Trustee as provided in this Section 15.5(a)(ii), and (b) holders of a
plurality of the outstanding Series B-1 Preferred Shares, voting together as
a separate class, shall have the power to elect a Preferred Shares Trustee.
If any such special meeting required to be called as above provided shall not
be called by the Board of Trustees within 90 days of a request pursuant to
this Section 15.5(a)(ii), then the holders of record of at least 25% of the
Series B-1 Preferred Shares then outstanding may designate in writing one of
their number to call such meeting, and the person so designated may, at the
Company's expense, call such meeting to be held at the place and upon the
notice above provided. No such special meeting and no adjournment thereof
shall be held on a date later than 30 days before the annual meeting of the
shareholders or a special meeting held in place thereof next succeeding the
time when the holders of Series B-1 Preferred Shares become entitled to elect
a Preferred Shares Trustee as above provided. No Preferred Shares Trustee
elected by the holders of the Series B-1 Preferred Shares may be removed
except by the vote of the holders of a majority of the outstanding Series B-1
Preferred Shares, voting together as a separate class, in person or by proxy,
at a meeting called for such purpose. So long as a Preferential Distribution
Non-Payment shall continue, if a Preferred Shares Trustee who has been
elected by the holders of Series B-1 Preferred Shares to serve on the Board
of Trustees shall no longer serve on the Board of Trustees by reason of
resignation, death or removal, such vacancy shall be filled by holders of a
plurality of the outstanding Series B-1 Preferred Shares, voting together as
a separate class, at a meeting called in accordance with the provisions of
this Section 15.5(a)(ii).
If and when all accumulated distributions on the Series B-1 Preferred
Shares have been authorized and paid or declared and set apart for payment,
the holders of the Series B-1 Preferred Shares shall be divested of the
special voting rights provided by this Section 15.5(a), subject to revesting
in the event of each and every subsequent Four Quarter Preferential
Distribution Non-Payment or Six Quarter Preferential Distribution
Non-Payment, as the case may be. Upon termination of such special voting
rights attributable to all holders of the Series B-1 Preferred Shares, the
term of office of the Preferred Shares Trustee or Trustees shall forthwith
terminate and the number of trustees constituting the entire Board of
Trustees shall be reduced by one or two, as the case may be.
(b) So long as any Series B-1 Preferred Shares are outstanding, the
number of trustees constituting the entire Board of Trustees shall at all
times be such that the exercise, by the holders of the Series B-1 Preferred
Shares of the right to elect a Preferred Shares Trustee under the
circumstances provided for in Section 15.5(a) will not contravene any
provision of the Declaration of Trust restricting the number of trustees
which may constitute the entire Board of Trustees.
(c) A Preferred Shares Trustee elected pursuant to Section 15.5(a)
shall serve until the earlier of (x) the next annual meeting of the
shareholders of the Company and the election (by the holders of the Series B-
1 Preferred Shares) and qualification of his successor or (y) the termination
of the special voting rights as provided for in Section 15.5(a).
Section 15.6 Trustees' Right to Refuse to Transfer Series B-1
Preferred Shares; Limitation on Holdings.
(a) The terms and provisions of this Section 15.6 shall apply in
addition to, and not in limitation of, the terms and provisions of Article
VII.
(b) Each Person who owns directly or indirectly more than five percent
in number or value of the total Shares outstanding shall, by January 30 of
each year, give written notice to the Company stating the Person's name and
address, the number of Shares directly or indirectly owned by such Person,
and a description of the capacity in which such Shares are held. For
purposes of this Section 15.6, the number and value of the total Shares
outstanding shall be determined by the Board of Trustees in good faith, which
determination shall be conclusive for all purposes hereunder. In addition,
each direct or indirect holder of Shares, irrespective of such shareholder's
percentage "ownership" of outstanding Shares, shall upon demand disclose to
the Company in writing such information with respect to the direct or
indirect ownership of Shares as the Board of Trustees deems reasonably
necessary from time to time to enable the Board of Trustees to determine
whether the Company complies with the REIT Provisions of the Code (as defined
in Section 1.5), to comply with the requirements of any taxing authority or
governmental agency or to ensure or ascertain compliance with this Section
15.6. For purposes of this Section 15.6, "ownership" shall be as defined in
Section 15.6(k).
(c) If, in the opinion of the Board of Trustees, which shall be binding
upon any prospective acquiror of Series B-1 Preferred Shares, any proposed
transfer or issuance would jeopardize the status of the Company as a REIT
under the REIT Provisions of the Code, the Board of Trustees shall have the
right, but not the duty, to refuse to permit such transfer or issuance or
refuse to give effect to such transfer or issuance and to take any action to
cause any such transfer not to occur or to void any such issuance.
(d) As a condition to any transfer and/or registration of transfer on
the books of the Company of any Series B-1 Preferred Shares which could
result in direct or indirect ownership of Shares exceeding 9.8% of the lesser
of the number or the value of the total Shares (such excess shares, the
"Excess Shares") by a Person other than a Series B-1 Excepted Person, such
prospective transferee shall give written notice to the Company of the
proposed transfer and shall furnish such opinions of counsel, affidavits,
undertakings, agreements and information as may be required by the Board of
Trustees no later than the 15th day prior to any transfer which, if
consummated, would result in such ownership. On each date of determination,
the calculation of the number of the total Shares outstanding on such date
shall be made assuming the conversion or exercise of all Series B-1 Preferred
Shares, Common Share Equivalents and Convertible Securities of such
transferee on the date of determination in accordance with the terms of these
Sections 15.1 through 15.14.
(e) Any transfer or issuance of Series B-1 Preferred Shares that would
(i) create a direct or indirect owner of Excess Shares other than a Series
B-1 Excepted Person; or (ii) result in the Company being "closely held"
within the meaning of Section 856(h) of the Code, shall be void ab initio and
the prospective acquiror shall not be entitled to any rights afforded to
owners of Series B-1 Preferred Shares hereunder and shall be deemed never to
have had an interest therein.
"Series B-1 Excepted Person" shall mean (i) any Person defined as an
"Excepted Person" pursuant to the Declaration of Trust, (ii) any Person
approved prior to the issuance of Series B-1 Preferred Shares by the Board of
Trustees, (iii) any Person approved after the issuance of Series B-1
Preferred Shares by the Board of Trustees, at its option and in its sole
discretion, and (iv) each Person listed below, for so long as its direct or
indirect ownership of Shares, individually or in the aggregate, in any
combination, with those of any or all other Persons listed below, do not and
could not exceed, the number of Shares or the percentage set forth below of
the lesser of the number or the value of the Shares outstanding.
Notwithstanding anything contained in these Sections 15.1 through 15.14 to
the contrary, the Board of Trustees shall not grant approval to any Person,
and no Person shall be or be deemed a Series B-1 Excepted Person, if such
Person's direct or indirect ownership of Series B-1 Excess Shares would or
could result, directly, indirectly or as a result of attribution of
ownership, in termination of the status of the Company as a REIT under the
REIT provisions of the Code.
Aggregate Number of Shares
Names of Series B-1 Excepted or Percentage For All
Persons Such Excepted Persons Combined
- ---------------------------- ------------------------------
Robert A. Mandor, Leonard S. The maximum number of shares of beneficial
Mandor, Mill Neck Associates, interest of the Company, into which such
B.& L. Associates, L.L.C. and/or holders' Series B-1 Preferred Shares are
Mountain View Mall, Inc. and/or then convertible, plus 33,200 Common
their affiliates. Shares, less any shares of beneficial
interest of the Company transferred by any
such holders to any Person who is not one
of the Series B-1 Excepted Persons listed
herein, but in no event less than 9.8%.
(f) The Company, by notice to the holder, transferor or transferee
thereof, as the case may be, may purchase any or all Excess Shares (i) that
are or proposed to be transferred in violation of any of the provisions
hereof or (ii) that are or proposed to be transferred pursuant to a transfer
which, in the opinion of the Board of Trustees (which shall be binding upon
any proposed transferor or transferee of Series B-1 Preferred Shares), would
result in any Person acquiring Series B-1 Excess Shares, or would otherwise
jeopardize the status of the Company as a real estate investment trust under
the REIT Provisions of the Code. The Company shall have the power, by lot or
other means deemed equitable by the Board of Trustees in its sole discretion,
to purchase such Series B-1 Excess Shares. The purchase price for each
Series B-1 Excess Share shall be equal to the greatest of (i) the average of
the closing prices for a Series B-1 Preferred Share for the thirty trading
days preceding the day on which notice of such proposed transfer is sent,
(ii) the product of (x) the average of the closing prices for a Common Share
for the thirty trading days preceding the day on which notice of such
proposed transfer is sent and (y) the number (including fractions) of Common
Shares into which such Series B-1 Preferred Share may be converted on such
day and (iii) the sum of (x) the Liquidation Preference for such Series B-1
Preferred Share and (y) the accrued and unpaid distributions on such Series
B-1 Preferred Share. The closing price for such days shall be the last
reported sale price regular way or, in case no such reported sale takes place
on such date, the average of the reported closing bid and asked prices
regular way, in either case of the New York Stock Exchange, Inc., or if the
Series B-1 Preferred Shares or Common Shares, as the case may be, are not
listed or admitted to trading on the New York Stock Exchange, Inc., on the
principal national securities exchange on which the Series B-1 Preferred
Shares or Common Shares, as the case may be, are listed or admitted to
trading or, if not listed or admitted to trading on any national securities
exchange, the closing sale price of the Series B-1 Preferred Shares or Common
Shares, as the case may be, or in case no reported sale takes place, the
average of the closing bid and asked prices, on NASDAQ or any comparable
system. If the Series B-1 Preferred Shares or Common Shares, as the case may
be, are not quoted on NASDAQ or any comparable system, the Board of Trustees
shall in good faith determine the current market price on such basis as it
considers appropriate. Prompt payment of the purchase price shall be made in
cash by the Company in such manner as may be determined by the Board of
Trustees, but in no event later than twenty Business Days after the Board of
Trustees elects to make such purchase. From and after the date fixed for
purchase by the Board of Trustees, and so long as payment of the purchase
price for the Series B-1 Preferred Shares to be so purchased shall have been
made or duly provided for, the holder of any Series B-1 Excess Shares so
called for purchase shall cease to be entitled to dividends, distributions,
voting rights and other benefits with respect to such Series B-1 Preferred
Shares, excepting only the right to payment of the purchase price fixed as
aforesaid. Any dividend or distribution paid to a proposed transferee of
Series B-1 Excess Shares prior to the discovery by the Company that the
Series B-1 Preferred Shares have been transferred in violation of this
Section 15.6 shall be repaid to the Company upon demand. The Series B-1
Preferred Shares purchased pursuant to the provisions of this Section 15.6(f)
shall thereupon be retired and may not be reissued as Series B-1 Preferred
Shares but shall thereafter have the status of authorized but unissued
Shares.
(g) If Section 15.6(e), (f), (g) or (h) is determined to be void or
invalid by virtue of any legal decision, statute, rule or regulation, then
the acquiror of Series B-1 Preferred Shares in violation of such subsections
shall be deemed, at the option of the Company, to have acted as agent on
behalf of the Company in acquiring such Series B-1 Preferred Shares on behalf
of the Company. The Company, by notice to the acquiror thereof, may purchase
any or all Series B-1 Preferred Shares so acquired in the manner designated
by Section 15.6(f).
(h) Subject to Section 15.6(l), notwithstanding any other provision in
these Sections 15.1 through 15.14 to the contrary, any purported transfer,
sale or acquisition of Series B-1 Preferred Shares (whether such purported
transfer, sale or acquisition results from the direct or indirect ownership,
or attribution of ownership, of Series B-1 Preferred Shares) which would
result in the termination of the status of the Company as a REIT under the
REIT Provisions of the Code shall be null and void ab initio. Any such
Series B-1 Preferred Shares may be treated by the Board of Trustees in the
manner prescribed for Series B-1 Excess Shares in Section 15.6(f).
(i) Subject to Section 15.6(l), nothing contained in this Section 15.6
or in any other provision of these Sections 15.1 through 15.14 shall limit
the authority of the Board of Trustees to take such other action as it deems
necessary or advisable to protect the Company and the interests of the
Shareholders by preservation of the Company's status as a REIT under the REIT
Provisions of the Code.
(j) If any provision of this Section 15.6 or any application of any
such provision is determined to be invalid by any federal or state court
having jurisdiction over the issues, the validity of the remaining provisions
shall not be affected and other applications of such provision shall be
affected only to the extent necessary to comply with the determination of
such court. To the extent this Section 15.6 may be inconsistent with any
other provision in these Sections 15.1 through 15.14, this Section 15.6 shall
be controlling.
(k) For purposes of these Sections 15.1 through 15.14, Series B-1
Preferred Shares not owned directly shall be deemed to be owned indirectly by
a Person if that Person or a group of which he is a member would be the
beneficial owner of such Series B-1 Preferred Shares, as defined in Rule
13d-3 under the Securities Exchange Act of 1934, as amended, and/or would be
considered to own such Series B-1 Preferred Shares by reason of the REIT
Provisions of the Code.
(l) Notwithstanding any other provision of Section 15.6, nothing in
these Sections 15.1 through 15.14 shall preclude the settlement of
transactions entered into through the facilities of the New York Stock
Exchange, Inc. The fact that the settlement of any transaction is permitted
shall not negate the effect of any other provision of this Section 15.6 and
any transferee in such a transaction shall be subject to all of the
provisions and limitations set forth in this Section 15.6.
Section 15.7 Redemption at the Option of the Board of Trustees.
(a) After February 27, 2002, if the aggregate Liquidation Preferences
of all of the outstanding Series B-1 Preferred Shares shall at any time be
less than $3,000,000, the Board of Trustees may, at its option and in its
sole discretion, redeem the Series B-1 Preferred Shares in whole, subject to
the limitations set forth below, at a redemption price equal to $25.00 per
share (the "Call Price"), plus (i) all distributions accrued and unpaid on
such Series B-1 Preferred Shares for past Distribution Periods and (ii) the
pro rata portion of the distributions on such Series B-1 Preferred Shares for
the current Distribution Period through the Redemption Date (together, the
"Redemption Distributions"), upon giving notice as provided below.
(b) At least 30 days but not more than 90 days prior to the date fixed
for the redemption of the Series B-1 Preferred Shares (the "Redemption
Date"), the Company shall mail a written notice (a "Notice of Redemption") to
each holder of record of the Series B-1 Preferred Shares in a postage prepaid
envelope addressed to such holder at his address as shown on the records of
the Company, notifying such holder of the election of the Company to redeem
such Series B-1 Preferred Shares, stating the Redemption Date, the Call
Price, the number of Series B-1 Preferred Shares then outstanding and to be
redeemed and the place(s) where the certificate(s) representing such Series
B-1 Preferred Shares are to be surrendered for payment.
(c) On or after the Redemption Date each holder of the Series B-1
Preferred Shares shall present and surrender his certificate or certificates
for such Series B-1 Preferred Shares to the Company at the place designated
in such notice for redemption and thereupon the Call Price and the Redemption
Distributions for such Series B-1 Preferred Shares shall be paid to or on the
order of the person whose name appears on such certificate or certificates as
the owner thereof and each surrendered certificate shall be cancelled. From
and after the Redemption Date (unless default shall be made by the Company in
payment of the Call Price or the Redemption Distributions), (i) all
distributions on the Series B-1 Preferred Shares shall cease to accrue, and
all rights of the holders thereof as shareholders of the Company shall cease
and terminate, except for the right (x) to surrender their Series B-1
Preferred Shares for conversion into Common Shares as provided for, and in
accordance with, the provisions of these Sections 15.1 through 15.14,
(including, without limitation, Section 15.4 hereof) at any time prior to the
Redemption Date or (y) to receive the Call Price and the Redemption
Distributions with respect to such Series B-1 Preferred Shares upon the
surrender of certificates representing the same, (ii) the Series B-1
Preferred Shares shall no longer be deemed to be outstanding for any purpose
whatsoever and (iii) the Series B-1 Preferred Shares redeemed pursuant to the
provisions of this Section 15.7 shall thereupon be retired and may not be
reissued as Series B-1 Preferred Shares but shall thereafter have the status
of authorized but unissued Shares.
(d) If a Notice of Redemption has been given pursuant to Section
15.7(b) above and any holder of Series B-1 Preferred Shares shall, prior to
the close of business on the last Business Day preceding the Redemption Date,
give written notice to the Company pursuant to Section 15.4 of the conversion
of any or all of the Series B-1 Preferred Shares to be redeemed held by such
holder (accompanied by a certificate or certificates for such shares, duly
endorsed or assigned to the Company), then such redemption shall not become
effective as to such Series B-1 Preferred Shares to be converted, such
conversion shall become effective as provided in Section 15.4.
Section 15.8 Exclusion of Other Rights.
Except as may otherwise be required by law, the Series B-1 Preferred
Shares shall not have any preferences, conversion or other rights, voting
powers, restrictions or limitations as to dividends or other distributions
other than as specifically set forth in the Declaration of Trust.
Section 15.9 Headings of Subdivisions.
The headings of the various sections hereof are for convenience of
reference only and shall not affect the interpretation of any of the
provisions hereof.
Section 15.10 Severability of Provisions.
If any of the preferences, conversion or other rights, voting powers,
restrictions, or limitations as to dividends or other distributions of the
Series B-1 Preferred Shares set forth in the Declaration of Trust is invalid,
unlawful or incapable of being enforced by reason of any rule of law or
public policy, all other preferences, conversion or other rights, voting
powers, restrictions, or limitations as to distributions of Series B-1
Preferred Shares set forth in the Declaration of Trust which can be given
effect without the invalid, unlawful or unenforceable provision thereof
shall, nevertheless, remain in full force and effect and no preferences,
conversion or other rights, voting powers, restrictions, or limitations as to
dividends or other distributions of the Series B-1 Preferred Shares herein
set forth shall be deemed dependent upon any other provision thereof unless
so expressed therein.
Section 15.11 Ranking.
With regard to rights to receive distributions and amounts payable upon
liquidation, dissolution or winding up of the Company, the Series B-1
Preferred Shares shall rank senior to any Junior Shares, the Common Shares
and any Common Share Equivalent and on a parity with any other preferred
shares issued by the Company, unless the terms of such other preferred shares
provide otherwise and, if applicable, the requirements of Section 15.12
hereof have been complied with. However, the Company may authorize or
increase any class or series of Parity Shares or Junior Shares, or both,
without the vote or consent of the holders of the Series B-1 Preferred
Shares.
Section 15.12 Limitations.
In addition to any other rights provided to the holders of the Series
B-1 Preferred Shares by applicable law, so long as any Series B-1 Preferred
Shares are outstanding, the Company shall not, without the affirmative vote
of the holders of at least two-thirds of the total number of outstanding
Series B-1 Preferred Shares, voting together as a separate class,
(i) authorize, create or issue, or increase the par value or
authorized or issued amount of, any class or series of Senior Shares, or
rights to subscribe to or acquire, any security convertible into, any
class or series of Senior Shares, or reclassify any shares of beneficial
interest into any such Senior Shares or reclassify any Junior Shares
into Parity Shares;
(ii) amend, alter or repeal, whether by merger, consolidation or
otherwise, any of the provisions of the Declaration of Trust (including
these Sections 15.1 through 15.14) so as to adversely affect the
preferences, right to convert, conversion price adjustments, notice
rights, special conversion rights, distribution and liquidation rights,
preferences, restrictions or limitations, redemption rights or
privileges, or voting powers or rights of the Series B-1 Preferred
Shares; or
(iii) modify an express contract right of the Series B-1 Preferred
Shares; but (except as otherwise provided in these Sections 15.1 through
15.14 or required by applicable law) nothing herein contained shall
require such a vote or consent (i) in connection with any increase in
the total number of authorized Common Shares, or (ii) in connection with
the authorization or increase of any class or series of Parity Shares or
Junior Shares. The Company with the written consent or affirmative vote
of the holders of a majority of the Series B-1 Preferred Shares shall
have the right to amend, alter or repeal any of the provisions of these
Sections 15.1 through 15.14 without the approval, consent or vote of any
other class of shares of beneficial interest of the Company.
Section 15.13 No Preemptive Rights.
No holder of Series B-1 Preferred Shares shall be entitled to any
preemptive rights to subscribe for or acquire any unissued Shares (whether
now or hereafter authorized) or securities of the Company convertible,
including securities into or carrying a right to subscribe to or acquire
Shares.
Section 15.14 Notices.
Except as may otherwise be provided in the Declaration of Trust, all
notices to holders of Series B-1 Preferred Shares shall be written, and
delivered by first class mail, postage prepaid, addressed to record holders
of the Series B-1 Preferred Shares as their names shall appear on the share
records of the Company on the applicable record date, or, if no record date
has been set, then on the date of delivery of such notice.
ARTICLE XVI
SERIES D CUMULATIVE REDEEMABLE
PREFERRED SHARES
Section 16.1 Certain Definitions.
Unless the context otherwise requires, the terms defined in this Section
16.1 shall have, for all purposes of the provisions of the Declaration of
Trust in respect of the Series D Preferred Shares, the meanings herein
specified (with terms defined in the singular having comparable meanings when
used in the plural).
Business Day. The term "Business Day" shall mean any day, other than a
Saturday or Sunday, that is neither a legal holiday nor a day on which
banking institutions in New York City are authorized or required by law,
regulation or executive order to close.
Capital Shares. The term "Capital Shares" shall mean, with respect to
any Person, any common shares of beneficial interest, preferred shares,
depositary shares, interests, participation or other ownership interests
(however designated) of such Person and any rights (other than debt
securities convertible into or exchangeable for capital shares), warrants or
options to purchase any thereof.
Code. The term "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
Common Equity. The term "Common Equity" shall mean all shares now or
hereafter authorized of any class of common shares of beneficial interest of
the Company, including the Common Shares, and any other shares of beneficial
interest of the Company, howsoever designated, which has the right (subject
always to prior rights of any class or series of preferred shares of
beneficial interest) to participate in the distribution of the assets and
earnings of the Company without limit as to per share amount.
Common Shares. The term "Common Shares" shall mean the Common Shares of
Beneficial Interest, $.01 par value per share, of the Company.
Distribution Payment Date. The term "Distribution Payment Date" shall
have the meaning set forth in Section 16.2(b).
Distribution Period. The term "Distribution Period" shall mean the
period from, and including, the Initial Payment Period Commencement Date,
notwithstanding that no Series D Preferred Shares had been issued on such
date to, but not including, the first Distribution Payment Date and
thereafter, each quarterly period from, and including, the Distribution
Payment Date to, but not including, the next Distribution Payment Date.
Distribution Record Date. The term "Distribution Record Date" shall
mean the date designated by the Board of Trustees of the Company at the time
a distribution is declared, provided, however, that such Distribution Record
Date shall be not more than 60 days nor less than ten days prior to such
Distribution Payment Date.
Initial Payment Period Commencement Date. The term "Initial Payment
Period Commencement Date" shall mean April 20, 2000.
Junior Shares. The term "Junior Shares" shall mean, as the case may be,
(i) the Common Equity and any other class or series of shares of beneficial
interest of the Company which is not entitled to receive any distributions in
any Distribution Period unless all distributions required to have been paid
or declared and set apart for payment on the Series D Preferred Shares shall
have been so paid or declared and set apart for payment and (ii) the Common
Equity and any other class or series of shares of beneficial interest of the
Company which is not entitled to receive any assets upon liquidation,
dissolution or winding up of the affairs of the Company until the Series D
Preferred Shares shall have received the entire amount to which such Class D
Preferred Shares are entitled upon such liquidation, dissolution or winding
up.
Liquidation Preference. The term "Liquidation Preference" shall mean
$25.00 per share.
Parity Shares. The term "Parity Shares" shall mean, as the case may be,
(i) any class or series of shares of beneficial interest of the Company which
is entitled to receive payment of distributions on a parity with the Series D
Preferred Shares, (ii) any class or series of shares of beneficial interest
of the Company which is entitled to receive assets upon liquidation,
dissolution or winding up of the affairs of the Company on a parity with the
Series D Preferred Shares, and (iii) the Series A-1 Preferred Shares and the
Series B-1 Preferred Shares.
Person. The term "Person" shall mean an individual, corporation,
partnership, estate, trust (including a trust classified under Section 401(a)
or 501(c)(17) of the Code), a portion of a trust permanently set aside for or
to be used exclusively for the purposes described in Section 642(c) of the
Code, association, private foundation within the meaning of Section 509(a) of
the Code, joint stock company or other entity, and also includes a group as
that term is used for purposes of Section 13(d)(3) of the Securities Exchange
Act of 1934, as amended, and a group to which an Excepted Holder Limit (as
defined in paragraph (F) below) applies, but does not include an underwriter
which participates in a public offering of the Series D Preferred Shares,
provided that such ownership by such underwriter would not result in the
Company being "closely held" within the meaning of Section 856(h) of the
Code, or otherwise result in the Company failing to qualify as a REIT.
Preferential Distribution Non-Payment. The term "Preferential
Distribution Non-Payment" shall have the meaning set forth in Section
16.5(b).
Preferred Shares Trustee. The term "Preferred Shares Trustee" shall
have the meaning set forth in Section 16.5(b).
Redemption Date. The term "Redemption Date" shall have the meaning set
forth in Section 16.4(b) below.
Redemption Price. The term "Redemption Price" shall mean a price per
Series D Preferred Share equal to $25.00 together with accrued and unpaid
distributions, if any, thereon to the Redemption Date, without interest.
Redemption Record Date. The term "Redemption Record Date" shall mean
the date designated by the Board of Trustees of the Company for redemption of
Series D Preferred Shares, provided, however, that such Redemption Record
Date shall be not more than 60 days nor less than 30 days prior to such
Redemption Date.
REIT. The term "REIT" shall mean a real estate investment trust under
Section 856 of the Code.
Senior Shares. The term "Senior Shares" shall mean, as the case may be,
(i) any class or series of shares of beneficial interest of the Company
ranking senior to the Series D Preferred
Shares in respect of the right to receive distributions or (ii) any class or
series of shares of beneficial interest of the Company ranking senior to the
Series D Preferred Shares in respect of the right to participate in any
distribution upon liquidation, dissolution or winding up of the affairs of
the Company.
Series A-1 Preferred Shares. The term "Series A-1 Preferred Shares"
shall mean the Series A-1 Increasing Rate Cumulative Convertible Preferred
Shares of Beneficial Interest, par value $.01 per share, of the Company.
Series B-1 Preferred Shares. The term "Series B-1 Preferred Shares"
shall mean the Series B-1 Cumulative Convertible Preferred Shares of
Beneficial Interest, par value $.01 per share, of the Company.
Section 16.2 Distributions.
(a) The record holders of Series D Preferred Shares shall be entitled
to receive cash distributions, when, as and if authorized and declared by the
Board of Trustees, out of assets legally available for payment of
distributions. Such distributions shall be payable quarterly by the Company
in cash at a rate of 9.5% of the Liquidation Preference per annum (equivalent
to $2.375 per Series D Preferred Share per annum).
(b) Distributions on Series D Preferred Shares shall be cumulative from
the Initial Payment Period Commencement Date, notwithstanding that no Series
D Preferred Shares had been issued on such date. Distributions shall be
payable quarterly in arrears when, as and if authorized by the Board of
Trustees of the Company on the 20th day of January, April, July, and October
of each year (each, a "Distribution Payment Date"), commencing on July 20,
2000. If any Distribution Payment Date occurs on a day that is not a
Business Day, any accrued distributions otherwise payable on such
Distribution Payment Date shall be paid on the next succeeding Business Day.
The amount of distributions payable on Series D Preferred Shares for each
full Distribution Period shall be computed by dividing by four the annual
distribution rate set forth in Section 16.2(a) above. Distributions payable
in respect of any Distribution Period which is less than a full Distribution
Period in length will be computed on the basis of a 360-day year consisting
of twelve 30-day months. Distributions shall be paid to the holders of
record of the Series D Preferred Shares as their names shall appear on the
share records of the Company at the close of business on the Distribution
Record Date for such distribution. Distributions in respect of any past
Distribution Periods that are in arrears may be declared and paid at any time
to holders of record on the Distribution Record Date therefor. Any
distribution payment made on Series D Preferred Shares shall be first
credited against the earliest accrued but unpaid distribution due which
remains payable. The Series D Preferred Shares rank pari passu to the Series
A-1 Preferred Shares and the Series B-1 Preferred Shares.
(c) If any Series D Preferred Shares are outstanding, no distributions
shall be authorized or paid or set apart for payment on any other class or
series of Junior Shares or Parity Shares for any period unless full
cumulative distributions have been or contemporaneously are authorized and
paid or authorized and a sum sufficient for the payment thereof set apart for
such payment on the Series D Preferred Shares for all past Distribution
Periods and the then current Distribution Period. When distributions are not
paid in full (or a sum sufficient for such full payment is not so set apart)
upon the Series D Preferred Shares and any other class or series of Preferred
Shares ranking on a parity as to distributions with the Series D Preferred
Shares, all distributions authorized upon the Series D Preferred Shares and
any other such class or series of Preferred Shares shall be authorized pro
rata so that the amount of distributions authorized per share on the Series D
Preferred Shares and such class or series of such Shares shall in all cases
bear to each other the same ratio that accrued and unpaid distributions per
share on the Series D Preferred Shares and such class or series of Shares
bear to each other. No interest, or sum of money in lieu of interest, shall
be payable in respect of any distribution payment or payments on the Series D
Preferred Shares which may be in arrears.
(d) Except as provided in Section 16.2(c), unless full cumulative
distributions on the Series D Preferred Shares have been or contemporaneously
are authorized and paid or authorized and a sum sufficient for the payment
thereof set apart for payment for all past Distribution Periods and the then
current Distribution Period, no distributions (other than in Junior Shares)
shall be authorized or paid or set apart for payment or other distribution
shall be authorized or made upon any Junior Shares or Parity Shares nor shall
any Junior Shares or Parity Shares be redeemed, purchased or otherwise
acquired for any consideration (or any moneys be paid to or made available
for a sinking fund for the redemption of any such shares) by the Company
(except by conversion into or exchange for other Junior Shares).
(e) Notwithstanding anything contained herein to the contrary, no
distributions on Series D Preferred Shares shall be authorized by the Board
of Trustees of the Company or paid or set apart for payment by the Company at
such time as the terms and provisions of any agreement of the Company,
including any agreement relating to its indebtedness, prohibits such
authorization, payment or setting apart for payment or provides that such
authorization, payment or setting apart for payment would constitute a breach
thereof or a default thereunder, or to the extent such authorization, payment
or setting apart for payment shall be restricted or prohibited by law.
(f) Notwithstanding anything contained herein to the contrary,
distributions on the Series D Preferred Shares, if not paid on the applicable
Distribution Payment Date, will accrue whether or not any agreement of the
Company prohibits payment of such distributions, whether or not distributions
are authorized for such Distribution Payment Date, whether or not the Company
has earnings and whether or not there are assets legally available for the
payment of such distributions.
(g) If, for any taxable year, the Board of Trustees elects to designate
as "capital gain dividends" (as defined in Section 857 of the Code) any
portion (the "Capital Gains Amount") of the distributions paid for the year
to holders of all classes of shares of beneficial interest of the Company
(the "Total Distributions"), then the portion of the Capital Gains Amount
that shall be allocable to holders of the Series D Preferred Shares shall be
the Capital Gains Amount multiplied by a fraction, the numerator of which
shall be the total distributions paid to the holders of the Series D
Preferred Shares for the year and the denominator of which shall be the Total
Distributions.
Section 16.3 Distributions Upon Liquidation, Dissolution or Winding
Up.
(a) Upon any voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Company, subject to the prior preferences
and other rights of any Senior Shares as to liquidation preferences, but
before any distribution or payment shall be made to the holders of any Junior
Shares as to the distribution of assets upon any liquidation, dissolution or
winding up of the affairs of the Company, the holders of Series D Preferred
Shares shall be entitled to receive out of the assets of the Company legally
available for distribution to its shareholders liquidating distributions in
cash or property at its fair market value as determined by the Board of
Trustees in the amount of the Liquidation Preference per share plus an amount
equal to all distributions accrued and unpaid thereon (whether or not
declared) to the date of such liquidation, dissolution or winding up. After
payment of the full amount of the liquidating distributions to which they are
entitled, the holders of Series D Preferred Shares will have no right or
claim to any of the remaining assets of the Company and shall not be entitled
to any other distribution in the event of liquidation, dissolution or winding
up of the affairs of the Company.
(b) In the event that, upon any such voluntary or involuntary
liquidation, dissolution or winding up, the legally available assets of the
Company are insufficient to pay the amount of the Liquidation Preference per
share plus an amount equal to all distributions accrued and unpaid on the
Series D Preferred Shares and the corresponding amounts payable on all shares
of Parity Shares as to the distribution of assets upon liquidation,
dissolution or winding up, then the holders of the Series D Preferred Shares
and all such Parity Shares shall share ratably in any such distribution of
assets in proportion to the full liquidating distributions to which they
otherwise would be respectively entitled. The Series D Preferred Shares rank
pari passu to the Series A-1 Preferred Shares and the Series B-1 Preferred
Shares as to the distribution of assets upon any liquidation, dissolution or
winding up of the affairs of the Company. Neither the consolidation or
merger of the Company into or with another entity nor the dissolution,
liquidation, winding up or reorganization of the Company immediately followed
by incorporation of another corporation to which such assets are distributed,
nor the sale, lease, transfer or conveyance of all or substantially all of
the assets of the Company to another entity shall be deemed a liquidation,
dissolution or winding up of the affairs of the Company within the meaning of
this Section 16.3; provided that, in each case, effective provision is made
in the charter of the resulting or surviving entity or otherwise for the
recognition, preservation and protection of the rights of the holders of the
Series D Preferred Shares.
Section 16.4 Redemption by the Company.
(a) The Series D Preferred Shares may be redeemed for cash, in whole or
from time to time in part, on any date on or after December 11, 2002 as fixed
by the Board of Trustees of the Company at the Redemption Price. The
Redemption Price of the Series D Preferred Shares (other than any portion
thereof consisting of accrued and unpaid dividends) shall be paid solely from
the sale proceeds of other Capital Shares of the Company and not from any
other source.
(b) Each date fixed for redemption pursuant to Section 16.4(a) is
called a "Redemption Date". If the Redemption Date is after a Distribution
Record Date and before the related Distribution Payment Date, the
distribution payable on such Distribution Payment Date shall be paid to the
holder in whose name the Series D Preferred Shares to be redeemed are
registered at the close of business on such Distribution Record Date
notwithstanding the redemption thereof between such Distribution Record Date
and the related Distribution Payment Date or the Company's default in the
payment of the distribution.
(c) In case of redemption of less than all of the Series D Preferred
Shares at the time outstanding, the shares to be redeemed shall be selected
by the Company pro rata from the holders of record of such shares in
proportion to the number of shares held by such holders (with adjustments to
avoid redemption of fractional shares) or by any other equitable method
determined by the Board of Trustees.
In order to facilitate the redemption of Series D Preferred Shares, the
Board of Trustees may fix a record date for the determination of the shares
to be redeemed, such record date to be not less than 30 nor more than 60 days
prior to the date fixed for such redemption.
(d) Notice of any redemption will be given by publication in a
newspaper of general circulation in The City of New York, such publication to
be made once a week for two successive weeks commencing not less than 30 nor
more than 60 days prior to the Redemption Date. A similar notice will be
mailed by the Company, postage prepaid, not less than 30 nor more than 60
days prior to the Redemption Date, addressed to the respective holders of
record of the Series D Preferred Shares to be redeemed at their respective
addressees as they appear on the share transfer records of the Company. No
failure to give such notice or any defect therein or in the mailing thereof
shall affect the validity of the proceedings for the redemption of any Series
D Preferred Shares except as to any holder to whom the Company has failed to
give notice or except as to any holder to whom notice was defective. In
addition to any information required by law or by the applicable rules of any
exchange upon which Series D Preferred Shares may be listed or admitted to
trading, such notice shall state: (i) the Redemption Date; (ii) the
Redemption Price; (iii) the number of Series D Preferred Shares to be
redeemed and, if less than all shares held by the particular holder are to be
redeemed, the number of Series D Preferred Shares to be redeemed from such
holder; (iv) the place or places where certificates for such shares are to be
surrendered for payment of the Redemption Price; and (v) that distributions
on the shares to be redeemed will cease to accrue on the Redemption Date.
(e) If notice has been mailed in accordance with Section 16.4(d), and
such notice provided that on or before the Redemption Date specified therein
all funds necessary for such redemption shall have been set aside by the
Company, separate and apart from its other funds in trust for the pro rata
benefit of the holders of the shares so called for redemption, so as to be,
and to continue to be available therefor, then, from and after the Redemption
Date, distributions on the Series D Preferred Shares so called for redemption
shall cease to accrue, and said shares shall no longer be deemed to be
outstanding and shall not have the status of Series D Preferred Shares, and
all rights of the holders thereof as shareholders of the Company (except the
right to receive from the Company the Redemption Price) shall cease. Upon
surrender, in accordance with said notice, of the certificates for any shares
so redeemed (properly endorsed or assigned for transfer, if the Company shall
so require and the notice shall so state), such shares shall be redeemed by
the Company at the Redemption Price. In case fewer than all the shares
represented by any such certificate are redeemed, a new certificate or
certificates shall be issued evidencing the unredeemed shares without cost to
the holder thereof.
(f) Any funds deposited with a bank or trust company for the purpose of
redeeming Series D Preferred Shares shall be irrevocable except that:
(i) the Company shall be entitled to receive from such bank or
trust company the interest or other earnings, if any, earned on any
money so deposited in trust, and the holders of any shares redeemed
shall have no claim to such interest or other earnings; and
(ii) any balance of monies so deposited by the Company and
unclaimed by the holders of the Series D Preferred Shares entitled
thereto at the expiration of two years from the applicable Redemption
Date shall be repaid, together with any interest or other earnings
earned thereon, to the Company, and after any such repayment, the
holders of the shares entitled to the funds so repaid to the Company
shall look only to the Company for payment without interest or other
earnings.
(g) No Series D Preferred Shares may be redeemed except with assets
legally available for the payment of the Redemption Price.
(h) Unless full cumulative distributions on all Series D Preferred
Shares shall have been or contemporaneously are authorized and paid or
authorized and a sum sufficient for the payment thereof set apart for payment
for all past Distribution Periods and the then current Distribution Period,
no Series D Preferred Shares shall be redeemed unless all outstanding Series
D Preferred Shares are simultaneously redeemed; provided, however, that the
foregoing shall not prevent the purchase or acquisition of Series D Preferred
Shares pursuant to a purchase or exchange offer made on the same terms to
holders of all outstanding Series D Preferred Shares, provided further,
however, that the foregoing shall not prevent the purchase or acquisition of
Series D Preferred Shares from persons owning in the aggregate 9.8 percent or
more of the lesser of the number or value of the total outstanding shares of
beneficial interest of the Company pursuant to provisions of the Declaration
of Trust, or 10 percent or more of the lesser of the number or value of the
total outstanding Series D Preferred Shares pursuant to provisions of this
Article XVI. Unless full cumulative distributions on all outstanding Series
D Preferred Shares have been or contemporaneously are authorized and paid or
authorized and a sum sufficient for the payment thereof set apart for payment
for all past Distribution Periods and the then current Distribution Period,
the Company shall not purchase or otherwise acquire directly or indirectly
any Series D Preferred Shares (except by conversion into or exchange for
shares of the Company ranking junior to the Series D Preferred Shares as to
distributions and upon liquidation, dissolution or winding up of the affairs
of the Company).
(i) All Series D Preferred Shares redeemed pursuant to this Section
16.4 shall be retired and shall be reclassified as authorized and unissued
preferred shares, without designation as to class or series, and may
thereafter be reissued as any class or series of preferred shares.
Section 16.5 Voting Rights.
(a) The holders of Series D Preferred Shares shall not be entitled to
vote on any matter except (i) as provided in Section 16.8 or (ii) as provided
in Section 16.5(b).
(b) In the event the Company shall have failed to authorize and pay or
set apart for payment in full the distributions accumulated on the
outstanding Series D Preferred Shares for any six or more quarterly
Distribution Periods, regardless of whether such quarterly periods are
consecutive (a "Preferential Distribution Non-Payment"), the number of
trustees of the Company shall be increased by two and the holders of the
outstanding Series D Preferred Shares, voting together as a class with all
other classes or series of preferred shares of the Company ranking on a
parity with the Series D Preferred Shares with respect to distribution rights
and then entitled to vote on the election of such additional two trustees,
shall be entitled to elect such two additional trustees until the full
distributions accumulated for the past distribution periods and the then
current distribution period on all outstanding Series D Preferred Shares have
been authorized and paid or set apart for payment. Upon the occurrence of a
Preferential Distribution Non-Payment or a vacancy in the office of a
Preferred Shares Trustee, the Board of Trustees may, and upon the written
request of the holders of record of not less than 20% of the holders of the
Series D Preferred Shares and all holders of other classes or series of
preferred shares of the Company ranking on a parity with the Series D
Preferred Shares with respect to distribution rights who are then entitled to
vote on the election of such additional trustee or trustees shall, call a
special meeting of such holders for the purpose of electing the additional
trustee or trustees. In the case of such a written request, such special
meeting shall be held within 90 days after the delivery of such request and,
in either case, at the place and upon the notice provided by law and in the
Bylaws of the Company, provided that the Company shall not be required to
call such a special meeting if such request is received less than 90 days
before the date fixed for the next ensuing annual meeting of shareholders of
the Company and all holders of the Series D Preferred Shares and shares of
any other class or series of preferred shares of the Company ranking on a
parity with the Series D Preferred Shares with respect to distribution rights
are afforded the opportunity to elect such additional trustee or trustees (or
fill any vacancy) at such annual meeting of shareholders.
If and when all accumulated distributions on the Series D Preferred
Shares have been authorized and paid or set aside for payment in full, the
holders of the Series D Preferred Shares shall be divested of the special
voting rights provided by this Section 16.5(b), subject to revesting in the
event of each and every subsequent Preferential Distribution Non-Payment.
Upon termination of such special voting rights attributable to all holders of
the Series D Preferred Shares and shares of any other class or series of
preferred shares of the Company ranking on a parity with the Series D
Preferred Shares with respect to distribution rights, the term of office of
each trustee elected by the holders of the Series D Preferred Shares and such
parity preferred shares (a "Preferred Shares Trustee") pursuant to such
special voting rights shall forthwith terminate and the number of trustees
constituting the entire Board of Trustees shall be reduced by the number of
Preferred Shares Trustees. Any Preferred Shares Trustee may be removed only
by the vote of the holders of record of a majority of the outstanding Series
D Preferred Shares and all other series of preferred shares of the Company
ranking on a parity with the Series D Preferred Shares with respect to
distribution rights who would then be entitled to vote in such Preferred
Shares Trustee's election, voting together as a separate class, at a meeting
called for such purpose.
(c) So long as any Series D Preferred Shares are outstanding, the
number of trustees constituting the entire Board of Trustees of the Company
shall at all times be such that the exercise, by the holders of the Series D
Preferred Shares and the holders of preferred shares of the Company ranking
on a parity with the Series D Preferred Shares with respect to distribution
rights, of the right to elect trustees under the circumstances provided for
in Section 16.5(b) will not contravene any provision of the Declaration of
Trust restricting the number of trustees which may constitute the entire
Board of Trustees.
(d) Trustees elected pursuant to Section 16.5(b) shall serve until the
earlier of (x) the next annual meeting of the shareholders of the Company and
the election (by the holders of the Series D Preferred Shares and the holders
of preferred shares of the Company ranking on a parity with the Series D
Preferred Shares with respect to distribution rights) and qualification of
their respective successors or (y) the termination of the term of office of
each Preferred Shares Trustee upon the termination of the special voting
rights as provided for in subparagraph (2) of this Section 16.5(b) or as
otherwise provided for in Section 16.5(b).
(e) So long as a Preferential Distribution Non-Payment shall continue,
any vacancy in the office of a Preferred Shares Trustee may be filled by vote
of the holders of record of a majority of the outstanding Series D Preferred
Shares and all other series of preferred shares ranking on a parity with the
Series D Preferred Shares with respect to distribution rights who are then
entitled to vote in the election of such Preferred Shares Trustee as provided
above. As long as the Preferential Distribution Non-Payment shall continue,
holders of the Series D Preferred Shares shall not, as such shareholders, be
entitled to vote on the election or removal of trustees other than Preferred
Shares Trustees, but shall not be divested of any other voting rights
provided to such shareholders by the Declaration of Trust and this Article
XVI with respect to any other matter to be acted upon by the shareholders of
the Company.
Section 16.6 Restriction on Transfer and Ownership of Series D
Preferred Shares
(a) The terms and provisions of this Section 16.6 shall apply in
addition to, and not in limitation of, the terms and provisions of Article
VII.
(b) Definitions. In addition to the definitions set forth in Section
16.1 above, for the purpose of this Section 16.6, the following terms shall
have the following meanings:
Beneficial Ownership. The term "Beneficial Ownership" shall mean
ownership of Series D Preferred Shares by a Person, whether the interest in
Series D Preferred Shares is held directly or indirectly (including by a
nominee), and shall include interests that would be treated as owned through
the application of Section 544 of the Code, as modified by Section
856(h)(1)(B) of the Code. The terms "Beneficial Owner," "Beneficially Owns"
and "Beneficially Owned" shall have the correlative meanings.
Charitable Beneficiary. The term "Charitable Beneficiary" shall
mean one or more beneficiaries of the Charitable Trust as determined pursuant
to Section 16.6(d)(vi), provided that each such organization must be
described in Section 501(c)(3) of the Code and contributions to each such
organization must be eligible for deduction under each of Sections
170(b)(1)(A), 2055 and 2522 of the Code.
Charitable Trust. The term "Charitable Trust" shall mean any trust
provided for in Section 16.6(d)(i).
Constructive Ownership. The term "Constructive Ownership" shall
mean ownership of Series D Preferred Shares by a Person, whether the interest
in Series D Preferred Shares is held directly or indirectly (including by a
nominee), and shall include interests that would be treated as owned through
the application of Section 318(a) of the Code, as modified by Section
856(d)(5) of the Code. The terms "Constructive Owner," "Constructively Owns"
and "Constructively Owned" shall have the correlative meanings.
Excepted Holder. The term "Excepted Holder" shall mean any
shareholder of the Company for whom an Excepted Holder Limit is created by
this Section 16.6 or by the Board of Trustees pursuant to Section
16.6(c)(vii)(A).
Excepted Holder Limit. The term "Excepted Holder Limit" shall mean
with respect to any Excepted Holder, provided that the affected Excepted
Holder agrees to comply with the requirements established by the Board of
Trustees pursuant to Section 16.6(c)(vii)(A), and subject to adjustment
pursuant to Section 16.6(c)(viii), the percentage limit established by the
Board of Trustees pursuant to Section 16.6(c)(vii)(A).
Initial Date. The term "Initial Date" shall mean the date upon
which this Article XVI containing this Section 16.6 is accepted for record by
the State Department of Assessments and Taxation of Maryland.
Market Price. The term "Market Price" on any date shall mean, with
respect to any class or series of outstanding Series D Preferred Shares, the
Closing Price for such Series D Preferred Shares on such date. The "Closing
Price" on any date shall mean the last sale price for such Series D Preferred
Shares, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, for such Series D
Preferred Shares, in either case as reported on the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the principal national securities exchange on which such Series D
Preferred Shares are listed or admitted to trading or, if such Series D
Preferred 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 high bid and low asked 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 in use, the principal other
automated quotation system that may then be in use or, if such Series D
Preferred 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 a market in such Series D Preferred Shares selected by the Board of
Trustees or, in the event that no trading price is available for such Series
D Preferred Shares, the fair market value of Series D Preferred Shares, as
determined in good faith by the Board of Trustees, which determination shall
be conclusive for all purposes hereof.
Prohibited Owner. The term "Prohibited Owner" shall mean, with
respect to any purported Transfer, any Person who, but for the provisions of
Section 16.6(c)(i), would Beneficially Own or Constructively Own Series D
Preferred Shares in violation of the provisions of Section 16.6(c)(i)(A) and
if appropriate in the context, shall also mean any Person who would have been
the record owner of Series D Preferred Shares that the Prohibited Owner would
have so owned.
Restriction Termination Date. The term "Restriction Termination
Date" shall mean the first day, after the Initial Date, on which the Board of
Trustees determines that it is no longer in the best interests of the Company
to attempt to, or continue to, qualify as a REIT or that compliance with the
restrictions and limitations on Beneficial Ownership, Constructive Ownership
and Transfers of Series D Preferred Shares set forth herein is no longer
required in order for the Company to qualify as a REIT.
Series D Preferred Share Ownership Limit. The term "Series D
Preferred Share Ownership Limit" shall mean not more than 10 percent (in
value or in number of shares, whichever is more restrictive) of the aggregate
of the outstanding Series D Preferred Shares. The number and value of
outstanding Series D Preferred Shares shall be determined by the Board of
Trustees in good faith, which determination shall be conclusive for all
purposes hereof.
Transfer. The term "Transfer" shall mean any issuance, sale,
transfer, gift, assignment, devise or other disposition, as well as any other
event that causes any Person to acquire Beneficial Ownership or Constructive
Ownership, or any agreement to take any such actions or cause any such
events, of Series D Preferred Shares or the right to vote or receive
dividends on Series D Preferred Shares, including (a) the granting or
exercise of any option (or any disposition of any option), (b) any
disposition of any securities or rights convertible into or exchangeable for
Series D Preferred Shares or any interest in Series D Preferred Shares or any
exercise of any such conversion or exchange right and (c) Transfers of
interests in other entities that result in changes in Beneficial or
Constructive Ownership of Series D Preferred Shares; in each case, whether
voluntary or involuntary, whether owned of record, Constructively Owned or
Beneficially Owned and whether by operation of law or otherwise. The terms
"Transferring" and "Transferred" shall have the correlative meanings.
Trustee. The term "Trustee" shall mean the Person, unaffiliated
with the Company and a Prohibited Owner, that is appointed by the Company to
serve as trustee of the Charitable Trust.
(c) Series D Preferred Shares.
(i) Ownership Limitations. During the period commencing on the
Initial Date and prior to the Restriction Termination Date:
(A) Basic Restrictions. No Person, other than an Excepted
Holder, shall Beneficially Own or Constructively Own Series D Preferred
Shares in excess of the Series D Preferred Share Ownership Limit, and no
Excepted Holder shall Beneficially Own or Constructively Own Series D
Preferred Shares in excess of the Excepted Holder Limit for such Excepted
Holder.
(B) Transfer in Trust. If any Transfer of Series D Preferred
Shares (whether or not such Transfer is the result of a transaction entered
into through the facilities of any national securities exchange or automated
inter-dealer quotation system) occurs which, if effective, would result in
any Person Beneficially Owning or Constructively Owning Series D Preferred
Shares in violation of Section 16.6(c)(i)(A),
(x) then that number of Series D Preferred Shares the
Beneficial or Constructive Ownership of which otherwise would cause such
Person to violate Section 16.6(c)(i)(A) (rounded to the nearest whole share)
shall be automatically transferred to a Charitable Trust for the benefit of a
Charitable Beneficiary, as described in Section 16.6(d), effective as of the
close of business on the Business Day prior to the date of such Transfer, and
such Person shall acquire no rights in such Series D Preferred Shares; or
(y) if the transfer to the Charitable Trust described
in clause (x) of this sentence would not be effective for any reason to
prevent the violation of Section 16.6(c)(i)(A), then the Transfer of that
number of Series D Preferred Shares that otherwise would cause any Person to
violate Section 16.6(c)(i)(A) shall be void ab initio and the intended
transferee shall acquire no rights in such Series D Preferred Shares.
(ii) Remedies for Breach. If the Board of Trustees or any duly
authorized committee thereof shall at any time determine in good faith that a
Transfer or other event has taken place that results in a violation of
Section 16.6(c)(i) or that a Person intends to acquire or has attempted to
acquire Beneficial or Constructive Ownership of any Series D Preferred Shares
in violation of Section 16.6(c)(i) (whether or not such violation is
intended), the Board of Trustees or a committee thereof shall take such
action as it deems advisable to refuse to give effect to or to prevent such
Transfer or other event, including, without limitation, causing the Company
to redeem Series D Preferred Shares, refusing to give effect to such Transfer
on the books of the Company or instituting proceedings to enjoin such
Transfer or other event; provided, however, that any Transfer or attempted
Transfer or other event in violation of Section 16.6(c)(i) shall
automatically result in the transfer to the Charitable Trust described above,
and, where applicable, such Transfer (or other event) shall be void ab initio
as provided above, irrespective of any action (or non-action) by the Board of
Trustees or a committee thereof.
(iii) Notice of Restricted Transfer. Any Person who acquires or
attempts or intends to acquire Beneficial Ownership or Constructive Ownership
of Series D Preferred Shares that will or may violate Section 16.6(c)(i)(A),
or any Person who would have owned Series D Preferred Shares that resulted in
a transfer to the Charitable Trust pursuant to the provisions of Section
16.6(c)(i)(B), shall immediately give written notice to the Company of such
event, or in the case of such a proposed or attempted transaction, give at
least 15 days prior written notice, and shall provide to the Company such
other information as the Company may request in order to determine the
effect, if any, of such Transfer on the Company's status as a REIT.
(iv) Owners Required To Provide Information. From the Initial Date
and prior to the Restriction Termination Date:
(A) every owner of more than five percent (or such lower
percentage as required by the Code or the Treasury Regulations promulgated
thereunder) of the outstanding Series D Preferred Shares, within 30 days
after the end of each taxable year, shall give written notice to the Company
stating the name and address of such owner, the number of Series D Preferred
Shares Beneficially Owned and a description of the manner in which such
shares are held. Each such owner shall provide to the Company such additional
information as the Company may request in order to determine the effect, if
any, of such Beneficial Ownership on the Company's status as a REIT and to
ensure compliance with the Series D Preferred Share Ownership Limit.
(B) each Person who is a Beneficial or Constructive Owner of
Series D Preferred Shares and each Person (including the shareholder of
record) who is holding Series D Preferred Shares for a Beneficial or
Constructive Owner shall provide to the Company such information as the
Company may request, in good faith, in order to determine the Company's
status as a REIT and to comply with requirements of any taxing authority or
governmental authority or to determine such compliance.
(v) Remedies Not Limited. Subject to Section 16.6(e) and Article
III, nothing contained in this subparagraph (3) of this Section 16.6(c) shall
limit the authority of the Board of Trustees to take such other action as it
deems necessary or advisable to protect the Company and the interests of its
shareholders in preserving the Company's status as a REIT.
(vi) Ambiguity. In the case of an ambiguity in the application of
any of the provisions of this Section 16.6(c), Section 16.6(d) or any
definition contained in Section 16.6(b), the Board of Trustees shall have the
power to determine the application of the provisions of this Section 16.6(c)
or Section 16.6(d) with respect to any situation based on the facts known to
it. If Section 16.6(c) or 16.6(d) requires an action by the Board of Trustees
and this Article XVI fails to provide specific guidance with respect to such
action, the Board of Trustees shall have the power to determine the action to
be taken so long as such action is not contrary to the provisions of Section
16.6(b), 16.6(c) or 16.6(d).
(vii) Exceptions.
(A) The Board of Trustees, in its sole discretion, may exempt
a Person from the Series D Preferred Share Ownership Limit, and may establish
or increase an Excepted Holder Limit for such Person if:
(x) the Board of Trustees obtains such
representations and undertakings from such Person as are reasonably necessary
to ascertain that such Person's Beneficial or Constructive Ownership of such
Series D Preferred Shares would not result in the Company being "closely
held" within the meaning of Section 856(h) of the Code (without regard to
whether the ownership interest is held during the last half of a taxable
year), or otherwise failing to qualify as a REIT (including, but not limited
to, Beneficial or Constructive Ownership that would result in the Company
owning (actually or Constructively) an interest in a tenant that is described
in Section 856(d)(2)(B) of the Code if the income derived by the Company from
such tenant would cause the Company to fail to satisfy any of the gross
income requirements of Section 856(c) of the Code);
(y) such Person does not and represents that it
will not own, actually or Constructively, an interest in a tenant of the
Company (or a tenant of any entity owned or controlled by the Company) that
would cause the Company to own, actually or Constructively, more than a 10
percent interest (as set forth in Section 856(d) (2) (B) of the Code) in such
tenant and the Board of Trustees obtains such representations and
undertakings from such Person as are reasonably necessary to ascertain this
fact (for this purpose, a tenant from whom the Company (or an entity owned or
controlled by the Company) derives (and is expected to continue to derive) a
sufficiently small amount of revenue such that, in the opinion of the Board
of Trustees, rent from such tenant would not adversely affect the Company's
ability to qualify as a REIT, shall not be treated as a tenant of the
Company); and
(z) such Person agrees that any violation or
attempted violation of such representations or undertakings (or other action
which is contrary to the restrictions contained in Section 16.6(c)(i) through
16.6(c)(vi) will result in such Series D Preferred Shares being automatically
transferred to a Charitable Trust in accordance with Section 16.6(c)(i)(A)
and 16.6(d).
(B) Prior to granting any exception pursuant to Section
16.6(c)(vii)(A), the Board of Trustees may require a ruling from the Internal
Revenue Service, or an opinion of counsel, in either case in form and
substance satisfactory to the Board of Trustees in its sole discretion, as it
may deem necessary or advisable in order to determine or ensure the Company's
status as a REIT. Notwithstanding the receipt of any ruling or opinion, the
Board of Trustees may impose such conditions or restrictions as it deems
appropriate in connection with granting such exception.
(C) An underwriter which participates in a public offering or
a private placement of Series D Preferred Shares (or securities convertible
into or exchangeable for Series D Preferred Shares) may Beneficially Own or
Constructively Own Series D Preferred Shares (or securities convertible into
or exchangeable for Series D Preferred Shares) in excess of the Series D
Preferred Share Ownership Limit, but only to the extent and for so long as it
is necessary to facilitate such public offering or private placement.
(D) The Board of Trustees may only reduce the Excepted Holder
Limit for an Excepted Holder: (1) with the written consent of such Excepted
Holder at any time, or (2) pursuant to the terms and conditions of the
agreements and undertakings entered into with such Excepted Holder in
connection with the establishment of the Excepted Holder Limit for that
Excepted Holder. No Excepted Holder Limit shall be reduced to a percentage
that is less than the Series D Preferred Share Ownership Limit.
(viii) Increase in Series D Preferred Share Ownership Limits.
The Board of Trustees may from time to time increase the Series D Preferred
Share Ownership Limit if the Board determines, in its sole discretion, that
such increase will not adversely affect the Company's ability to qualify as a
REIT.
(ix) Legend. Each certificate for Series D Preferred Shares shall
bear substantially the following legend:
The shares evidenced by this certificate are subject to
restrictions on Beneficial and Constructive Ownership and
Transfer for the purpose, among others, of the Company's
maintenance of its status as a Real Estate Investment
Trust (a "REIT") under the Internal Revenue Code of 1986,
as amended (the "Code"). Subject to certain further
restrictions and except as expressly provided in the
Company's Declaration of Trust, as amended and
supplemented, no Person may Beneficially or
Constructively Own Series D Preferred Shares of the
Company in excess of 10 percent (in value or number of
shares) of the outstanding Series D Preferred Shares of
the Company unless such Person is an Excepted Holder (in
which case the Excepted Holder Limit shall be
applicable). Any Person who Beneficially or
Constructively Owns or attempts to Beneficially or
Constructively Own Series D Preferred Shares which cause
or will cause a Person to Beneficially or Constructively
Own Series D Preferred Shares in excess or in violation
of the above limitations must immediately notify the
Company. If any of the restrictions on transfer or
ownership are violated, the Series D Preferred Shares
represented hereby will be automatically transferred to a
Trustee of a Charitable Trust for the benefit of one or
more Charitable Beneficiaries. In addition, upon the
occurrence of certain events, attempted Transfers in
violation of the restrictions described above may be void
ab initio. All capitalized terms in this legend have the
meanings defined in Article XVI of the Company's
Declaration of Trust relating to the Series D Preferred
shares, as the same may be amended from time to time, a
copy of which, including the restrictions on transfer and
ownership, will be furnished to each holder of Series D
Preferred Shares of the Company on request and without
charge.
Instead of the foregoing legend, the certificate may state that the
Company will furnish a full statement about certain restrictions on
transferability to a shareholder on request and without charge.
(d) Transfer of Series D Preferred Shares in Trust.
(i) Ownership in Trust. Upon any purported Transfer or other event
described in Section 16.6(c)(i)(B) that would result in a transfer of Series
D Preferred Shares to a Charitable Trust, such Series D Preferred Shares
shall be deemed to have been transferred to the Trustee as trustee of a
Charitable Trust for the exclusive benefit of one or more Charitable
Beneficiaries. Such transfer to the Trustee shall be deemed to be effective
as of the close of business on the Business Day prior to the purported
Transfer or other event that results in the transfer to the Charitable Trust
pursuant to Section 16.6(c)(i)(B). The Trustee shall be appointed by the
Board of Trustees of the Company and shall be a Person unaffiliated with the
Company and any Prohibited Owner. Each Charitable Beneficiary shall be
designated by the Company as provided in Section 16.6(d)(vi).
(ii) Status of Shares Held by the Trustee. Series D Preferred
Shares held by the Trustee shall be issued and outstanding Series D Preferred
Shares of the Company. The Prohibited Owner shall have no rights in the
shares held by the Trustee. The Prohibited Owner shall not benefit
economically from ownership of any shares held in trust by the Trustee, shall
have no rights to dividends or other distributions and shall not possess any
rights to vote or other rights attributable to the shares held in the
Charitable Trust.
(iii) Dividend and Voting Rights. The Trustee shall have all
voting rights and rights to dividends or other distributions with respect to
Series D Preferred Shares held in the Charitable Trust, which rights shall be
exercised for the exclusive benefit of the Charitable Beneficiary. Any
dividend or other distribution paid with respect to Series D Preferred Shares
after the time that such Series D Preferred Shares have been transferred to
the Trustee but before the discovery by the Company of such transfer shall be
paid by the Prohibited Owner to the Trustee upon demand and any dividend or
other distribution authorized but unpaid shall be paid when due to the
Trustee. Any dividends or distributions so paid over to the Trustee shall be
held in trust for the Charitable Beneficiary. The Prohibited Owner shall have
no voting rights with respect to shares held in the Charitable Trust and,
subject to Maryland law, effective as of the date that Series D Preferred
Shares have been transferred to the Trustee, the Trustee shall have the
authority (at the Trustee's sole discretion) (i) to rescind as void any vote
cast by a Prohibited Owner prior to the discovery by the Company that Series
D Preferred Shares have been transferred to the Trustee (but only votes cast
with respect to such transferred Series D Preferred Shares) and (ii) to
recast such vote in accordance with the desires of the Trustee acting for the
benefit of the Charitable Beneficiary; provided, however, that if the Company
has already taken irreversible trust action, then the Trustee shall not have
authority to rescind and recast such vote. Notwithstanding the provisions of
this Section 16.6, until the Company has received notification that Series D
Preferred Shares have been transferred into a Charitable Trust, the Company
shall be entitled to rely on its share transfer and other shareholder records
for purposes of preparing lists of shareholders entitled to vote at meetings,
determining the validity and authority of proxies and otherwise conducting
votes of shareholders.
(iv) Sale of Shares by Trustee. Within 20 days of receiving notice
from the Company that Series D Preferred Shares have been transferred to the
Charitable Trust, the Trustee of the Charitable Trust shall sell the shares
held in the Charitable Trust to a person, designated by the Trustee, whose
ownership of the shares will not violate the ownership limitations set forth
in Section 16.6(c)(i)(A). Upon such sale, the interest of the Charitable
Beneficiary in the shares sold shall terminate and the Trustee shall
distribute the net proceeds of the sale to the Prohibited Owner and to the
Charitable Beneficiary as provided in this Section 16.6(d)(iv). The
Prohibited Owner shall receive the lesser of (1) the price paid by the
Prohibited Owner for the shares or, if the Prohibited Owner did not give
value for the shares in connection with the event causing the shares to be
held in the Charitable Trust (e.g., in the case of a gift, devise or other
such transaction), the Market Price of the shares on the day of the event
causing the shares to be held in the Charitable Trust and (2) the price per
share received by the Trustee from the sale or other disposition of the
shares held in the Charitable Trust. In addition, if a Prohibited Owner has
received any dividend or other distribution paid with respect to Series D
Preferred Shares prior to the discovery by the Company that such Series D
Preferred Shares have been transferred to the Trustee and the Prohibited
Owner has not paid the Trustee the amount of such dividend or other
distribution as required by Section 16.6(d)(iii), the amount received by the
Prohibited Owner pursuant to the preceding sentence shall be reduced by the
amount of such dividend or other distribution. Any net sales proceeds in
excess of the amount payable to the Prohibited Owner shall be immediately
paid to the Charitable Beneficiary. If, prior to the discovery by the Company
that Series D Preferred Shares have been transferred to the Trustee, such
shares are sold by a Prohibited Owner, then (i) such shares shall be deemed
to have been sold on behalf of the Charitable Trust and (ii) to the extent
that the Prohibited Owner received an amount for such shares that exceeds the
amount that such Prohibited Owner was entitled to receive pursuant to this
Section 16.6(d)(iv), such excess shall be paid by the Prohibited Owner to the
Trustee upon demand.
(v) Purchase Right in Shares Transferred to the Trustee. Series D
Preferred Shares transferred to the Trustee shall be deemed to have been
offered for sale to the Company, or its designee, at a price per share equal
to the lesser of (i) the price per share in the transaction that resulted in
such transfer to the Charitable Trust (or, in the case of a devise or gift,
the Market Price at the time of such devise or gift) and (ii) the Market
Price on the date the Company, or its designee, accepts such offer. The
Company shall have the right to accept such offer until the Trustee has sold
the shares held in the Charitable Trust pursuant to Section 16.6(d)(iv).
Upon such a sale to the Company, the interest of the Charitable Beneficiary
in the shares sold shall terminate and the Trustee shall distribute the net
proceeds of the sale to the Prohibited Owner.
(vi) Designation of Charitable Beneficiaries. By written notice to
the Trustee, the Board of Trustees of the Company shall designate one or more
nonprofit organizations to be the Charitable Beneficiary of the interest in
the Charitable Trust such that (i) Series D Preferred Shares held in the
Charitable Trust would not violate the restrictions set forth in Section
16.6(c)(i)(A) in the hands of such Charitable Beneficiary and (ii) each such
organization must be described in Section 501(c)(3) of the Code and
contributions to each such organization must be eligible for deduction under
each of Sections 170(b)(1)(A), 2055 and 2522 of the Code.
(e) Stock Exchange Transactions. Nothing in this Section 16.6 shall
preclude the settlement of any transaction entered into through the
facilities of any national securities exchange or automated inter-dealer
quotation system. The fact that the settlement of any transaction occurs or
takes place shall not negate the effect of any other provision of this
Section 16.6 and any transferee in such a transaction shall be subject to all
of the provisions and limitations set forth in this Section 16.6.
(f) Enforcement. The Company is authorized specifically to seek
equitable relief, including injunctive relief, to enforce the provisions of
this Section 16.6.
(g) Non-Waiver. No delay or failure on the part of the Company or the
Board of Trustees in exercising any right hereunder shall operate as a waiver
of any right of the Company or the Board of Trustees, as the case may be,
except to the extent specifically waived in writing.
Section 16.7 Ranking.
With regard to rights to receive distributions and amounts payable upon
liquidation, dissolution or winding up of the Company, the Series D Preferred
Shares rank senior to the Common Shares, and on a parity with the Series A-1
Preferred Shares and the Series B-1 Preferred Shares and any other preferred
shares issued by the Company, unless the terms of such other preferred shares
provide otherwise and, if applicable, the requirements of Section 16.8 hereof
have been complied with. However, the Company may authorize or increase any
class or series of shares of beneficial interest ranking on a parity with or
junior to the Series D Preferred Shares as to distribution rights or
liquidation preference without the vote or consent of the holders of the
Series D Preferred Shares.
Section 16.8 Limitations.
So long as any Series D Preferred Shares are outstanding, the Company
shall not, without the affirmative vote, or the written consent, of the
holders of at least two-thirds of the total number of outstanding Series D
Preferred Shares, voting as a class,
1. authorize, create or issue, or increase the
authorized or issued amount of, any class or series of, or
rights to subscribe to or acquire, any security convertible
into, any class or series of shares of beneficial interest
ranking as to distribution rights or liquidation preference,
senior to the Series D Preferred Shares, or reclassify any
shares of beneficial interest into any such shares; or
2. amend, alter or repeal, whether by merger,
consolidation or otherwise, any of the provisions of the
Declaration of Trust (including this Article XVI) that would
change the preferences, rights or privileges with respect to
the Series D Preferred Shares so as to affect the Series D
Preferred Shares materially and adversely;
but (except as otherwise expressly required by applicable law) nothing herein
contained shall require such a vote or consent (i) in connection with any
increase in the total number of authorized Common Shares; (ii) in connection
with the authorization or increase of any class or series of shares of
beneficial interest ranking, as to distribution rights and liquidation
preference, on a parity with or junior to the Series D Preferred Shares;
(iii) in connection with any merger or consolidation in which the Company is
the surviving entity if, immediately after the merger or consolidation, there
are outstanding no shares of beneficial interest and no securities
convertible into shares of beneficial interest ranking as to distribution
rights or liquidation preference senior to the Series D Preferred Shares
other than the securities of the Company outstanding prior to such merger or
consolidation; (iv) in connection with any merger or consolidation in which
the Company is not the surviving entity if, as a result of the merger or
consolidation, the holders of Series D Preferred Shares receive shares of
stock or beneficial interest or other equity securities with preferences,
rights and privileges substantially identical to the preferences, rights and
privileges of the Series D Preferred Shares and there are outstanding no
shares of stock or beneficial interest or other equity securities of the
surviving entity ranking as to distribution rights or liquidation preference
senior to the Series D Preferred Shares other than the securities of the
Company outstanding prior to such merger or consolidation; or (v) if, at or
prior to the time when the issuance of any such shares ranking senior to the
Series D Preferred Shares is to be made or any such change is to take effect,
as the case may be, the Series D Preferred Shares have been called for
redemption upon proper notice and sufficient funds have been irrevocably
deposited in trust for the redemption of all the then outstanding Series D
Preferred Shares.
Section 16.9 Exclusion of Other Rights.
The Series D Preferred Shares shall not have any preferences or other
rights, voting powers, restrictions, limitations as to dividends or other
distributions, qualifications or terms or conditions of redemption other than
expressly set forth herein or elsewhere in the Declaration of Trust.
Section 16.10 Headings of Subdivisions.
The headings of the various sections hereof are for convenience of
reference only and shall not affect the interpretation of any of the
provisions hereof.
Section 16.11 Severability of Provisions.
If any preferences or other rights, voting powers, restrictions,
limitations as to dividends or other distributions, qualifications or terms
or conditions of redemption of the Series D Preferred Shares set forth in the
Declaration of Trust is invalid, unlawful or incapable of being enforced by
reason of any rule of law or public policy, all other preferences or other
rights, voting powers, restrictions, limitations as to dividends or other
distributions, qualifications or terms or conditions of redemption of Series
D Preferred Shares set forth herein or elsewhere in the Declaration of Trust
which can be given effect without the invalid, unlawful or unenforceable
provision thereof shall, nevertheless, remain in full force and effect and no
preferences or other rights, voting powers, restrictions, limitations as to
dividends or other distributions, qualifications or terms or conditions of
redemption of the Series D Preferred Shares herein set forth shall be deemed
dependent upon any other provision thereof unless so expressed therein.
Section 16.12 No Preemptive Rights.
No holder of Series D Preferred Shares shall be entitled to any
preemptive rights to subscribe for or acquire any unissued shares of
beneficial interest of the Company (whether now or hereafter authorized) or
securities of the Company convertible into or carrying a right to subscribe
to or acquire shares of beneficial interest of the Company.
Section 16.13 Conversion.
The Series D Preferred Shares are not convertible into or exchangeable
for any other property or securities of the Company.
THIRD: The amendment to and restatement of the Declaration of Trust of
the Trust as hereinabove set forth have been duly advised by the Board of
Trustees and approved by the shareholders of the Trust as required by law.
The undersigned President acknowledges these Articles of Amendment and
Restatement to be the trust act of the Trust and as to all matters or facts
required to be verified under oath, the undersigned President acknowledges
that to the best of his knowledge, information and belief, these matters and
facts are true in all material respects and that this statement is made under
the penalties for perjury.
IN WITNESS WHEREOF, the Trust has caused these Articles of Amendment and
Restatement to be signed in its name and on its behalf by its President and
attested to by its Secretary on this ______ day of ____________, 2000.
ATTEST: KRAMONT REALTY TRUST
_________________________ __________________________(SEAL)
Secretary President
Appendix E
=============================================================================
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
KRAMONT OPERATING PARTNERSHIP, L.P.
________, 2000
=============================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1 Defined Terms. . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 2 Organizational Matters . . . . . . . . . . . . . . . . . . . .15
2.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . .15
2.2 Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
2.3 Registered Office and Agent; Principal Office. . . . . . . . .15
2.4 Power of Attorney. . . . . . . . . . . . . . . . . . . . . . .16
2.5 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
ARTICLE 3 Purpose. . . . . . . . . . . . . . . . . . . . . . . . . . . .17
3.1 Purpose and Business . . . . . . . . . . . . . . . . . . . . .17
3.2 Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
ARTICLE 4 Capital Contributions. . . . . . . . . . . . . . . . . . . . .20
4.1 Capital Contributions of the Partners. . . . . . . . . . . . .20
4.2 Additional Funds . . . . . . . . . . . . . . . . . . . . . . .20
4.3 Issuance of Additional Partnership Interests; Admission of
Additional Limited Partners. . . . . . . . . . . . . . . . . .22
4.4 Repurchase of Shares; Excess Shares. . . . . . . . . . . . . .23
4.5 No Third Party Beneficiary . . . . . . . . . . . . . . . . . .24
4.6 No Interest; No Return . . . . . . . . . . . . . . . . . . . .24
4.7 No Preemptive Rights . . . . . . . . . . . . . . . . . . . . .24
ARTICLE 5 Distributions. . . . . . . . . . . . . . . . . . . . . . . . .24
5.1 Regular Distributions. . . . . . . . . . . . . . . . . . . . .24
5.2 Qualification as a REIT. . . . . . . . . . . . . . . . . . . .25
5.3 Withholding. . . . . . . . . . . . . . . . . . . . . . . . . .25
5.4 Distributions in Kind. . . . . . . . . . . . . . . . . . . . .25
5.5 Distributions Upon Liquidation . . . . . . . . . . . . . . . .25
ARTICLE 6 Allocations. . . . . . . . . . . . . . . . . . . . . . . . . .25
ARTICLE 7 Management and Operations of Business. . . . . . . . . . . . .26
7.1 Management . . . . . . . . . . . . . . . . . . . . . . . . . .26
7.2 Certificate of Limited Partnership . . . . . . . . . . . . . .30
7.3 Reimbursement of the General Partner . . . . . . . . . . . . .31
7.4 Outside Activities of the General Partner. . . . . . . . . . .31
7.5 Contracts with Affiliates. . . . . . . . . . . . . . . . . . .32
7.6 Indemnification. . . . . . . . . . . . . . . . . . . . . . . .32
7.7 Liability of the General Partner . . . . . . . . . . . . . . .34
7.8 Other Matters Concerning the General Partner . . . . . . . . .35
7.9 Title to Partnership Assets. . . . . . . . . . . . . . . . . .36
7.10 Reliance by Third Parties. . . . . . . . . . . . . . . . . . .36
ARTICLE 8 Rights and Obligations of Limited Partners . . . . . . . . . .37
8.1 Limitation of Liability. . . . . . . . . . . . . . . . . . . .37
8.2 Management of Business . . . . . . . . . . . . . . . . . . . .37
8.3 Outside Activities of Limited Partners . . . . . . . . . . . .37
8.4 Return of Capital. . . . . . . . . . . . . . . . . . . . . . .37
8.5 Rights of Limited Partners Relating to the Partnership . . . .38
8.6 Redemption Rights. . . . . . . . . . . . . . . . . . . . . . .39
ARTICLE 9 Books, Records, Accounting, and Reports. . . . . . . . . . . .43
9.1 Records and Accounting . . . . . . . . . . . . . . . . . . . .43
9.2 Fiscal Year. . . . . . . . . . . . . . . . . . . . . . . . . .43
9.3 Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . .43
ARTICLE 10 Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . .44
10.1 Preparation of Tax Returns . . . . . . . . . . . . . . . . . .44
10.2 Tax Elections. . . . . . . . . . . . . . . . . . . . . . . . .44
10.3 Tax Matters Partner. . . . . . . . . . . . . . . . . . . . . .44
10.4 Withholding. . . . . . . . . . . . . . . . . . . . . . . . . .46
ARTICLE 11 Transfers and Withdrawals. . . . . . . . . . . . . . . . . . .47
11.1 Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . .47
11.2 Transfer of the General Partner's and the Company's Partnership
Interests. . . . . . . . . . . . . . . . . . . . . . . . . . .47
11.3 Limited Partners' Rights to Transfer . . . . . . . . . . . . .48
11.4 Substituted Limited Partners . . . . . . . . . . . . . . . . .50
11.5 Assignees. . . . . . . . . . . . . . . . . . . . . . . . . . .50
11.6 General Provisions . . . . . . . . . . . . . . . . . . . . . .51
ARTICLE 12 Admission of Partners. . . . . . . . . . . . . . . . . . . . .52
12.1 Admission of Successor General Partner . . . . . . . . . . . .52
12.2 Admission of Additional Limited Partners . . . . . . . . . . .52
12.3 Amendment of Agreement and Certificate of Limited Partnership.53
ARTICLE 13 Dissolution, Liquidation, and Termination. . . . . . . . . . .53
13.1 Dissolution. . . . . . . . . . . . . . . . . . . . . . . . . .53
13.2 Winding Up . . . . . . . . . . . . . . . . . . . . . . . . . .54
13.3 No Obligation to Contribute Deficit. . . . . . . . . . . . . .56
13.4 Rights of Limited Partners.. . . . . . . . . . . . . . . . . .56
13.5 Notice of Dissolution. . . . . . . . . . . . . . . . . . . . .56
13.6 Termination of Partnership and Cancellation of Certificate of
Limited Partnership. . . . . . . . . . . . . . . . . . . . . .56
13.7 Reasonable Time for Winding-Up . . . . . . . . . . . . . . . .56
13.8 Waiver of Partition. . . . . . . . . . . . . . . . . . . . . .56
ARTICLE 14 Amendment of Partnership Agreement; Action by
Limited Partners . . . . . . . . . . . . . . . . . . . . . . .57
14.1 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . .57
14.2 Action by Limited Partners . . . . . . . . . . . . . . . . . .58
ARTICLE 15 General Provisions . . . . . . . . . . . . . . . . . . . . . .59
15.1 Addresses and Notice . . . . . . . . . . . . . . . . . . . . .59
15.2 Titles and Captions. . . . . . . . . . . . . . . . . . . . . .59
15.3 Certain Terms. . . . . . . . . . . . . . . . . . . . . . . . .59
15.5 Further Action . . . . . . . . . . . . . . . . . . . . . . . .60
15.6 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . .60
15.7 Creditors. . . . . . . . . . . . . . . . . . . . . . . . . . .60
15.8 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . .60
15.9 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . .60
15.10 Applicable Law . . . . . . . . . . . . . . . . . . . . . . . .60
15.11 Invalidity of Provisions . . . . . . . . . . . . . . . . . . .60
15.12 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . .60
EXHIBIT A PARTNERS' CONTRIBUTIONS AND PARTNERSHIP INTERESTS (OP COMMON
UNITS)
EXHIBIT B ALLOCATIONS OF PARTNERSHIP ITEMS
EXHIBIT C FORM OF NOTICE OF REDEMPTION
EXHIBIT D PROPERTIES TO WHICH SECTION 7.1A(3) IS APPLICABLE
EXHIBIT E FORM OF LETTER
EXHIBIT F CLASS A OP PREFERRED UNITS
EXHIBIT G CLASS B-1 OP PREFERRED UNITS
EXHIBIT H CLASS D OP PREFERRED UNITS
EXHIBIT I LIMITED PARTNERS
EXHIBIT J FLORIDA LAND
<PAGE>
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF
KRAMONT OPERATING PARTNERSHIP, L.P.
This Amended and Restated Agreement of Limited Partnership of
Kramont Operating Partnership, L.P. (the "Partnership"), dated as of
________, 2000, is entered into by and among KRT Trust, a Maryland real
estate investment trust ("KRT Trust"), KRT Trust I LLC, a Delaware limited
liability company ("KRT Trust I LLC") and the other parties whose names are
set forth on Exhibit A attached hereto.
WHEREAS, Kramont Operating Partnership, L.P. (formerly named "KRT
Operating Partnership, L.P.") was formed pursuant to the Revised Uniform
Limited Partnership Act of the State of Delaware by filing, on November 5,
1999, a certificate of limited partnership with the Secretary of State of the
State of Delaware and the execution of an Agreement of Limited Partnership
(the "Original Agreement") by KRT Trust, as general partner and KRT Trust I
LLC, as limited partner;
WHEREAS, pursuant to a certain Agreement and Plan of
Reorganization and Merger, dated as of December __, 1999 (the "Merger
Agreement"), among Kranzco Realty Trust ("Kranzco"), a Maryland real estate
investment trust, KRT Trust, a wholly owned subsidiary of Kranzco, CV Reit,
Inc. ("CV"), a Delaware corporation, and Kramont Realty Trust ("Kramont"), a
Maryland real estate investment trust, among other things, KRT Trust will
merge with and into Kramont (the "KRT Trust Merger") and Kramont, the
surviving entity, shall become the general partner of the Partnership and of
Montgomery CV Realty, L.P. ("CV Partnership"), an affiliate of CV;
WHEREAS, following consummation of the transactions contemplated
by the Merger Agreement and pursuant to the terms of a Unit Contribution
Agreement ("Contribution Agreement"), dated as of _________, 2000, Kramont
will contribute to the Partnership its units of general and limited partner
interest in CV Partnership in exchange for additional units of limited
partner interest in the Partnership;
WHEREAS, pursuant to the terms of the Contribution Agreement,
certain holders of units of limited partner interest in CV Partnership ("CV
LP Holders"), will either (i) contribute to the Partnership units of limited
partner interest in CV Partnership held by such holders in exchange for units
of limited partner interest in the Partnership, at which time the CV LP
Holders shall be admitted as limited partners of the Partnership, or (ii) (A)
first contribute to CV Partner Holdings, L.P., a Delaware limited partnership
("Holdings"), the units of limited partner interest in CV Partnership held by
such holders in exchange for units of limited partner interest in Holdings
and (B) then contribute to the Partnership the units of limited partner
interest in Holdings then held by such holders in exchange for units of
limited partner interest in the Partnership;
WHEREAS, pursuant to the terms of the Contribution Agreement,
after acquisition of the units of general partner and limited partner
interest in CV Partnership and the units of limited partner interest in
Holdings, described above, the Partnership will contribute all of such units
of general partner and limited partner interest in CV Partnership and
Holdings to CV GP L.P., a Delaware limited partnership (the "LP"); and
WHEREAS, the Partners desire to continue the Partnership and to
amend and to restate the Original Agreement as set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and other valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties do hereby amend and restate the
Original Agreement in its entirety and agree as follows:
ARTICLE 1
Defined Terms
The following definitions shall be applied for all purposes of
this Agreement, unless otherwise clearly indicated to the contrary:
"Act" means the Delaware Revised Uniform Limited Partnership Act,
as it may be amended from time to time, and any successor to such statute.
"Additional Limited Partner" means a Person admitted to the
Partnership as a Limited Partner pursuant to Section 4.3 and who is shown as
such on the books and records of the Partnership.
"Adjusted Capital Account Deficit" means with respect to any
Partner, the negative balance, if any, in such Partner's Capital Account as
of the end of any relevant fiscal year, determined after giving effect to the
following adjustments:
(a) credit to such Capital Account any portion of such
negative balance which such Partner (i) is treated as obligated to restore to
the Partnership pursuant to the provisions of section 1.704-1(b)(2)(ii)(c) of
the Regulations, or (ii) is deemed to be obligated to restore to the
Partnership pursuant to the penultimate sentences of sections 1.704-2(g)(1)
and 1.704-2(i)(5) of the Regulations; and
(b) debit to such Capital Account the items described in
sections 1.704-1(b)(2)(ii)(d)(4), (5), and (6) of the Regulations.
"Adjustment Factor" means 1.0 (as adjusted from time to time in
accordance with this definition); provided that, in the event that the
Company (i) declares or pays a dividend on its outstanding Shares in Shares
or makes a distribution to all holders of its outstanding Shares in Shares,
(ii) subdivides or splits its outstanding Shares, or (iii) combines its
outstanding Shares into a smaller number of Shares, the Adjustment Factor
shall be adjusted by multiplying the Adjustment Factor by a fraction, the
numerator of which shall be the number of Shares issued and outstanding on
the record date for such dividend, distribution, subdivision, or combination
(assuming for such purposes that such dividend, distribution, subdivision, or
combination has occurred as of such time) and the denominator of which shall
be the actual number of Shares (determined without the above assumption)
issued and outstanding on the record date for such dividend, distribution,
subdivision, or combination. Any adjustment to the Adjustment Factor shall
become effective immediately after the effective date of such event
retroactive to the record date, if any, for the event giving rise thereto; it
being intended that (x) adjustments to the Adjustment Factor are to be made
in order to avoid unintended dilution or anti-dilution as a result of
transactions in which Shares are issued, redeemed, or exchanged without
corresponding issuance, redemption, or exchange of OP Units and (y) if a
Specified Redemption Date shall fall between the record date and the
effective date of any event of the type described above, the Adjustment
Factor applicable to such redemption shall be adjusted to take into account
such event.
"Affiliate" means, (a) with respect to any individual Person, any
member of the Immediate Family of such Person or a trust established for the
benefit of such member, or (b) with respect to any Entity, any Person which,
directly or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such Entity. For the
purposes of this definition, "control" when used with respect to any Person
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such Person, whether through
the ownership of voting securities, by contract or otherwise, and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Agreement" means this Agreement of Limited Partnership, as
amended, modified, supplemented or restated from time to time, as the context
requires.
"Assignee" means a Person to whom one or more OP Common Units have
been transferred in a manner permitted under this Agreement, but who has not
become a Substituted Limited Partner, and who has the rights set forth in
Section 11.5.
"Available Cash" means, with respect to any applicable period of
measurement, the excess, if any, during such period of:
(a) the gross cash receipts of the Partnership from all
sources whatsoever, including, without limitation, the following:
(i) all rents, revenues, income, and proceeds derived by
the Partnership from its operations, including, without limitation,
distributions received by the Partnership from any Entity in which the
Partnership has an interest;
(ii) all proceeds and revenues received by the
Partnership on account of any sales of property of the Partnership or as
a refinancing of or payments of principal, interest, costs, fees,
penalties, or otherwise on account of any borrowings or loans made by
the Partnership or financings or refinancings of any property of the
Partnership;
(iii) the amount of any insurance proceeds and
condemnation awards received by the Partnership;
(iv) all capital contributions or loans received by
the Partnership;
(v) all cash amounts previously reserved by the
Partnership, to the extent such amounts are no longer needed for the
specific purposes for which such amounts were reserved;
(vi) the proceeds of liquidation of the Partnership's
property in accordance with this Agreement; and
(vii) reductions in reserves not accompanied by cash
expenditures;
over (b) the sum of:
(i) all operating costs and expenses, including costs
relating to tenant improvements, brokerage expenses, taxes, and other
expenses of the Properties of the Partnership and capital expenditures
made during such period (without deduction, however, for any capital
expenditures, charges for Depreciation, or other expenses not paid in
cash or expenditures from reserves);
(ii) all costs and expenses expended or paid during such
period in connection with the sale or other disposition, or acquisition,
financing or refinancing, of property of the Partnership or the recovery
of insurance or condemnation proceeds;
(iii) all fees, if any, provided for under this Agreement;
(iv) all debt service, including principal and interest,
paid during such period on all indebtedness (including under any line of
credit) of the Partnership;
(v) all capital contributions, advances, reimbursements,
or similar payments made to any Person in which the Partnership has an
interest;
(vi) all loans made by the Partnership in accordance with
the terms of this Agreement;
(vii) all reimbursements to the General Partner or its
Affiliates during such period; and
(viii) any new reserves or increases in reserves reasonably
determined by the General Partner to be necessary for working capital,
acquisitions, capital improvements, payments of periodic expenditures,
debt service, or other purposes for the Partnership or any Person in
which the Partnership has an interest.
Notwithstanding the foregoing, Available Cash shall not include any cash
received or reductions in reserves, or take into account any disbursements
made or reserves established, after commencement of the dissolution and
liquidation of the Partnership.
"Capital Account" means with respect to any Partner, the Capital
Account maintained for such Partner in accordance with section 1.704-1(b) of
the Regulations and the following provisions:
a. to each Partner's Capital Account there shall be credited
(i) such Partner's Capital Contributions, (ii) such Partner's distributive
share of Net Income and any items in the nature of income or gain which are
specially allocated to such Partner pursuant to Paragraphs 1 and 2 of Exhibit
B, and (iii) the amount of any Partnership liabilities assumed by such
Partner or which are secured by any asset distributed to such Partner;
b. to each Partner's Capital Account there shall be debited
(i) the amount of cash and the Gross Asset Value of any property distributed
to such Partner pursuant to any provision of this Agreement, (ii) such
Partner's distributive share of Net Losses and any items in the nature of
expenses or losses which are specially allocated to such Partner pursuant to
Paragraphs 1 and 2 of Exhibit B, and (iii) the amount of any liabilities of
such Partner assumed by the Partnership or which are secured by any asset
contributed by such Partner to the Partnership; and
c. in the event all or a portion of a Partnership Interest
is transferred in accordance with the terms of this Agreement, the transferee
shall succeed to the Capital Account of the transferor to the extent it
related to the transferred Partnership Interest.
The foregoing provisions and the other provisions of this Agreement relating
to the maintenance of Capital Accounts are intended to comply with Sections
1.704-1(b) and 1.704-2 of the Regulations, and shall be interpreted and
applied in a manner consistent with such Regulations. In the event the
General Partner shall reasonably determine that it is prudent to modify the
manner in which the Capital Accounts, or any debits or credits thereto
(including, without limitation, debits or credits relating to liabilities
which are secured by contributed or distributed assets or which are assumed
by the Partnership, the General Partner or any Limited Partner) are computed
in order to comply with such Regulations, the General Partner may make such
modification; provided that it does not have an adverse effect on the amounts
distributable to any Partner pursuant to Article 13 upon the dissolution of
the Partnership. The Capital Accounts of the Partners immediately after the
execution of this Agreement are set forth on Exhibit A hereto and have been
determined in accordance with Regulations Section 1.704-1(b)(2)(iv).
"Capital Contribution" means, with respect to any Partner, any
cash, cash equivalents, or the Gross Asset Value of property which such
Partner contributes or is deemed to contribute to the Partnership pursuant to
Article 4.
"Cash Amount" means an amount of cash equal to the Value on the
Specified Redemption Date of the Shares Amount.
"Certificate" means the Certificate of Limited Partnership of the
Partnership filed in the office of the Delaware Secretary of State, as
amended or restated from time to time in accordance with the terms hereof and
the Act.
"Charter" means the Declaration of Trust (or other instrument
serving a similar function) of the General Partner, as amended and restated
from time to time.
"Code" means the Internal Revenue Code of 1986, as amended and in
effect from time to time, as interpreted by the applicable regulations
thereunder. Any reference herein to a specific section or sections of the
Code shall be deemed to include a reference to any corresponding provision of
future law.
"Company" means KRT Trust and, after the effective time of the KRT
Trust Merger, Kramont.
"Contributed Property" means each property or other asset, in such
form as may be permitted by the Act, contributed or deemed contributed to the
Partnership by any Partner (including any deemed contributions to the
Partnership on termination and reconstitution thereof pursuant to Regulations
promulgated under section 708 of the Code).
"Depreciation" means, with respect to any asset of the Partnership
for any fiscal year or other period, the depreciation, depletion,
amortization, or other cost recovery deduction, as the case may be, allowed
or allowable for Federal income tax purposes in respect of such asset for
such fiscal year or other period; provided, however, that except as otherwise
provided in the Regulations, if there is a difference between the Gross Asset
Value (including the Gross Asset Value, as increased pursuant to paragraph 1
of the definition of Gross Asset Value) and the adjusted tax basis of such
asset at the beginning of such fiscal year or other period, Depreciation for
such asset shall be an amount that bears the same ratio to the beginning
Gross Asset Value of such asset as the Federal income tax depreciation,
depletion, amortization, or other cost recovery deduction for such fiscal
year or other period bears to the beginning adjusted tax basis of such asset;
provided, further, that if the Federal income tax depreciation, depletion,
amortization, or other cost recovery deduction for such asset for such fiscal
year or other period is zero, Depreciation of such asset shall be determined
with reference to the beginning Gross Asset Value of such asset using any
reasonable method selected by the General Partner.
"Entity" means any general partnership, limited partnership,
corporation, joint venture, trust, business trust, real estate investment
trust, limited liability company, cooperative, association or other entity.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time (or any corresponding provisions of succeeding
laws).
"Florida Land" means the property described in Exhibit J.
"GAAP" means United States generally accepted accounting
principles, as in effect from time to time.
"General Partner" means KRT Trust and, after the effective time of
the KRT Trust Merger, Kramont, or any of their successors as the general
partner of the Partnership from time to time.
"General Partner Interest" means a Partnership Interest held by the
General Partner, in its capacity as general partner. A General Partner
Interest may be expressed as a number of OP Units.
"Gross Asset Value" means, with respect to any asset of the
Partnership, such asset's adjusted basis for Federal income tax purposes,
except as follows:
1. the initial Gross Asset Value of any asset contributed by
a Partner to the Partnership shall be the gross fair market value of such
asset, without reduction for liabilities, as determined by the contributing
Partner and the Partnership on the date of contribution thereof (as reflected
on Exhibit A, as such Exhibit may be amended from time to time);
2. if the General Partner reasonably determines that an
adjustment is necessary or appropriate to reflect the relative economic
interests of the Partners, the Gross Asset Values of all Partnership assets
shall be adjusted in accordance with sections 1.704-1(b)(2)(iv)(f) and (g) of
the Regulations to equal their respective gross fair market values, without
reduction for liabilities, as reasonably determined by the General Partner,
as of the following times:
a. a Capital Contribution (other than a de minimis
Capital Contribution) to the Partnership by a new or existing Partner as
consideration for a Partnership Interest; or
b. the distribution by the Partnership to a Partner of
more than a de minimis amount of Partnership assets as consideration for the
repurchase of a Partnership Interest; or
c. the liquidation of the Partnership within the
meaning of section 1.704-1(b)(2)(ii)(g) of the Regulations;
3. the Gross Asset Values of Partnership assets distributed
to any Partner shall be the gross fair market values of such assets without
reduction for liabilities, as reasonably determined by the General Partner as
of the date of distribution; and
4. the Gross Asset Values of Partnership assets shall be
increased (or decreased) to reflect any adjustments to the adjusted basis of
such assets pursuant to sections 734(b) or 743(b) of the Code, but only to
the extent that such adjustments are taken into account in determining
Capital Accounts pursuant to section 1.704-1(b)(2)(iv)(m) of the Regulations
(as set forth in Exhibit B); provided, however, that Gross Asset Values shall
not be adjusted pursuant to this paragraph (4) to the extent that the General
Partner reasonably determines that an adjustment pursuant to paragraph (2)
above is necessary or appropriate in connection with a transaction that would
otherwise result in an adjustment pursuant to this paragraph (4).
At all times, Gross Asset Values shall be adjusted by any Depreciation taken
into account with respect to the Partnership's assets for purposes of
computing Net Income and Net Loss.
"Immediate Family" means, with respect to any individual, such
individual's spouse, parents, parents-in-law, descendants, nephews, nieces,
brothers, sisters, brothers-in-law, sisters-in-law, stepchildren,
sons-in-law, and daughters-in-law or any trust solely for the benefit of any
of the foregoing family members whose sole beneficiaries include the
foregoing family members.
"Incapacity" or "Incapacitated" means, (i) as to any individual
Partner, death, total physical disability, or entry of an order, judgment, or
decree by a court of competent jurisdiction adjudicating such Partner
incompetent to manage such Partner's person or estate; (ii) as to any
corporation which is a Partner, the filing of a certificate of dissolution,
or its equivalent, for the corporation or the revocation of its charter;
(iii) as to any partnership which is a Partner, the dissolution and
commencement of winding up of the partnership; (iv) as to any estate which is
a Partner, the distribution by the fiduciary of the estate's entire interest
in the Partnership; (v) as to any trustee of a trust which is a Partner, the
termination of the trust (but not the substitution of a new trustee); or (vi)
as to any Partner, the bankruptcy of such Partner. For purposes of this
definition, bankruptcy of a Partner shall be deemed to have occurred when (a)
the Partner commences a voluntary proceeding seeking liquidation,
reorganization, or other relief under any bankruptcy, insolvency, or other
similar law now or hereafter in effect; (b) the Partner is adjudged as
bankrupt or insolvent, or a final and nonappealable order for relief under
any bankruptcy, insolvency, or similar law now or hereafter in effect has
been entered against the Partner; (c) the Partner executes and delivers a
general assignment for the benefit of the Partner's creditors; (d) the
Partner files an answer or other pleading admitting or failing to contest the
material allegations of a petition filed against the Partner in any
proceeding of the nature described in clause (b), above; (e) the Partner
seeks, consents to, or acquiesces in the appointment of a trustee, receiver,
or liquidator for the Partner or for all or any substantial part of the
Partner's properties; (f) any proceeding seeking liquidation, reorganization,
or other relief of or against such Partner under any bankruptcy, insolvency,
or other similar law now or hereafter in effect has not been dismissed within
one hundred twenty (120) days after the commencement thereof; (g) the
appointment without the Partner's consent or acquiescence of a trustee,
receiver, or liquidator has not been vacated or stayed within ninety (90)
days of such appointment; or (h) an appointment referred to in clause (g)
which has been stayed is not vacated within ninety (90) days after the
expiration of any such stay.
"Indemnitee" means (i) any Person made a party to a proceeding by
reason of (A) such Person's status as (1) the General Partner or an Affiliate
thereof, (2) a director, trustee, officer, manager or general partner of the
Partnership or the General Partner (or an Affiliate thereof), or (3) in the
case of a director, trustee, officer, manager or general partner of any other
Entity, each Person serving in such capacity at the request of the
Partnership or the General Partner, or (B) such Person's liabilities,
pursuant to a loan guarantee or otherwise, for any indebtedness of the
Partnership or any Subsidiary of the Partnership (including, without
limitation, any indebtedness which the Partnership or any Subsidiary of the
Partnership has assumed or taken assets subject to); and (ii) such other
Persons (including Affiliates of the General Partner or the Partnership) as
the General Partner may designate from time to time (whether before or after
the event giving rise to potential liability), in its sole and absolute
discretion.
"Kramont" means Kramont Realty Trust, a Maryland real estate
investment trust.
"KRT Trust" means KRT Trust, a Maryland real estate investment
trust.
"Lien" means any lien, security interest, mortgage, deed of trust,
charge, claim, encumbrance, pledge, option, or right of first offer or first
refusal and any other right or interest of others of any kind or nature,
actual or contingent, or other encumbrance of any nature whatsoever.
"Limited Partner" means any Person named as a Limited Partner
(other than the General Partner in its capacity as the holder of OP Preferred
Units) in Exhibit A attached hereto, as such Exhibit may be amended from time
to time, or any Substituted Limited Partner or Additional Limited Partner, in
such Person's capacity as a limited partner of the Partnership. All Partners
other than the General Partner (in its capacity as General Partner) are
Limited Partners. For purposes of any vote of the Limited Partners in
connection with any merger, consolidation, or conversion involving the
Partnership (except as provided in the definition of "Qualifying Limited
Partner Interest"), the Limited Partners shall be treated as a single class
or group.
"Limited Partner Interest" means a Partnership Interest of a
Limited Partner in the Partnership representing a fractional part of the
Partnership Interests of all Limited Partners and includes any and all
benefits to which the holder of such a Partnership Interest may be entitled,
as provided in this Agreement, together with all obligations of such Person
to comply with the terms and provisions of this Agreement. A Limited Partner
Interest may be expressed as a number of OP Common Units.
"Liquidating Event" has the meaning set forth in Section 13.1.
"Liquidator" has the meaning set forth in Section 13.2.
"Master Agreement" means the Definitive Master Agreement dated as
of September 19, 1997, among CV Reit, Inc., Montgomery CV Trust, Drexel
Realty, Inc., and certain other Persons, as amended.
"Meshon" means Louis P. Meshon, Sr.
"Net Income" or "Net Loss" means, for each fiscal year or other
applicable period, an amount equal to the Partnership's taxable income or
loss for such year or period as determined for Federal income tax purposes by
the General Partner, determined in accordance with section 703(a) of the Code
(for this purpose, all items of income, gain, loss or deduction required to
be stated separately pursuant to section 703(a) of the Code shall be included
in taxable income or loss), adjusted as follows: (a) by including as an item
of gross income any tax-exempt income received by the Partnership and not
otherwise taken into account in computing Net Income or Net Loss; (b) by
treating as a deductible expense any expenditure of the Partnership described
in section 705(a)(2)(B) of the Code (or which is treated as a section
705(a)(2)(B) expenditure pursuant to section 1.704-1(b)(2)(iv)(i) of the
Regulations) and not otherwise taken into account in computing Net Income or
Net Loss, including amounts paid or incurred to organize the Partnership
(unless an election is made pursuant to section 709(b) of the Code) or to
promote the sale of interests in the Partnership and by treating deductions
for any losses incurred in connection with the sale or exchange of
Partnership property disallowed pursuant to sections 267(a)(1) or 707(b) of
the Code as expenditures described in section 705(a)(2)(B) of the Code; (c)
by taking into account Depreciation in lieu of depreciation, depletion,
amortization, and other cost recovery deductions taken into account in
computing taxable income or loss; (d) by computing gain or loss resulting
from any disposition of Partnership property with respect to which gain or
loss is recognized for Federal income tax purposes by reference to the Gross
Asset Value of such property rather than its adjusted tax basis; (e) in the
event of an adjustment of the Gross Asset Value of any Partnership asset
which requires that the Capital Accounts of the Partnership be adjusted
pursuant to sections 1.704-1(b)(2)(iv)(e), (f), and (g) of the Regulations,
by taking into account the amount of such adjustment as if such adjustment
represented additional Net Income or Net Loss pursuant to Exhibit B; and (f)
by not taking into account in computing Net Income or Net Loss items
separately allocated to the Partners pursuant to Paragraphs 1 and 2 of
Exhibit B and Sections 4.1 and 7.3B.
"Nonrecourse Deductions" has the meaning set forth in sections
1.704-2(b)(1) and 1.704-2(c) of the Regulations.
"Nonrecourse Liabilities" has the meaning set forth in section
1.704-2(b)(3) of the Regulations.
"OP Common Unit" means a fractional, undivided share of the
Partnership Interests of all Partners issued pursuant to Sections 4.1, 4.2,
and 4.3, but does not include any OP Preferred Unit or any other OP Unit not
designated as an OP Common Unit; provided, however, that the General Partner
Interest and the Limited Partner Interests shall have the differences in
rights, preferences and privileges as specified in this Agreement. The
number of OP Common Units outstanding and the Percentage Interests in the
Partnership represented by such OP Common Units are set forth in Exhibit A,
as such Exhibit may be amended from time to time. The ownership of OP Common
Units may (but need not, in the sole and absolute discretion of the General
Partner) be evidenced by such form of certificate for OP Common Units as the
General Partner may adopt from time to time. The General Partner may reflect
on any such certificate any transfer or other restriction, forfeitability
risk, or similar matter that pertains to the OP Common Units evidenced
thereby.
"OP Preferred Unit" means a fractional undivided share of the
Partnership Interests of all Partners that the General Partner has authorized
pursuant to Section 4.3 hereof that has distribution rights, or rights upon
liquidation, winding up and dissolution, that are superior or prior to the OP
Common Units.
"OP Unit" shall mean an OP Common Unit, an OP Preferred Unit or any
other fractional share of the Partnership Interests that the General Partner
has authorized pursuant to Section 4.3 hereof (an "Other OP Unit").
"OP Unit Designation" shall have the meaning set forth in Section
4.3A hereof.
"Partner" means a General Partner or a Limited Partner, and
"Partners" means the General Partner and the Limited Partners collectively.
"Partner Minimum Gain" means an amount, with respect to each
Partner Nonrecourse Debt, equal to the Partnership Minimum Gain that would
result if such Partner Nonrecourse Debt were treated as a Nonrecourse
Liability, determined in accordance with Regulations section 1.704-2(i)(3).
"Partner Nonrecourse Debt" has the meaning set forth in Regulations
section 1.704-2(b)(4).
"Partner Nonrecourse Deductions" has the meaning set forth in
Regulations section 1.704-2(i)(2), and the amount of Partner Nonrecourse
Deductions with respect to a Partner Nonrecourse Debt for a Partnership
taxable year shall be determined in accordance with the rules of Regulations
section 1.704-2(i)(2).
"Partnership" means Kramont Operating Partnership, L.P., a Delaware
limited partnership, and any successor thereto.
"Partnership Interest" means a partnership interest in the
Partnership held by either a Limited Partner or the General Partner (or the
predecessor in interest of an Assignee) and includes any and all benefits to
which the holder of such a Partnership Interest may be entitled as provided
and limited in this Agreement, together with all obligations of such Person
to comply with the terms and provisions of this Agreement. A Partnership
Interest may be expressed as a number of OP Common Units, OP Preferred Units
or other OP Units.
"Partnership Minimum Gain" has the meaning set forth in Regulations
section 1.704-2(b)(2), and the amount of Partnership Minimum Gain, as well as
any net increase or decrease in a Partnership Minimum Gain, for a Partnership
taxable year shall be determined in accordance with the rules of Regulations
section 1.704-2(d).
"Partnership Record Date" means the record date established by the
General Partner for the distribution of Available Cash pursuant to Section
5.1.
"Partnership Year" means the fiscal year of the Partnership, as set
forth in Section 9.2.
"Percentage Interest" means, as to a Partner owning OP Common Units
the fractional part of the Partnership Interests owned by such Partner and
determined from time to time by dividing the number of OP Common Units owned
by such Partner at any such time by the total number of OP Common Units
outstanding at such time.
"Permitted Partners" has the meaning set forth in subparagraph 1(b)
of Exhibit B.
"Permitted Transferee" means any person to whom OP Units are
permitted to be Transferred in accordance with Section 11.3 (determined
without regard to Section 11.3E(iii)).
"Person" means an individual or Entity.
"Qualifying Limited Partner Interest" at any time means (a) if 5%
or more of the OP Common Units at that time are not then held by the General
Partner or its Affiliates, a majority of the OP Common Units of the Limited
Partners (not including OP Common Units originally issued to the General
Partner and then held by the General Partner or its Affiliates, but
specifically including OP Common Units originally issued to other Limited
Partners and subsequently acquired by the General Partner or its Affiliates
pursuant to Section 8.6 or otherwise) and (b) otherwise, the OP Common Units
then held by the General Partner and its Affiliates.
"Regulations" means the final, temporary, or proposed Income Tax
Regulations promulgated under the Code, as such regulations may be amended
from time to time (including corresponding provisions of succeeding
regulations).
"REIT" means a real estate investment trust as defined in section
856 of the Code.
"REIT Requirements" has the meaning set forth in Section 5.2.
"Restricted Partner" has the meaning set forth in Section 1(b) of
Exhibit B.
"Section," "Article," or "Exhibit," when used without reference to
the Code, ERISA, the Act, the Regulations, regulations of the Department of
Labor, or other statute or document means a section or article of or exhibit
to, as the case may be, this Agreement.
"Share" means a common share of beneficial interest of the General
Partner, if the General Partner is a trust, and a share of common stock of
the General Partner, if the General Partner is a corporation.
"Shares Amount" means a number of Shares equal to the product of
the number of OP Common Units offered for redemption by a Redeeming Partner
times the Adjustment Factor; provided that, in the event the General Partner
issues to all holders of Shares rights, options, warrants, or convertible or
exchangeable securities entitling such holders to subscribe for or to
purchase Shares (collectively, the "rights"), then, for purposes of computing
the Cash Amount and the Shares Amount, (i) but only if the Redeeming Partner
shall tender to the General Partner the consideration then needed pursuant to
such rights if such rights are then exercisable, the Shares Amount shall also
include the number of Shares that a holder of Shares (in an amount equal to
the product of the number of OP Common Units offered for redemption times the
Adjustment Factor) would be entitled to receive upon exercise of such rights,
options, warrants, or securities or (ii) if such rights are not at such time
exercisable, the Shares Amount shall also include such rights that a holder
of that number of Shares would be entitled to receive. In the case of a
merger, consolidation, or recapitalization involving, or other change in
identity, form or place of organization of, the General Partner, the "Shares
Amount" shall mean a number of shares, certificates of beneficial interest,
cash or other property or other securities of the successor General Partner
in connection with such change equal to the product of the number of OP
Common Units offered for redemption by a Redeeming Partner times the
Adjustment Factor times the number (or fractional number) of such shares,
certificates of beneficial interest, cash or other property or other
securities issued or paid in exchange for one Share in connection with the
transaction or series of related transactions effecting such change (and such
shares, certificates of beneficial interest, cash or other property or other
securities shall be considered "Shares" for purposes hereof).
"Specified Redemption Date" means the tenth business day after
receipt by the General Partner of a Notice of Redemption.
"Stock Option Plans" means any plan adopted or assumed from time to
time by the General Partner pursuant to which Shares are issued, or options
to acquire Shares are granted, to employees, officers, directors or trustees
of the General Partner, the Partnership, or their respective Affiliates in
consideration for services or future services.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, or other Entity of which a majority of (i) the voting power of
the voting equity securities; or (ii) the outstanding equity interests, is
owned, directly or indirectly (including, without limitation, through one or
more other Subsidiaries), by such Person.
"Substituted Limited Partner" means a Person who is admitted as a
limited partner to the Partnership pursuant to Section 11.4.
"Tax Items" has the meaning set forth in Exhibit B.
"Terminating Capital Transaction" means any sale or other
disposition of all or substantially all of the assets of the Partnership or a
related series of transactions that, taken together, result in the sale or
other disposition of all or substantially all of the assets of the
Partnership.
"Transfer," as a noun, means any sale, assignment, conveyance,
pledge, hypothecation, gift, encumbrance, or other transfer and, as a verb,
means to sell, assign, convey, pledge, hypothecate, give, encumber, or
otherwise transfer.
"Value" means, with respect to any Share, the average of the daily
market price for the ten (10) consecutive trading days immediately preceding
the date on which the Notice of Redemption is received by the General Partner
(or, if such date is not a trading day, on the next succeeding trading day).
The market price for each such trading day shall be (i) if such shares are
listed or admitted to trading on any securities exchange or the Nasdaq
National Market, the closing price, regular way, on such day, or if no such
sale takes place on such day, the average of the closing bid and asked prices
on such day, (ii) if such shares are not listed or admitted to trading on any
securities exchange or the Nasdaq National Market, the last reported sale
price on such day or, if no sale takes place on such day, the average of the
closing bid and asked prices on such day, as reported by a reliable quotation
source designated by the General Partner or (iii) if such shares are not
listed or admitted to trading on any securities exchange or the Nasdaq
National Market and no such last reported sale price or closing bid and asked
prices are available, the average of the reported high bid and low asked
prices on such day, as reported by a reliable quotation source designated by
the General Partner, or if there shall be no bid and asked prices on such
day, the average of the high bid and low asked prices, as so reported, on the
most recent day (not more than ten (10) days prior to the date in question)
for which prices have been so reported; provided that, if there are no bid
and asked prices reported during the ten (10) days prior to the date in
question, the value of such shares shall be determined by the General Partner
acting in good faith on the basis of such quotations, if any, and other
information as it considers, in its reasonable judgment, appropriate. In the
event that any such Share includes rights that a holder of such share has or
would be entitled to receive, then the value of such rights shall be
determined by the General Partner acting in good faith on the basis of such
quotations and other information as it considers, in its reasonable judgment,
appropriate, and the value of such rights, as determined, shall be added to
the value of a Share, as determined in accordance with this definition, to
determine the Value of such Share.
Certain additional terms and phrases have the meanings set forth in
Exhibit B.
ARTICLE 2
Organizational Matters
2.1 Organization. The Partnership is a limited partnership formed
pursuant to the provisions of the Act and upon the terms and conditions set
forth in this Agreement. Except as expressly provided herein to the
contrary, the rights and obligations of the Partners and the administration
and termination of the Partnership shall be governed by the Act. KRT Trust
hereby continues as the General Partner until the effective time of the KRT
Trust Merger, and KRT Trust I LLC hereby continues as a Limited Partner
until the CV LP Holders are admitted to the Partnership as Limited Partners.
At the effective time of the KRT Trust Merger, notwithstanding anything to
the contrary contained in this Agreement, including Articles 11 and 12
hereof, Kramont shall automatically and without further action be admitted to
the Partnership as the General Partner and a Limited Partner, and thereafter
KRT Trust will cease to be the General Partner. Notwithstanding anything to
the contrary contained in this Agreement, including Articles 11 and 12
hereof: (i) upon the contribution to the Partnership of their units of
limited partner interest in CV Partnership or Holdings, as contemplated by
the Contribution Agreement, the CV LP Holders shall automatically and without
further action be admitted to the Partnership as Limited Partners; and (ii)
effective immediately after the admission to the Partnership of the CV LP
Holders as Limited Partners, all rights of KRT Trust I LLC as a Limited
Partner and all of its interests in the Partnership shall be canceled without
any consideration, and the only partners of the Partnership shall be Kramont
as General Partner and as a Limited Partner and the CV LP Holders as Limited
Partners. The Partnership Interest of each Partner shall be personal
property for all purposes.
2.2 Name. The name of the Partnership is Kramont Operating
Partnership, L.P. The Partnership's business may be conducted under any
other name or names deemed advisable by the General Partner, including the
name of the General Partner or any Affiliate thereof. The words "Limited
Partnership," "L.P.," "Ltd." or similar words or letters shall be included in
the Partnership's name where necessary for the purposes of complying with the
laws of any jurisdiction that so requires. The General Partner in its sole
and absolute discretion may, upon 5 days prior written notice to the Limited
Partners, change the name of the Partnership.
2.3 Registered Office and Agent; Principal Office. The address of
the registered office of the Partnership in the State of Delaware and the
name and address of the registered agent for service of process on the
Partnership in the State of Delaware is The Corporation Trust Company, 1209
Orange Street, Wilmington, DE 19801 or such other address and/or registered
agent as the General Partner may from time to time designate. The principal
office of the Partnership shall be 580 West Germantown Pike, Plymouth
Meeting, PA 19462, or such other place as the General Partner may from time
to time designate by notice to the Limited Partners. The Partnership may
maintain offices at such other place or places within or outside the State of
Delaware as the General Partner deems advisable.
2.4 Power of Attorney.
A. Each Limited Partner and each Assignee hereby constitutes
and appoints the General Partner, any Liquidator, and authorized officers and
attorneys-in-fact of each, and each of those acting singly, in each case with
full power of substitution, as its true and lawful agent and
attorney-in-fact, with full power and authority in its name, place and stead
to:
(1) execute, swear to, acknowledge, deliver, file, and
record in the appropriate public offices (a) all certificates, documents, and
other instruments (including, without limitation, this Agreement and the
Certificate and all amendments or restatements thereof) that the General
Partner or the Liquidator deems appropriate or necessary to form, qualify, or
continue the existence or qualification of the Partnership as a limited
partnership (or a partnership in which the Limited Partners have limited
liability) in the State of Delaware and in all other jurisdictions in which
the Partnership may or plans to conduct business or own property, including,
without limitation, any documents necessary or advisable to convey any
Contributed Property to the Partnership; (b) all instruments that the General
Partner deems appropriate or necessary to reflect any amendment, change,
modification, or restatement of this Agreement in accordance with its terms;
(c) all conveyances and other instruments or documents that the General
Partner or the Liquidator deems appropriate or necessary to reflect the
dissolution and termination of the Partnership pursuant to the terms of this
Agreement, including, without limitation, a certificate of cancellation; (d)
all instruments relating to the admission, withdrawal, removal, or
substitution of any Partner pursuant to, or other events described in,
Article 11, 12, or 13 or the Capital Contribution of any Partner; and (e) all
certificates, documents, and other instruments relating to the determination
of the rights, preferences and privileges of any Partnership Interest; and
(2) execute, swear to, seal, acknowledge, and file all
ballots, consents, approvals, waivers, certificates, and other instruments
appropriate or necessary, in the sole and absolute discretion of the General
Partner or any Liquidator, to make, evidence, give, confirm, or ratify any
vote, consent, approval, agreement, or other action which is made or given by
the Partners hereunder or is consistent with the terms of this agreement or
appropriate or necessary, in the sole and absolute discretion of the General
Partner or any Liquidator, to effectuate the terms or intent of this
Agreement.
Nothing contained herein shall be construed as authorizing the General
Partner or any Liquidator to amend this Agreement except in accordance with
Article 14 or as may be otherwise expressly provided for in this Agreement.
B. The foregoing power of attorney is hereby declared to be
irrevocable and a power coupled with an interest, in recognition of the fact
that each of the Partners will be relying upon the power of the General
Partner and any Liquidator to act as contemplated by this Agreement in any
filing or other action by it on behalf of the Partnership, and it shall
survive and not be affected by the subsequent Incapacity of any Limited
Partner or Assignee and the Transfer of all or any portion of such Limited
Partner's or Assignee's OP Units and shall extend to such Limited Partner's
or Assignee's heirs, successors, assigns, and personal representatives. Each
such Limited Partner or Assignee hereby agrees to be bound by any
representation made by the General Partner or any Liquidator, acting in good
faith pursuant to such power of attorney, and each such Limited Partner or
Assignee hereby waives any and all defenses which may be available to
contest, negate, or disaffirm the action of the General Partner or any
Liquidator, taken in good faith under such power of attorney. Each Limited
Partner or Assignee shall execute and deliver to the General Partner or the
Liquidator, within fifteen (15) days after receipt of the General Partner's
or Liquidator's request therefor, such further designations, powers of
attorney, and other instruments as the General Partner or the Liquidator, as
the case may be, deems necessary to effectuate this Agreement and the
purposes of the Partnership.
2.5 Term. The term of the Partnership commenced on the date the
Certificate was filed and shall continue until December 31, 2096, unless the
Partnership is dissolved sooner pursuant to the provisions of Article 13 or
as otherwise provided by law.
ARTICLE 3
Purpose
3.1 Purpose and Business. The purpose and nature of the business
to be conducted by the Partnership is to conduct any business that may be
lawfully conducted by a limited partnership formed pursuant to the Act
including, without limitation, to engage in the following activities: to
acquire, hold, own, develop, construct, improve, maintain, manage, operate,
sell, lease, transfer, encumber, convey, exchange, and otherwise dispose of
or deal with real and personal property of all kinds; to undertake such other
activities as may be necessary, advisable, desirable, incidental, or
convenient to the business of the Partnership; to acquire, hold, own, sell,
transfer, encumber, convey, exchange, and otherwise dispose of general
partner and limited partner interests in CV Partnership and Holdings (and the
membership interests in CV OP Holdings LLC) which may be held directly by the
Partnership or through the LP, and to act and to cause the LP to act as a
general partner and a limited partner of CV Partnership and Holdings (and as
sole member of CV OP Holdings LLC); to acquire, hold, own, sell, transfer,
encumber, convey, exchange, and otherwise dispose of partnership interests in
the LP and in limited liability company interests in CV GP LLC, the general
partner of the LP ("CV GP LLC"), and to act as a limited partner of the LP
and as a member of CV GP LLC; and to engage in such other ancillary
activities as shall be necessary or desirable to effectuate the foregoing
purposes, all with a view to enabling the Partnership, consistent with
operation of the Partnership in a prudent manner, to make pro rata
distributions to all Partners sufficient to cause the Company to continue to
qualify as a REIT to which the provisions of part II of subchapter M of
chapter 1 of the Code apply; provided, however, that such business shall be
limited to and conducted in such a matter as to permit the General Partner at
all times to be classified as a real estate investment trust for federal
income tax purposes. The Partnership shall have all powers necessary,
advisable, desirable, incidental, or convenient to accomplish the purposes
enumerated. In connection with the foregoing, but subject to all of the
terms, covenants, conditions, and limitations contained in this Agreement and
any other agreement entered into by the Partnership, the Partnership shall
have full power and authority to enter into, perform, and carry out contracts
of any kind, to borrow money and to issue evidences of indebtedness, whether
or not secured by mortgage, trust deed, pledge, or other Lien, and, directly
or indirectly, to acquire and construct additional properties necessary or
useful in connection with its business. Notwithstanding anything in this
Agreement to the contrary, the Company has the right to fail to qualify as a
REIT to which the provisions of part II of subchapter M of chapter 1 of the
Code apply.
3.2 Powers. The Partnership is empowered to do any and all acts
and things necessary, appropriate, proper, advisable, incidental to, or
convenient for the furtherance and accomplishment of the purposes and
business described herein and for the protection and benefit of the
Partnership (including specifically, but without limitation, to exercise all
of the powers set out in Section 7.1); provided, that the Partnership shall
refrain from taking any action which, in the General Partner's good faith
belief, (i) could adversely affect the ability of the Company to continue to
qualify as a REIT to which the provisions of part II of subchapter M of
chapter 1 of the Code apply (and as a "corporation subject to a tax imposed
by subchapter M," within the meaning of section 11(c) of the Code); (ii)
could subject the Company to any additional taxes or other liability under
the Code, including specifically, but without limitation, under sections 30,
42, 45A, 49, 50, 55, 453, 453A, 531, 541, 857, 1294, or 4981 of the Code; or
(iii) could violate any law or regulation of any governmental body or agency
having jurisdiction over the General Partner, its Affiliates, or their
respective securities or properties.
Section 3.3 Representations and Warranties by the Parties.
A. Each Partner that is an individual admitted to the Partnership
as a Partner after the date hereof (including, without limitation, each
Additional Limited Partner or Substituted Limited Partner as a condition to
becoming an Additional Limited Partner or a Substituted Limited Partner)
represents and warrants to each other Partner(s) that (i) the consummation of
the transactions contemplated by this Agreement to be performed by such
Partner will not result in a breach or violation of, or a default under, any
material agreement by which such Partner or any of such Partner's property is
bound, or any statute, regulation, order or other law to which such Partner
is subject, (ii) such Partner is neither a "foreign person" within the
meaning of Code Section 1445(f) nor a "foreign partner" within the meaning of
Code Section 1446(e), and (iii) this Agreement is binding upon, and
enforceable against, such Partner in accordance with its terms.
B. Each Partner admitted to the Partnership as a Partner after
the date hereof (including, without limitation, each Additional Limited
Partner or Substituted Limited Partner as a condition to becoming an
Additional Limited Partner or a Substituted Limited Partner) that is not an
individual represents and warrants to each other Partner(s) that (i) all
transactions contemplated by this Agreement to be performed by it have been
duly authorized by all necessary action, including, without limitation, that
of its general partner(s), committee(s), trustee(s), beneficiaries, directors
and/or shareholder(s), as the case may be, as required, (ii) the consummation
of such transactions shall not result in a breach or violation of, or a
default under, its partnership or operating agreement, trust agreement,
charter or bylaws, as the case may be, any material agreement by which such
Partner or any of such Partner's properties or any of its partners, members,
beneficiaries, trustees or shareholders, as the case may be, is or are bound,
or any statute, regulation, order or other law to which such Partner of any
of its partners, members trustees, beneficiaries or shareholders, as the case
may be, is or are subject, (iii) such Partner is neither a "foreign person"
within the meaning of Code Section 1445(f) nor a "foreign partner" within
the meaning of Code Section 1446(e) and (iv) this Agreement is binding upon,
and enforceable against, such Partner in accordance with its terms.
C. Each Partner admitted to the Partnership as a Partner after
the date hereof (including, without limitation, each Substituted Limited
Partner as a condition to becoming a Substituted Limited Partner) represents,
warrants and agrees that it has acquired its interest in the Partnership for
its own account for investment only and not for the purpose of, or with a
view toward, the resale or distribution of all or any part thereof, nor with
a view toward selling or otherwise distributing such interest or any part
thereof at any particular time or under any predetermined circumstances.
Each such Partner further represents and warrants that (together with its
advisors and/or investor representative) it is a sophisticated investor, able
and accustomed to handling sophisticated financial matters for itself,
particularly real estate investments, and that it has a sufficiently high net
worth that it does not anticipate a need for the funds that it has invested
in the Partnership.
D. The representations and warranties contained in Sections
3.3.A, 3.3.B and 3.3.C hereof shall survive the execution and delivery of
this Agreement by each Partner (and, in the case of an Additional Limited
Partner or Substituted Limited Partner, the admission of such Additional
Limited Partner or Substituted Limited Partner as a Limited Partner in the
Partnership) and the dissolution, liquidation and termination of the
Partnership.
E. Each Partner (including, without limitation, each Substituted
Limited Partner as a condition to becoming a Substituted Limited Partner)
hereby acknowledges that no representations as to potential profit, cash
flows, taxable income or loss, funds from operations or yield, if any, in
respect of the Partnership or the General Partner have been made by any
Partner or any employee or representative or Affiliate of any Partner, and
that any projections submitted to such Partner shall not constitute any
representation or warranty of any kind or nature, express or implied. Each
Partner (including, without limitation, each Substituted Limited Partner as a
condition to becoming a Substituted Limited Partner) hereby acknowledges that
no projections as to taxable income or loss in respect to the Partnership or
the General Partner or the business or financial condition or property of the
Partnership or the General Partner have been submitted to such Partner by any
Partner or an employee or representative or Affiliate of any Partner, and
each Partner is relying on its own tax advisors with respect to the
transactions contemplated by this Agreement.
ARTICLE 4
Capital Contributions
4.1 Capital Contributions of the Partners.
A. The Limited Partners owning OP Common Units have made, or
upon the consummation of the transactions contemplated by the Contribution
Agreement, will have made, the Capital Contributions and have been issued, or
upon consummation of the transactions contemplated by the Contribution
Agreement, will have been issued, OP Common Units in exchange therefor and
have, or upon consummation of the transactions contemplated by the
Contribution Agreement, will have, the Percentage Interest in the
Partnership, all as set forth in Exhibit A (as such Exhibit A may hereafter
be amended or corrected by the General Partner to reflect the provisions
hereof). The General Partner has made the Capital Contributions and has been
issued the OP Common Units and the OP Preferred Units in exchange therefor,
all as set forth in Exhibit A (and footnote 3 thereto) (as such Exhibit A may
be amended or corrected by the General Partner to reflect the provisions
hereof). To the extent the Partnership acquires any property by the merger
of any other Entity into the Partnership, or by the contribution to the
Partnership of interests in other Entities, including general partner or
limited partner interests of CV Partnership or Holdings (and the membership
interests in CV OP Holdings LLC), Persons who receive Partnership Interests
in exchange for their interests in the Entity merging into the Partnership
or, in the case of a contribution to the Partnership of interests in other
Entities, in exchange for such interests in the other Entities, shall be
deemed to have made Capital Contributions as provided in the applicable
merger agreement, the applicable contribution agreement, or any other
applicable document and as set forth in Exhibit A. The number of OP Common
Units held by the General Partner, in its capacity as general partner, shall
be deemed to be the General Partner Interest.
B. The Partners shall have no obligation to make any
additional Capital Contributions or loans to the Partnership.
4.2 Additional Funds.
A. The sums of money required to finance the business and
affairs of the Partnership shall be derived from, among other things, the
initial Capital Contributions made to the Partnership by the Partners as set
forth in Section 4.1 and from funds generated from the operation and business
of the Partnership including, without limitation, distributions directly or
indirectly received by the Partnership from any Entity. The General Partner
may, in its sole and absolute discretion, in such amounts and at such times
as it solely shall determine to be necessary or appropriate, (i) cause the
Partnership to issue additional Partnership Interests and admit additional
limited partners to the Partnership in accordance with Section 4.3; (ii) make
additional Capital Contributions to the Partnership (subject to the
provisions of Section 4.2B); (iii) in the event additional financing is
needed from sources other than as set forth in the preceding sentence for any
reason, cause the Partnership to borrow money, enter into loan arrangements,
issue debt securities, obtain letters of credit, or otherwise borrow money on
a secured or unsecured basis; (iv) make a loan or loans to the Partnership
(subject to Section 4.2B); or (v) except as provided in Section 7.1A(3), sell
any assets or properties of the Partnership.
B. In no event shall the Limited Partners be required to
make any additional Capital Contributions or any loan to, or otherwise
provide any financial accommodation for the benefit of, the Partnership.
C. If the Company shall issue any debt securities (otherwise
than to enable the Company to pay any dividend required to cause the Company
to continue to qualify as a REIT to which the provisions of part II of
subchapter M of chapter 1 of the Code apply), preferred stock, or common
stock (including additional Shares (otherwise than (i) in connection with
payment of the Shares Amount pursuant to Section 8.6 of this Agreement (but
not pursuant to Section 8.6 of the Second Amended and Restated Agreement of
Limited Partnership of CV Partnership) or (ii) in connection with the
conversion or exchange of securities of the Company solely in conversion or
exchange for other securities of the Company)) or rights, options, warrants,
or convertible or exchangeable securities containing the right to subscribe
for or purchase any of the foregoing (collectively, "Securities"), the
Company shall (i) in the case of debt securities, lend to the Partnership an
amount equal to the proceeds of or consideration received for such Securities
on the same terms and conditions, including interest rate and repayment
schedule, as shall be applicable with respect to or incurred in connection
with the issuance of such Securities and the proceeds of, or consideration
received from, any exercise, exchange, or conversion thereof (if applicable);
(ii) in the case of equity Securities senior or junior to the Shares as to
dividends and distributions on liquidation, contribute to the Partnership an
amount equal to the proceeds of or consideration (including any property or
other non-cash assets) received for such Shares or other Securities and the
proceeds of, or consideration received from, any exercise, exchange, or
conversion thereof (if applicable), and receive from the Partnership
interests in the Partnership in consideration therefor with the same economic
terms and conditions, including dividend, dividend priority, and liquidation
preference, as are applicable to such Securities; and (iii) in the case of
Shares or other equity Securities on a parity with the Shares as to dividends
and distributions on liquidation (including, without limitation, Shares or
other Securities issued upon exercise of options issued under the Stock
Option Plans), contribute to the Partnership an amount equal to the proceeds
of or consideration (including any property or other non-cash assets)
received for such Shares or other Securities and the proceeds of, or
consideration received from, any subsequent exercise, exchange, or conversion
thereof (if applicable), and receive from the Partnership a number of
additional OP Common Units in consideration therefor equal to the product of
(x) the number of Shares or other equity Securities on a parity with Shares
(appropriately adjusted if such parity is not share-for-share) issued by the
Company, multiplied by (y) a fraction the numerator of which is one and the
denominator of which is the Adjustment Factor in effect on the date of such
contribution. Notwithstanding the foregoing, if at any time the Company
issues any Shares pursuant to a Stock Option Plan (whether pursuant to the
exercise of a stock option or the grant of a restricted share award or
otherwise), the following shall occur with respect to each such Share: (i)
the Company shall be deemed to contribute to the capital of the Partnership
an amount of cash equal to the current per share market price of a Share on
the date such share is issued (or, if earlier, the date the related option is
exercised); (ii) the Partnership shall be deemed to purchase from the Company
a Share for an amount of cash equal to the amount of cash deemed contributed
by the Company to the Partnership in clause (i) above (and such Share is
deemed delivered to its owner under the Stock Option Plan); (iii) the net
proceeds (including the amount of any payments made on a loan with respect to
a stock purchase award) received by the Company with respect to such Share,
if any, shall be concurrently transferred to the Partnership (and such net
proceeds so transferred shall not constitute a capital contribution); and
(iv) the Partnership shall issue to the Company for each such Share one (1)
additional OP Common Unit registered in the name of the Company. The
Partnership shall retain any net proceeds that are paid directly to the
Partnership.
4.3 Issuance of Additional Partnership Interests;
Admission of Additional Limited Partners.
A. General. The General Partner is hereby authorized to
cause the Partnership (i) to issue additional Partnership Interests, in the
form of OP Common Units for any Partnership purpose, at any time or from time
to time, to the Partners (including the General Partner) or to other Persons,
and to admit such Persons as Additional Limited Partners, for such
consideration and on such terms and conditions as shall be established by the
General Partner in its sole discretion, and (ii) to issue additional
Partnership Interests, in the form of OP Preferred Units or other OP Units to
the General Partner, without further consideration, but only to the extent
and with such economic terms and for such periods as shall be necessary to
provide the General Partner with distributions at such times and in such
amounts as shall be required to meet its payment obligations under the
provisions of any class of preferred stock or other equity securities of the
General Partner then issued and outstanding, provided that (y) such OP Units
shall not be transferable by the General Partner except to a successor to the
Company which becomes General Partner and (z) such OP Preferred Units or
other OP Units (other than OP Common Units) issued to the General Partner
shall not entitle the holder thereof to vote on matters on which the Partners
holding OP Common Units may vote; in each case, all without the approval of
any Limited Partners. Subject to the foregoing, the General Partner is
expressly authorized to cause the Partnership to issue OP Units (i) upon the
conversion, redemption or exchange of any Debt, OP Units or other securities
issued by the Partnership, (ii) for less than fair market value, so long as
the General Partner concludes in good faith that such issuance is in the best
interests of the Partnership, and (iii) in connection with any merger of any
other Person into the Partnership. Subject to Delaware law and only as
permitted by the first sentence of this Section 4.3A, any additional
Partnership Interests may be issued in one or more classes, or one or more
series of any of such classes, with such designations, preferences and
relative, participating, optional or other special rights, powers and duties
as shall be determined by the General Partner, in its sole and absolute
discretion without the approval of any Limited Partner, and such rights,
powers and duties shall be set forth in a written document thereafter
attached to and made an exhibit to this Agreement (each, an "OP Unit
Designation"). On the date hereof, the Partnership has issued Class A-1,
Class B-1 and Class D OP Preferred Units, in the amounts and with the
designations, preferences and rights, powers and duties set forth on the OP
Unit Designations attached hereto as Exhibits F, G and H, respectively.
Without limiting the generality of the foregoing and only as permitted by the
first sentence of this Section 4.3A, the General Partner shall have authority
to specify (a) the allocation of items of Partnership income, gain, loss,
deduction and credit to each such class or series of Partnership Interests;
(b) the right of each such class or series of Partnership Interests to share
in Partnership distributions; (c) the rights of each such class or series of
Partnership Interests upon dissolution and liquidation of the Partnership;
(d) the voting rights, if any, of each such class or series of Partnership
Interests; and (e) the conversion, redemption or exchange rights applicable
to each such class or series of Partnership Interests and such other rights,
preferences and privileges as the General Partner may determine. Upon the
issuance of any additional Partnership Interests, the General Partner shall
amend Exhibit A as appropriate to reflect such issuance.
B. Notwithstanding the foregoing, no issuance of Partnership
Interests pursuant to this Section 4.3 shall be made if (i) such issuance has
a material adverse impact (as such material adverse impact is determined in
the good faith discretion of the General Partner's Board of Directors) on (A)
the existing Limited Partners' right to exercise their rights under Section
8.6, (B) the economic effect upon the Limited Partners of the allocations set
forth in Exhibit B (other than due to the issuance of OP Units or other
interests in the Partnership as set forth in this Section 4.3), (ii) such
issuance causes the Partnership to become, with respect to any employee
benefit plan subject to title I of ERISA or section 4975 of the Code, a
"party in interest" (as defined in section 3(14) of ERISA) or a "disqualified
person" (as defined in section 4975(e) of the Code); and (iii) such issuance
would not cause any portion of the assets of the Partnership to constitute
"plan assets" within the meaning of the regulations promulgated by the
Department of Labor, at 29 C.F.R. Section 2510.3-101. Subject to the
limitations set forth in the preceding sentence and in Articles 11 and 12,
the General Partner may take such steps as it, in its reasonable discretion,
deems necessary or appropriate to admit any Person as a Limited Partner of
the Partnership, including, without limitation, amending Exhibit A or any
other provisions of this Agreement (except as provided in Section 14.1C)
4.4 Repurchase of Shares; Excess Shares. In the event that the
General Partner or any Affiliate thereof shall elect to purchase from the
Company's shareholders Shares for the purpose of delivering such Shares to
satisfy an obligation under any dividend reinvestment program adopted by the
Company or any Affiliate thereof, any employee stock purchase plan adopted by
the Company or any Affiliate thereof, or any other obligation or arrangement
undertaken by the Company or any Affiliate thereof in the future, the
purchase price paid by the Company or any Affiliate thereof for such Shares
and any other expenses incurred by the Company or any Affiliate thereof in
connection with such purchase shall be considered expenses of the Partnership
and shall be reimbursed to the Company or such Affiliate, subject to the
condition that: (i) if such Shares subsequently are to be sold by the Company
or any Affiliate thereof, as provided in Section 4.2B, the Company shall pay
to the Partnership an amount equal to any net proceeds received by the
Company or such Affiliate for such Shares (provided that an exchange of
Shares for OP Units pursuant to Section 8.6 would not be considered a sale
for such purposes); and (ii) if such Shares are not sold by the Company or
any Affiliate thereof within 30 days after the purchase thereof, the General
Partner shall cause the Partnership to cancel a number of OP Units held by
the Company, as a Limited Partner, equal to the product of (x) the number of
such Shares and (y) a fraction, the numerator of which is one and the
denominator of which is the Adjustment Factor in effect on the date of such
contribution.
4.5 No Third Party Beneficiary. No creditor or other third party
having dealings with the Partnership shall have the right to enforce the
right or obligation of any Partner to make Capital Contributions or loans or
to pursue any other right or remedy hereunder or at law or in equity, it
being understood and agreed that the provisions of this Agreement shall be
solely for the benefit of, and may be enforced solely by, the parties hereto
and their respective successors and assigns.
4.6 No Interest; No Return. No Partner shall be entitled to
interest on its Capital Contribution or on such Partner's Capital Account.
Except as provided herein or by law, no Partner shall have any right to
demand or receive the return of its Capital Contribution from the
Partnership.
4.7 No Preemptive Rights. Subject to any preemptive rights that
may be granted pursuant to Section 4.3, no Person shall have any preemptive
or other similar right with respect to (i) additional Capital Contributions
or loans to the Partnership or (ii) issuance or sale of any OP Units or other
Partnership Interests.
ARTICLE 5
Distributions
5.1 Regular Distributions. Subject to the payment of any amounts
required to be made to the General Partner in priority to the Limited
Partners pursuant to any OP Unit Designation, and except for distributions
pursuant to Section 13.2 in connection with the dissolution and liquidation
of the Partnership, and subject to the provisions of Sections 5.3, 5.4, and
5.5, the General Partner shall cause the Partnership to distribute, from time
to time as determined by the General Partner, but in any event not less
frequently than quarterly, all or such portion as the General Partner may in
its sole discretion determine, of Available Cash generated by the Partnership
during such quarter, to the holders of OP Common Units in accordance with
their respective OP Common Units held on the Partnership Record Date with
respect to such quarter; provided, however, that in no event may a Partner
receive a distribution of Available Cash with respect to an OP Unit if such
Partner is entitled to receive a distribution out of such Available Cash with
respect to a Share for which such OP Unit has been exchanged. Except as may
otherwise be provided in the terms of any OP Unit Designation, distributions
payable with respect to OP Units (other than OP Units held by the General
Partner and any other OP Common Units issued pursuant to the Contribution
Agreement) that were not outstanding during the entire quarterly period in
respect of which any distribution is made shall be prorated based on the
portion of the period such interests were outstanding.
5.2 Qualification as a REIT. The General Partner may cause the
Partnership (including, without limitation, by causing any Entity in which
the Partnership holds an interest to make distributions to the Partnership)
to distribute sufficient amounts under this Article 5 to enable the General
Partner to make distributions sufficient to (i) satisfy the requirements for
qualifying as a REIT under the Code and Regulations ("REIT Requirements"),
and (ii) avoid any Federal income or excise tax liability of the Company
(provided, however, that a general partner of the Partnership shall not be
bound to comply with this covenant to the extent such distributions would
violate applicable Delaware law).
5.3 Withholding. With respect to any withholding tax or other
similar tax liability or obligation to which the Partnership may be subject
as a result of any act or status of any Partner or to which the Partnership
becomes subject with respect to any OP Unit, the Partnership shall have the
right to withhold amounts of Available Cash distributable to such Partner or
with respect to such OP Units, to the extent of the amount of such
withholding tax or other similar tax liability or obligation pursuant to the
provisions contained in Section 10.4.
5.4 Distributions in Kind. No right is given to any Unit holder to
demand and receive property other than cash as provided in this Agreement.
The General Partner may determine, in its sole discretion, to make a pro rata
distribution in kind of Partnership assets to the Partners.
5.5 Distributions Upon Liquidation. Proceeds from a Terminating
Capital Transaction and any other cash received or reductions in reserves
made after commencement of the liquidation of the Partnership shall be
distributed to the Partners in accordance with Section 13.2. Notwithstanding
any provision to the contrary contained in this Agreement (including any OP
Unit Designation), the Partnership, and the General Partner on behalf of the
Partnership, shall not be required to make a distribution to a Partner or
holder of an OP Unit on account of its interest in the Partnership if such
distribution would violate Section 17-607 of the Act or any other applicable
law.
ARTICLE 6
Allocations
Subject to the allocations provided in any OP Unit Designation, the
Net Income, Net Loss, and other items of the Partnership shall be allocated
pursuant to the provisions of Section 7.3B and Exhibit B.
ARTICLE 7
Management and Operations of Business
7.1 Management.
A. Except as otherwise expressly provided in this Agreement,
all management powers over the business and affairs of the Partnership are
and shall be exclusively vested in the General Partner, and no Limited
Partner shall have any right to participate in or exercise control or
management power over the business and affairs of the Partnership. The
General Partner may not be removed by the Limited Partners with or without
cause. In addition to the powers now or hereafter granted a general partner
of a limited partnership under applicable law or which are granted to the
General Partner under any other provision of this Agreement, the General
Partner shall have full power and authority to do all things deemed necessary
or desirable by it to conduct the business of the Partnership, to exercise
all powers set forth in Section 3.2 hereof, and to effectuate the purposes
set forth in Section 3.1 hereof, including, without limitation:
(1) (a) the making of any expenditures, the lending or
borrowing of money, including, without limitation, making prepayments on
loans and borrowing money to permit the Partnership to make distributions to
its Partners in such amounts sufficient to permit the Company (so long as the
Company qualifies as a REIT) to avoid the payment of any Federal income tax
(including, for this purpose, any excise tax pursuant to section 4981 of the
Code) and to make distributions to its shareholders in amounts sufficient to
permit the Company to maintain REIT status, (b) the assumption or guarantee
of, or other contracting for, indebtedness and other liabilities, (c) the
issuance of evidences of indebtedness (including the securing of the same by
deed, mortgage, deed of trust, or other lien or encumbrance on the
Partnership's assets), (d) the incurring of any obligations it deems
necessary for the conduct of the activities of the Partnership, and (e) the
execution and delivery, on the Partnership's behalf, of evidences of
indebtedness and documents granting security for the payment thereof (with or
without warrant of attorney to confess judgment against the Partnership upon
default) and, without limiting the generality of the foregoing, the granting
of a warrant of attorney to confess judgment against the Partnership;
(2) the making of tax, regulatory, and other filings, or
rendering of periodic or other reports to governmental or other agencies
having jurisdiction over the business or assets of the Partnership;
(3) the acquisition, disposition, transfer, mortgage,
pledge, encumbrance, hypothecation, or exchange of any assets of the
Partnership, the LP, CV GP LLC or of CV Partnership, of which the Partnership
or the LP is the General Partner (including the exercise or grant of any
conversion, option, privilege, or subscription right or other right available
in connection with any assets at any time held by the Partnership), or the
merger or other combination or conversion of the Partnership with or into
another entity; provided that (a) no disposition (including a disposition
described in Section 7.1A(23)) of an interest in a property listed on Exhibit
D (whether by disposition of such property or by disposition of the
Partnership's interest in an Entity owning such property) may be made prior
to the date listed with respect to such property on Exhibit D (but only to
the extent the person listed with respect to such property on Exhibit D is a
Limited Partner hereunder), without the consent of each person listed with
respect to such property on Exhibit D (b) (x) prior to August 1, 2000, except
with the consent or at the request of Meshon and Paul Cohen (but only to the
extent each is a Limited Partner hereunder), in the case of the Woodbourne
Square Shopping Center shopping center, or (y) prior to July 31, 2002, except
with the consent or at the request of Meshon, Patricia Meshon, Carol D. Cohen
and Paul H. Cohen (but only to the extent each is a Limited Partner
hereunder), in the case of the Chesterbrook Shopping Center Plaza shopping
center, or (z) prior to June 24, 2002, except with the consent or at the
request of Marlton Crossing Shopping Center Limited Partnership, a New Jersey
limited partnership (but only to the extent it is a Limited Partner), in the
case of the Marlton Crossing Shopping Center Phase I (the "Marlton Center"),
or, notwithstanding clauses (x), (y), and (z), except as required under the
Master Agreement, the Partnership shall take no action (other than making
capital improvements to the property involved, causing a sale not otherwise
prohibited hereunder of the property involved or the Partnership's interest
therein, making the principal amortization payments scheduled under the
respective loan documents in effect on the date hereof, or issuing additional
Partnership Interests under Section 4.3) which, of itself, would cause a
reduction in the share of Meshon or Paul Cohen, (but only to the extent each
is a Limited Partner hereunder) of the liabilities to which the Woodbourne
Square Shopping Center and Chesterbrook Shopping Center Plaza shopping
centers are subject, if such reduction would, of itself, cause a realization
or recognition of income to Meshon or Paul Cohen (in each case, to the extent
a party hereto); provided that the consent of any individual described in
this Section 7.1A(3) shall not be required after such individual's death;
(4) the use of the assets of the Partnership (including,
without limitation, cash on hand) for any purpose consistent with the terms
of this Agreement and on any terms it sees fit, including, without
limitation, the financing of the conduct of the operations of the Company or
its Affiliates, the Partnership, or any of the Partnership's Subsidiaries,
the lending of funds to other Persons (including, without limitation, the
Subsidiaries of the Partnership and/or the Company or its Affiliates), and
the repayment of obligations of the Partnership and its Subsidiaries and any
other Person in which it has an equity investment, and the making of capital
contributions to its Subsidiaries;
(5) the management, operation, expansion, development,
construction, leasing, landscaping, repair, alteration, demolition, or
improvement of any real property or improvements owned by the Partnership or
any Subsidiary of the Partnership;
(6) the negotiation, execution, and performance of any
contracts, conveyances, or other instruments that the General Partner
considers necessary, advisable, desirable, incidental, or convenient to the
conduct of the Partnership's operations or the implementation of the General
Partner's powers under this Agreement, including contracting with
contractors, developers, consultants, accountants, legal counsel, other
professional advisors, and other agents and the payment of their expenses and
compensation out of the Partnership's assets;
(7) the distribution of Partnership cash or other
Partnership assets in accordance with this Agreement;
(8) the holding, managing, investing, and reinvesting
cash and other assets of the Partnership;
(9) the collection and receipt of revenues and income of
the Partnership;
(10) the establishment of one or more divisions of the
Partnership, the selection and dismissal of employees of the Partnership
(including, without limitation, employees who may be designated as officers
having titles such as "president," "vice president," "secretary" and
"treasurer" of the Partnership), and agents, outside attorneys, accountants,
consultants and contractors of the Partnership, and the determination of
their compensation and other terms of employment or engagement;
(11) the maintenance of such insurance for the benefit of
the Partnership and the Partners as it deems necessary or appropriate;
(12) the formation of, or acquisition of an interest in,
and the contribution of property to, any further limited or general
partnerships, limited liability companies, joint ventures, or other
relationships that it deems desirable (including, without limitation, the
acquisition or disposal of interests in, and the contributions of property
to, its Subsidiaries and any other Person in which it has an equity
investment from time to time);
(13) the control of any matters affecting the rights and
obligations of the Partnership, including the settlement, compromise,
submission to arbitration or any other form of dispute resolution, or
abandonment of any claim, cause of action, liability, debt or damages, due or
owing to or from the Partnership, the commencement or defense of suits, legal
proceedings, administrative proceedings, arbitration, or other forms of
dispute resolution, and the representation of the Partnership in all suits or
legal proceedings, administrative proceedings, arbitrations, or other forms
of dispute resolution, the incurring of legal expenses, and the
indemnification of any Person against liabilities and contingencies to the
extent permitted by law;
(14) the undertaking of any action in connection with the
Partnership's direct or indirect investment in its Subsidiaries or any other
Person (including, without limitation, the contribution or loan of funds by
the Partnership to such Persons);
(15) the determination of the fair market value of any
Partnership property distributed in kind using such method of valuation as
the General Partner may adopt;
(16) the enforcement of any rights against any Partner
pursuant to representations, warranties, covenants and indemnities relating
to such Partner's contribution of property or assets to the Partnership or
otherwise;
(17) the exercise, directly or indirectly, through any
attorney-in-fact acting under a general or limited power of attorney, of any
right, including the right to vote, appurtenant to any asset or investment
held by the Partnership;
(18) the exercise of any of the powers of the General
Partner enumerated in this Agreement on behalf of or in connection with any
Subsidiary of the Partnership or any other Person in which the Partnership
has a direct or indirect interest, or jointly with any such Subsidiary or
other Person;
(19) the exercise of any of the powers of the General
Partner enumerated in this Agreement on behalf of any Person in which the
Partnership does not have an interest pursuant to contractual or other
arrangements with such Person;
(20) the issuance of additional OP Units, in the General
Partner's absolute discretion, in connection with Capital Contributions by
Additional Limited Partners and additional Capital Contributions by Partners
pursuant to Article 4;
(21) the opening of bank accounts on behalf of, and in
the name of, the Partnership and its Subsidiaries;
(22) the commencing of a case under title 11 of the
United States Code, as the same may be amended from time to time, the making
of an assignment for the benefit of creditors and the dissolution of the
Partnership pursuant to the laws of the State of Delaware, as the same may be
amended from time to time, the consenting to or the acquiescing in the filing
of any of the foregoing by any Person other than the General Partner or to
take any action in furtherance of any of the foregoing;
(23) the transfer of any property of the Partnership in
complete or partial satisfaction of a creditor's claims including, without
limitation, the holder of a mortgage or other lien on property of the
Partnership, by executing and delivering a deed in lieu of foreclosure, bill
of sale or otherwise;
(24) the confessing of a judgment;
(25) not contesting any foreclosure action commenced with
respect to the property of the Partnership or any other action claiming a
default under any mortgage or other lien on property of the Partnership;
(26) the making, execution, and delivery of any and all
deeds, leases, notes, mortgages, deeds of trust, security agreements,
conveyances, contracts, guarantees, warranties, indemnities, waivers,
releases, or legal instruments or agreements in writing necessary, advisable,
desirable, incidental, or convenient in the judgment of the General Partner,
for the accomplishment of any of the foregoing; and
(27) the execution, delivery and performance of the
Contribution Agreement and any other documents necessary, advisable or
incidental in the judgment of the General Partner, for the accomplishment of
the transactions contemplated thereby.
B. Each of the Limited Partners agrees that the General
Partner is authorized to perform the above-mentioned acts, and to execute,
deliver and perform any agreements, and transactions on behalf of the
Partnership without any further act, approval, or vote of the Partners,
notwithstanding any other provision of this Agreement to the fullest extent
permitted under the Act or other applicable law, rule, or regulation. The
execution, delivery, or performance by the General Partner or the Partnership
of any agreement authorized or permitted under this Agreement shall not
constitute a breach by the General Partner of any duty that the General
Partner may owe the Partnership or the Limited Partners or any other Persons
under this Agreement or of any duty stated or implied by law or equity.
C. At all times from and after the date hereof, the General
Partner may cause the Partnership to establish and maintain at any and all
times working capital accounts and other cash or similar balances in such
amount as the General Partner, in its sole and absolute discretion, deems
appropriate and reasonable from time to time.
D. In exercising its authority under this Agreement, the
General Partner may, but (except as provided in Sections 3.2, 7.1A(3), and
10.2) shall be under no obligation to, take into account the tax consequences
to any Partner of any action taken by it. The General Partner and the
Partnership shall not have liability to a Limited Partner under any
circumstances as a result of an income tax liability incurred by such Limited
Partner as a result of an action (or inaction) by the General Partner taken
pursuant to its authority under and in accordance with this Agreement.
7.2 Certificate of Limited Partnership. The General Partner shall
use all reasonable efforts to cause to be filed such other certificates or
documents as may be reasonable and necessary or appropriate for the
formation, continuation, qualification, and operation of a limited
partnership (or a partnership in which the limited partners have limited
liability) in the State of Delaware and any other state, or the District of
Columbia, in which the Partnership may elect to do business or own property.
To the extent that such action is determined by the General Partner to be
reasonable and necessary or appropriate, the General Partner shall file
amendments to and restatements of the Certificate and do all of the things to
maintain the Partnership as a limited partnership (or a partnership in which
the limited partners have limited liability) under the laws of the State of
Delaware and each other state, or the District of Columbia, in which the
Partnership may elect to do business or own property. Subject to the terms
of Section 8.5A(3), the General Partner shall not be required, before or
after filing, to deliver or mail a copy of the Certificate or any amendment
thereto to any Limited Partner.
7.3 Reimbursement of the General Partner.
A. Except as provided in this Section 7.3 and elsewhere in
this Agreement (including the provisions of Articles 5 and 6 regarding
distributions, payments, and allocations to which it may be entitled), the
General Partner shall not be compensated for its services as general partner
of the Partnership.
B. On such monthly or other basis as the General Partner may
determine in its sole and absolute discretion, the Partnership shall pay for
the account of the General Partner or reimburse the General Partner for the
following "Reimbursable Amounts": all expenses that it (or any of its
Affiliates) incurs relating to the ownership and operation of, or for the
benefit of, the Partnership; all of its (and its Affiliates') payroll and
fringe benefit expense, professional fees (including, without limitation,
legal, audit, advisory, directors', and management, executive service, and
similar fees), corporate insurance expense (including, without limitation,
directors' and officers' insurance), public company expenses, office
expenses, Delaware franchise taxes (regardless of whether or not included in
the Company's liability for deferred income taxes on the date hereof, but not
including any taxes attributable, under the rules of Treasury Regulation
section 1.704-1(b)(2)(iv)(n), to periods ending on or before the date
hereof), Pennsylvania capital stock, loans, and corporate net income taxes
(regardless of whether or not included in the Company's liability for
deferred income taxes on the date hereof, but not including any taxes
attributable, under the rules of Treasury Regulation section
1.704-1(b)(2)(iv)(n), to periods ending on or before the date hereof), and
other expenses of a similar nature. To the extent of Reimbursable Amounts
not otherwise treated as expenses of the Partnership, gross income of the
Partnership for the year of reimbursement or payment for a Partner's account
shall be allocated to the Partner receiving such reimbursement and such
reimbursement or payment for a Partner's account shall constitute a
distribution from the Partnership to such Partner. To the extent of
Reimbursable Amounts that are otherwise treated as expenses of the
Partnership, payment of such amounts by the Partner receiving reimbursement
shall be treated as a loan by such Partner to the Partnership and such
reimbursement shall be treated as repayment of such loan. Any reimbursement
or payment for a Partner's account pursuant to this Section 7.3B shall be in
addition to any reimbursement made as a result of indemnification pursuant to
Section 7.6.
7.4 Outside Activities of the General Partner. The General
Partner or any of its Subsidiaries, other than the Partnership and any
Subsidiaries of the Partnership, may not, directly or indirectly enter into
or conduct any business not connected with the ownership, acquisition,
development, and disposition of Partnership Interests and (subject to
Sections 4.1B and 7.3B of the limited partnership agreement of CV
Partnership) the Florida Land and the management of the business of the
Partnership and the management of (subject to Sections 4.1B and 7.3B of the
limited partnership agreement of CV Partnership) the Florida land, and such
activities as are incidental thereto, except that the General Partner may
acquire and contribute properties to the Partnership for additional OP Units
as provided in Section 4.2C. The General Partner directly or indirectly may
acquire Limited Partner Interests and shall be entitled to exercise all
rights of a Limited Partner relating to such Limited Partner Interests.
7.5 Contracts with Affiliates.
A. The Partnership may lend or contribute funds or other
assets to its Subsidiaries or other Persons in which it has an equity
investment and such Subsidiaries and Persons may borrow funds from the
Partnership, on terms and conditions established in the sole and absolute
discretion of the General Partner. The foregoing authority shall not create
any right or benefit in favor of any Subsidiary or any other Person.
B. Except as provided in Section 7.4, the Partnership may
Transfer assets to joint ventures, other partnerships, corporations, or other
business entities in which it is or thereby becomes a participant upon such
terms and subject to such conditions consistent with this Agreement and
applicable law as the General Partner, in its sole and absolute discretion,
believes are advisable and in the best interests of the Partnership.
C. Except as expressly permitted by this Agreement, neither
the General Partner nor any of its Affiliates (or any officers or directors
of either) shall sell, Transfer, or convey any property to, or purchase any
property from, the Partnership, directly or indirectly, except pursuant to
transactions that are determined by the General Partner in good faith to be
fair and reasonable.
D. The General Partner, in its sole and absolute discretion
and without the approval of the Limited Partners, may propose and adopt, on
behalf of the Partnership, employee benefit plans, stock option plans, and
similar plans funded by the Partnership for the benefit of employees of the
General Partner, the Partnership, Subsidiaries of the Partnership, or any
Affiliate of any of them in respect of services performed, directly or
indirectly, for the benefit of the Partnership, the General Partner, or any
Subsidiaries of the Partnership.
7.6 Indemnification.
A. To the fullest extent permitted by Delaware law, the
Partnership shall indemnify each Indemnitee from and against any and all
losses, claims, damages, liabilities, joint, several, or joint and several,
expenses (including, without limitation, reasonable attorneys' fees and other
legal fees and expenses), judgments, fines, settlements, and other amounts
arising from any and all claims, demands, actions, suits, or proceedings,
civil, criminal, administrative, or investigative, that relate to the
operations of the Partnership or its Affiliates as set forth in this
Agreement, in which such Indemnitee may be involved, or is threatened to be
involved, as a party or otherwise, except to the extent it is finally
determined by a court of competent jurisdiction, from which no further appeal
may be taken, that such Indemnitee's action constituted intentional acts or
omissions constituting gross negligence, willful misconduct, or fraud.
Without limitation, the foregoing indemnity shall extend to any liability of
any Indemnitee, pursuant to a loan guaranty or otherwise for any indebtedness
of the Partnership or any Subsidiary of the Partnership (including, without
limitation, any indebtedness which the Partnership or any Subsidiary of the
Partnership has assumed or taken subject to), and the General Partner is
hereby authorized and empowered, on behalf of the Partnership, to enter into
one or more indemnity agreements consistent with the provisions of this
Section 7.6 in favor of any Indemnitee having or potentially having liability
for any such indebtedness. Any indemnification pursuant to this Section 7.6
shall be made only out of the assets of the Partnership, and neither the
General Partner nor any Limited Partner shall have any obligation to
contribute to the capital of the Partnership, or otherwise provide funds, to
enable the Partnership to fund its obligations under this Section 7.6.
B. Reasonable expenses (including reasonable legal fees)
incurred by an Indemnitee who is a party to a proceeding shall be paid or
reimbursed by the Partnership in advance of the final disposition of the
proceeding.
C. The indemnification provided by this Section 7.6 shall be
in addition to any other rights to which an Indemnitee or any other Person
may be entitled under any agreement, pursuant to any vote of the Partners, as
a matter of law or otherwise, and shall continue as to an Indemnitee who has
ceased to serve in such capacity unless otherwise provided in a written
agreement to which such Indemnitee is a party.
D. The Partnership may, but shall not be obligated to,
purchase and maintain insurance (including so-called "D&O insurance"), on
behalf of the Indemnitees and such other Persons as the General Partner shall
determine, against any liability that may be asserted against or expenses
that may be incurred by such Person in connection with the Partnership's
activities, regardless of whether the Partnership would have the power or
obligation to indemnify such Person against such liability under the
provisions of this Agreement.
E. For purposes of this Section 7.6, the Partnership shall
be deemed to have requested an Indemnitee to serve as fiduciary of an
employee benefit plan whenever the performance by such Indemnitee of its
duties to the Partnership also imposes duties on, or otherwise involves
services by, such Indemnitee to the plan or participants or beneficiaries of
the plan; excise taxes assessed on an Indemnitee with respect to an employee
benefit plan pursuant to applicable law shall constitute fines within the
meaning of this Section 7.6; and actions taken or omitted by the Indemnitee
with respect to an employee benefit plan in the performance of its duties for
a purpose reasonably believed by it to be in the interest of the participant
and beneficiaries of the plan shall be deemed to be for a purpose which is
not opposed to the best interests of the Partnership.
F. In no event may an Indemnitee subject any of the Partners
to personal liability by reason of the indemnification provisions set forth
in this Agreement.
G. An Indemnitee shall not be denied indemnification in
whole or in part under this Section 7.6 because the Indemnitee had an
interest in the transaction with respect to which the indemnification applies
if the transaction was otherwise permitted by the terms of this Agreement.
H. The provisions of this Section 7.6 are for the benefit of
the Indemnitees and their heirs, successors, assigns, and administrators and
shall not be deemed to create any rights for the benefit of any other
Persons. Any amendment, modification, or repeal of this Section 7.6 or any
provision hereof shall be prospective only and shall not in any way affect
the Partnership's liability to any Indemnitee under this Section 7.6, as in
effect immediately prior to such amendment, modification, or repeal with
respect to claims arising from or relating to matters occurring, in whole or
in part, prior to such amendment, modification, or repeal, regardless of when
such claims may arise or be asserted.
I. If and to the extent any payments to the General Partner
pursuant to this Section 7.6 constitute gross income to the General Partner
(as opposed to the repayment of advances made on behalf of the Partnership),
such amounts shall constitute guaranteed payments within the meaning of
Section 707(c) of the Code, shall be treated consistently therewith by the
Partnership and all Partners, and shall not be treated as distributions for
purposes of computing the Partners' Capital Accounts.
7.7 Liability of the General Partner.
A. Notwithstanding anything to the contrary set forth in
this Agreement, neither the General Partner nor any of its officers or
directors shall be liable for monetary damages to the Partnership, any
Partners, or any Assignees for losses sustained or liabilities incurred as a
result of errors in judgment or of any act or omission if the General Partner
acted in good faith and without gross negligence or malfeasance.
B. The Limited Partners expressly acknowledge that the
General Partner is acting on behalf of the Partnership and the partners of
the Partnership, collectively, that the General Partner, subject to the
provisions of Section 7.1D, is under no obligation to consider the separate
interest of the Limited Partners (including, without limitation, the tax
consequences to Limited Partners or Assignees) in deciding whether to cause
the Partnership to take (or decline to take) any actions (except that the
General Partner shall comply with Sections 3.2, 7.1A(3) and 10.2), and that
the General Partner shall not be liable for monetary damages for losses
sustained, liabilities incurred, or benefits not derived by Limited Partners
in connection with such decisions, provided that the General Partner has
acted in good faith and without gross negligence or malfeasance. With
respect to any indebtedness of the Partnership which any Limited Partner may
have guaranteed, the General Partner shall have no duty to keep such
indebtedness outstanding.
C. Subject to its obligations and duties as General Partner
set forth in Section 7.1A, the General Partner may exercise any of the powers
granted to it by this Agreement and perform any of the duties imposed upon it
hereunder either directly or by or through its agents. The General Partner
shall not be responsible for any misconduct or negligence on the part of any
such agent appointed by the General Partner in good faith.
D. Any amendment, modification, or repeal of this Section
7.7 or any provision hereof shall be prospective only and shall not in any
way affect the limitations on the General Partner's and its officers' and
directors' liability to the Partnership and the Limited Partners under this
Section 7.7 as in effect immediately prior to such amendment, modification,
or repeal with respect to claims arising from or relating to matters
occurring, in whole or in part, prior to such amendment, modification, or
repeal, regardless of when such claims may arise or be asserted.
E. To the fullest extent permitted by law, no officer,
director, trustee or shareholder of the General Partner shall be liable to
the Partnership for money damages except for (i) active and deliberate
dishonesty established by a non-appealable final judgment or (ii) actual
receipt of an improper benefit or profit in money, property or services.
7.8 Other Matters Concerning the General Partner.
A. The General Partner may rely and shall be protected in
acting, or refraining from acting, upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent, order,
bond, debenture, or other paper or document believed by it in good faith to
be genuine and to have been signed or presented by the proper party or
parties.
B. The General Partner may consult with legal counsel,
accountants, appraisers, management consultants, investment bankers,
architects, engineers, environmental consultants, and other consultants and
advisers selected by it, and any act taken or omitted to be taken in reliance
upon the opinion or advice of such Persons as to matters which such General
Partner reasonably believes to be within such Person's professional or expert
competence shall be conclusively presumed to have been done or omitted in
good faith and in accordance with such opinion or advice.
C. The General Partner shall have the right, in respect of
any of its powers or obligations hereunder, to act through any of its duly
authorized officers and duly appointed attorneys-in-fact. Each such attorney
shall, to the extent provided by the General Partner in the power of
attorney, have full power and authority to do and perform all and every act
and duty which is permitted or required to be done by the General Partner
hereunder.
D. Notwithstanding any other provisions of this Agreement or
the Act, any action of the General Partner on behalf of the Partnership or
any decision of the General Partner to refrain from acting on behalf of the
Partnership, undertaken in the good faith belief that such action or omission
is necessary or advisable in order (i) to protect the ability of the Company
to continue to qualify as a REIT to which the provisions of part II of
subchapter M of chapter 1 of the Code apply (and as a "corporation subject to
a tax imposed by subchapter M," within the meaning of section 11(c) of the
Code); or (ii) to avoid the Company's incurring any taxes or other liability
under the Code, including specifically, but without limitation, under
sections 30, 42, 45A, 49, 50, 55, 453, 453A, 531, 541, 857, 1294, or 4981 of
the Code, is expressly authorized under this Agreement and is deemed approved
by all of the Limited Partners.
7.9 Title to Partnership Assets. Title to Partnership assets,
whether real, personal, or mixed and whether tangible or intangible, shall be
deemed to be owned by the Partnership as an entity, and no Partner,
individually or collectively, shall have any ownership interest in such
Partnership assets or any portion thereof. Title to any or all of the
Partnership assets may be held in the name of the Partnership, the General
Partner, or one or more nominees, as the General Partner may determine,
including Affiliates of the General Partner. The General Partner hereby
declares and warrants that any Partnership asset for which legal title is
held in the name of the General Partner or any nominee or Affiliate of the
General Partner shall be held by the General Partner or such nominee or
Affiliate for the use and benefit of the Partnership in accordance with the
provisions of this Agreement; provided, that the General Partner shall use
reasonable efforts to cause beneficial and record title to such assets to be
vested in the Partnership as soon as reasonably practicable. All Partnership
assets shall be recorded as the property of the Partnership in its books and
records, irrespective of the name in which legal title to such Partnership
assets is held.
7.10 Reliance by Third Parties. Notwithstanding anything to the
contrary in this Agreement, any Person dealing with the Partnership shall be
entitled to assume that the General Partner has full power and authority,
without consent or approval of any other Partner or Person, to encumber,
sell, or otherwise use in any manner any and all assets of the Partnership
and to enter into any contracts on behalf of the Partnership, and take any
and all actions on behalf of the Partnership, and such Person shall be
entitled to deal with the General Partner as if the General Partner were the
Partnership's sole party in interest, both legally and beneficially. Each
Limited Partner hereby waives any and all defenses or other remedies which
may be available against such Person to contest, negate, or disaffirm any
action of the General Partner in connection with any such dealing. In no
event shall any Person dealing with the General Partner or its
representatives be obligated to ascertain that the terms of this Agreement
have been complied with or to inquire into the necessity or expedience of any
act or action of the General Partner or its representatives. Each and every
certificate, document, or other instrument executed on behalf of the
Partnership by the General Partner or its representatives shall be conclusive
evidence in favor of any and every Person relying thereon or claiming
thereunder that (i) at the time of the execution and delivery of such
certificate, document, or instrument, this Agreement was in full force and
effect; (ii) the Person executing and delivering such certificate, document,
or instrument was duly authorized and empowered to do so for and on behalf of
the Partnership; and (iii) such certificate, document, or instrument was duly
executed and delivered in accordance with the terms and provisions of this
Agreement and is binding upon the Partnership.
ARTICLE 8
Rights and Obligations of Limited Partners
8.1 Limitation of Liability. The Limited Partners shall have no
liability under this Agreement except as expressly provided in this
Agreement, including Section 10.4, or under the Act.
8.2 Management of Business. No Limited Partner or Assignee (other
than the General Partner, any of its Affiliates or any officer, director,
employee, agent, or trustee of the General Partner, the Partnership, or any
of their Affiliates, in their capacity as such) shall take part in the
operation, management, or control (within the meaning of the Act) of the
Partnership's business, transact any business in the Partnership's name, or
have the power to sign documents for or otherwise bind the Partnership. The
transaction of any such business by the General Partner, any of its
Affiliates or any officer, director, employee, partner, agent, or trustee of
the General Partner, the Partnership, or any of their Affiliates, in their
capacity as such, shall not affect, impair, or eliminate the limitations on
the liability of the Limited Partners or Assignees under this Agreement.
8.3 Outside Activities of Limited Partners. Subject to any
agreements entered into pursuant to Section 7.5 hereof and any other
agreements entered into by a Limited Partner or its Affiliates with the
Partnership or any of its Subsidiaries, any Limited Partner (other than the
Company) and any officer, director, employee, agent, trustee, Affiliate, or
shareholder of any Limited Partner (other than the Company) shall be entitled
to and may have business interests and engage in business activities in
addition to those relating to the Partnership, including business interests
and activities that are in direct competition with the Partnership or that
are enhanced by the activities of the Partnership. Neither the Partnership
nor any Partners shall have any rights by virtue of this Agreement in any
business ventures of any Limited Partner or Assignee. None of the Limited
Partners nor any other Person shall have any rights by virtue of this
Agreement or the Partnership relationship established hereby in any business
ventures of any other Person and such Person shall have no obligation
pursuant to this Agreement to offer any interest in any such business
ventures to the Partnership, any Limited Partner, or any such other Person,
even if such opportunity is of a character which, if presented to the
Partnership, any Limited Partner or such other Person, could be taken by such
Person.
8.4 Return of Capital. Except pursuant to Section 8.6, no Limited
Partner shall be entitled to the withdrawal or return of its Capital
Contribution, except to the extent of distributions made pursuant to this
Agreement or upon dissolution of the Partnership as provided herein. Except
to the extent provided by Exhibit B (or Sections 4.1 or 7.3B) or as otherwise
expressly provided in this Agreement or any OP Unit Designation, no Limited
Partner or Assignee shall have priority over any other Limited Partner or
Assignee, either as to the return of Capital Contributions or as to profits,
losses, or distributions.
8.5 Rights of Limited Partners Relating to the Partnership.
A. In addition to the other rights provided by this
Agreement or by the Act, and except as limited by Section 8.5B hereof, each
Limited Partner shall have the right, for a purpose reasonably related to
such Limited Partner's interest as a limited partner in the Partnership, upon
written demand with a statement of the purpose of such demand and at such
Limited Partner's own reasonable expense (including such copying and
administrative charges as the General Partner may establish from time to
time):
(1) to obtain a copy of the Partnership's Federal,
state, and local income tax returns for each Partnership Year;
(2) to obtain a current list of the name and last known
mailing address of each Partner;
(3) to obtain a copy of this Agreement and the
Certificate and all amendments and/or restatements thereto, together with
executed copies of all powers of attorney pursuant to which this Agreement,
the Certificate and all amendments and/or restatements thereto have been
executed; and
(4) to obtain true and full information regarding the
amount of cash and a description and statement of any other property or
services contributed by each Partner and which each Partner has agreed to
contribute in the future, and the date on which each became a Partner.
B. The General Partner shall provide to each Limited
Partner, without cost, copies of the Company's annual and quarterly reports
filed with the Securities and Exchange Commission pursuant to the Securities
Exchange Act of 1934.
C. Notwithstanding any other provision of this Section 8.5,
the General Partner may keep confidential from the Limited Partners, for such
period of time as the General Partner determines in its sole and absolute
discretion to be reasonable, any information that (i) the General Partner
reasonably believes to be in the nature of trade secrets or other
information, the disclosure of which the General Partner in good faith
believes is not in the best interests of the Partnership or could damage the
Partnership or its business; or (ii) the Partnership is required by law or by
agreements with an unaffiliated third party to keep confidential. To the
extent permitted by law, the General Partner shall keep confidential from the
Limited Partners any information that the General Partner determines, in its
sole and absolute discretion, to be in the nature of trade secrets or other
confidential information of the General Partner (or any of its Affiliates) or
to constitute material non-public information of or relating to the General
Partner (or any of its Affiliates) the disclosure of which is not in the best
interests of the General Partner (or any of its Affiliates) or its (or their)
business or could involve a violation of law.
8.6 Redemption Rights.
A. General.
(i) Subject to Section 8.6C, below, on or after the date
one year (or such other period as may be agreed between the General Partner
and the holder of an OP Common Unit hereafter acquired pursuant to Section
4.2 or 4.3 or, in the case of an OP Common Unit acquired pursuant to the
Contribution Agreement by a Limited Partner who so elects in the Contribution
Agreement, immediately) after the issuance of an OP Common Unit to a Limited
Partner pursuant to Article 4 (or upon the earlier death of such Limited
Partner), the holder of such OP Common Unit (if other than the General
Partner or any Subsidiary of the General Partner) shall have the right (the
"Redemption Right") to require the Partnership to redeem such OP Common Unit
on a Specified Redemption Date and at a redemption price equal to and in the
form of the Cash Amount to be paid by the Partnership. Any such Redemption
Right shall be exercised pursuant to a Notice of Redemption (in the form of
Exhibit C hereto, as such form may be amended by the General Partner, in its
reasonable discretion, from time to time, upon no less than 30 days' notice
to the Limited Partners) delivered to the Partnership (with a copy
simultaneously to the General Partner) by the Limited Partner who is
exercising the Redemption Right (the "Redeeming Partner"). A Limited Partner
may not exercise the Redemption Right for fewer than 1,000 OP Common Units
or, if such Redeeming Partner holds fewer than 1,000 OP Common Units, for
fewer than all of the OP Common Units held by such Redeeming Partner. In the
sole discretion of the General Partner at the request of any Limited Partner,
the General Partner may substitute "six months" (or some period of time
greater than six months, but less than one year) for "one year" in applying
the first sentence of this Section 8.6A(i) to such Limited Partner and, in
connection with the exercise of such discretion, the General Partner may
require that the Redeeming Partner provide a letter to the Partnership and
the General Partner in substantially the form of Exhibit E hereto.
(ii) The Redeeming Partner shall have no right with
respect to any OP Common Units so redeemed to receive any distributions paid
after the Specified Redemption Date.
(iii) The Assignee of any Limited Partner may exercise
the rights of such Limited Partner pursuant to this Section 8.6 and such
Limited Partner shall be deemed to have assigned such rights to such Assignee
and shall be bound by the exercise of such rights by such Limited Partner's
Assignee. In connection with any exercise of such rights by such Assignee on
behalf of such Limited Partner, the Cash Amount shall be paid by the
Partnership directly to such Assignee and not to such Limited Partner.
B. General Partner Assumption of Right.
(i) If a Limited Partner has delivered a Notice of
Redemption, the General Partner may, within 5 business days after receipt of
such Notice, in its sole discretion (subject to any limitations on ownership
and transfer of Shares set forth in the Company's Certificate of
Incorporation), elect to assume directly and satisfy a Redemption Right by
paying to the Redeeming Partner either the Cash Amount or, but only if the
Company has in effect (or, at the request of the Redeeming Partner, consents
and within 60 days after such election causes to be in effect) a registration
statement (the "Registration Statement") covering the immediate resale of all
the Shares to be issued to the Redeeming Partner pursuant to such election
(or, under then-applicable law, the Shares upon issuance would be freely
tradeable without such a registration statement's being in effect), the
Shares Amount, as the General Partner determines in its sole discretion on
the Specified Redemption Date, whereupon the General Partner shall acquire
the OP Common Units offered for redemption by the Redeeming Partner and shall
be treated for all purposes of this Agreement as the owner of such OP Common
Units. If it shall be necessary under the preceding sentence for a
Registration Statement to be caused to be in effect, the General Partner will
use commercially reasonable efforts to cause such Registration Statement to
be filed and to become effective as soon as reasonably practicable and within
the 60-day period theretofore described. Unless the General Partner, in its
sole discretion, shall exercise its right to assume directly and satisfy the
Redemption Right, the General Partner shall not have any obligation to the
Redeeming Partner or to the Partnership with respect to the Redeeming
Partner's exercise of the Redemption Right. In the event the General Partner
shall exercise its right to satisfy the Redemption Right in the manner
described in the first sentence of this Section 8.6B and shall fully perform
its obligations in connection therewith, the Partnership shall have no right
or obligation to pay any amount to the Redeeming Partner with respect to such
Redeeming Partner's exercise of the Redemption Right, and each of the
Redeeming Partner, the Partnership, and the General Partner shall, for
Federal income tax purposes, treat the transaction between the General
Partner and the Redeeming Partner as a sale of the Redeeming Partner's OP
Common Units to the General Partner. Nothing contained in this Section 8.6B
shall imply any right of the General Partner to require any Limited Partner
to exercise the Redemption Right afforded to such Limited Partner pursuant to
Section 8.6A.
(ii) In the event that the General Partner determines to
pay the Redeeming Partner the Redemption Amount in the form of Shares, the
total number of Shares to be paid to the Redeeming Partner in exchange for
the Redeeming Partner's OP Common Units shall be the applicable Shares
Amount. In the event this amount is not a whole number of Shares, the
Redeeming Partner shall be paid (i) that number of Shares which equals the
nearest whole number less than such amount plus (ii) an amount of cash which
the General Partner determines, in its reasonable discretion, to represent
the fair value of the remaining fractional Share which would otherwise be
payable to the Redeeming Partner.
(iii) Each Redeeming Partner agrees to provide in a
timely fashion such information and to execute such documents as the General
Partner and its Affiliates may reasonably require in connection with the
issuance of Shares upon exercise of the Redemption Right and the registration
of the resale of such Shares, including, without limitation, an agreement
pursuant to which the Redeeming Partner agrees to indemnify and to hold
harmless the General Partner, the Partnership, the Company, the Affiliates of
any of them, and the respective officers, directors, general partners, and
agents of the General Partner, the Partnership, the Company, and such
Affiliates with respect to any information provided by the Redeeming Partner
for inclusion in the Registration Statement and the General Partner agrees to
indemnify and to hold harmless the Redeeming Partner with respect to
information provided by the Company in the Registration Statement.
(iv) So long as the Redeeming Partner confirms in
writing that the Redeeming Partner continues to intend in good faith to sell
all of its Shares received under this Section 8.6 under such Registration
Statement, the Company shall use its best efforts to keep the Registration
Statement effective for up to one year after the effective date thereof, but
only if the Redeeming Partner agrees not to make any offers or sales of any
Shares under any such Registration Statement if the Redeeming Partner has
received a notice from the General Partner to the effect that, for a stated
period (not in excess of 60 days), it would not for any reason (including,
without limitation, by reason of the General Partner's or any of its
Affiliate's having a good business reason not to disclose publicly certain
information which may be material) be in the best interests of the General
Partner or any of its Affiliates for offers or sales to be effected under
such Registration Statement. The General Partner shall not give any
Redeeming Partner such a notice more than twice in any 12-month period.
(v) If a Limited Partner is considering exercising
its Redemption Right with respect to its OP Common Units and desires that the
Shares it receives from the General Partner in exchange for the redeemed OP
Common Units, if any, be the subject to an effective Registration Statement
at the time of receipt, it may, at its sole option, follow the procedure set
forth in this clause (v). The Limited Partner shall give the General Partner
written notice referring to this clause and stating that it is considering
exercising its Redemption Right (a "Pre-Redemption Notice"). Upon receipt of
the Pre-Redemption Notice, if the General Partner determines that it wishes
to elect to assume the redemption obligation from the Partnership and wishes
to give the Redeeming Partner Shares and the Company consents to such
election, the Company shall file a Registration Statement with respect to the
resale of all such Shares as soon as practicable and use its commercially
reasonable efforts to cause such Registration Statement to become effective
as soon as possible and within not more than 60 days. The General Partner
shall notify the Limited Partner as soon as the Registration Statement has
become effective. The other provisions of this Section 8.6 shall apply with
respect to such Registration Statement and with respect to any Redemption
Notice given by such Limited Partner. Neither the giving of the Pre-
Redemption Notice nor the filing of the Registration Statement (nor its
becoming effective) shall obligate the Limited Partner to give a Notice of
Redemption nor, if a Notice of Redemption is subsequently given, obligate the
General Partner to assume the redemption obligation and/or elect to give the
Redeeming Partner Shares in exchange for its OP Common Units. If the Limited
Partner which gave the Pre-Redemption Notice does not give the Partnership a
Redemption Notice with respect to its OP Common Units within 180 days after
the effective date of such Registration Statement, neither the Partnership,
the Company, nor the General Partner shall have any obligation to continue to
maintain the effectiveness of such Registration Statement and the Limited
Partner which gave the Pre-Redemption Notice shall be liable for the costs of
the Partnership, the Company and the General Partner in filing the
Registration Statement (including without limitation, legal fees and
disbursements and any filing fees). No Limited Partner may give more than
one Pre-Redemption Notice (unless the General Partner shall otherwise
consent).
C. Exceptions to Exercise of Redemption Right.
Notwithstanding the provisions of Sections 8.6A and 8.6B, a Partner shall not
be entitled to exercise the Redemption Right pursuant to Section 8.6A if (but
only as long as), in the written opinion of counsel to the General Partner,
the delivery of Shares to such Partner on the Specified Redemption Date (i)
would be prohibited under the Certificate of Incorporation, (ii) would cause
a violation of the REIT Requirements, or (iii) would be prohibited (after
giving effect to any applicable exemptions) under applicable Federal or state
securities laws or regulations (in each case regardless of whether the
General Partner would in fact assume and satisfy the Redemption Right).
D. No Liens on OP Common Units Delivered for Redemption.
Each Limited Partner covenants and agrees with the Partnership and the
General Partner that the Redeeming Partner shall transfer good title to all
OP Common Units delivered for redemption to the Partnership or the General
Partner, as the case may be, free and clear of all Liens (as defined in
Exhibit C), and, notwithstanding anything contained herein to the contrary,
neither the General Partner nor the Partnership shall be under any obligation
to acquire OP Common Units which are or may be subject to any Liens. Each
Limited Partner further agrees that, in the event any state or local property
transfer tax is imposed on the Limited Partner (or jointly on the Limited
Partner and the transferee) as a result of the transfer of its OP Common
Units to the Partnership or the General Partner, such Limited Partner shall
assume and pay such transfer tax.
E. Additional Partnership Interests. In the event that the
Partnership issues OP Common Units to any Additional Limited Partner pursuant
to Article 4, the General Partner shall make such amendments to this Section
8.6 as it determines are necessary to reflect the issuance of such OP Common
Units (including setting forth any restrictions on the exercise of the
Redemption Right with respect to OP Common Units described in this Section
8.6E).
F. Successor to the Company. If the Company shall cease to
serve as General Partner, all of the Company's rights under this Section 8.6
shall vest in the Company's successor as General Partner, if such successor
is an Affiliate of the Company (or would have been an Affiliate of the
Company had the Company continued to exist), and otherwise in such Affiliate
of the Company (or such Person that would have been an Affiliate of the
Company, had the Company continued to exist) as the Company may designate
(or, if the Company has not made any such designation, as any Person with
authority to act on behalf of the Company in connection with the winding up
of its affairs or otherwise may designate).
ARTICLE 9
Books, Records, Accounting, and Reports
9.1 Records and Accounting. The General Partner shall keep or
cause to be kept at the principal office of the Partnership those records and
documents required to be maintained by the Act and other books and records
deemed by the General Partner to be appropriate with respect to the
Partnership's business, including, without limitation, all books and records
necessary to comply with applicable REIT Requirements and to provide to the
Limited Partners any information, lists, and copies of documents required to
be provided pursuant to Sections 8.5A and 9.3. Any records maintained by or
on behalf of the Partnership in the regular course of its business may be
kept on or be in the form of any information storage device or system,
provided that the records so maintained are convertible into clearly legible
written form within a reasonable period of time. The books of the
Partnership shall be maintained, for financial reporting purposes, on an
accrual basis in accordance with GAAP, and, for tax purposes, on an accrual
basis, or such other bases as the General Partner determines to be necessary
or appropriate.
9.2 Fiscal Year. The fiscal year of the Partnership shall be the
calendar year.
9.3 Reports.
A. As soon as practicable, but in no event later than 105
days after the close of each Partnership Year, the General Partner shall
cause to be mailed to each Limited Partner as of the close of the Partnership
Year, an annual report containing financial statements of the Partnership, or
of the Company if such statements are prepared solely on a consolidated basis
with the Company, for such Partnership Year, presented in accordance with
GAAP, such statements to be audited by a nationally recognized firm of
independent public accountant selected by the General Partner in its sole
discretion.
B. As soon as practicable, but in no event later than 45
days after the close of each calendar quarter (except the last calendar
quarter of each calendar year), the General Partner shall cause to be mailed
to each Limited Partner a report containing unaudited financial statements as
of the last day of the calendar quarter of the Partnership, or of the
Company, if such statements are prepared solely on a consolidated basis with
the Company, and such other information as may be required by applicable law
or regulation, or as the General Partner determines to be appropriate.
ARTICLE 10
Tax Matters
10.1 Preparation of Tax Returns. The General Partner shall arrange
for the preparation and timely filing of all returns of Partnership income,
gains, deductions, losses and other items required of the Partnership for
Federal and state income tax purposes and shall use reasonable efforts to
furnish, within one hundred sixty-five (165) days of the close of each
taxable year, the tax information reasonably required by Limited Partners for
Federal and state income tax reporting purposes. At the time of any sale or
refinancing of any property listed on Exhibit D, the General Partner shall
give notice thereof to each individual listed with respect to such property
on Exhibit D.
10.2 Tax Elections. Except as otherwise provided herein, the
General Partner shall, in its sole and absolute discretion, determine whether
to make any available election pursuant to the Code. Except as provided in
Section 7.8D, the General Partner shall (i) select (and cause Montgomery CV
Realty L.P. to select) the "traditional method" of making allocations
pursuant to Regulation section 1.704-3 (either without any curative
allocations or with curative allocations to a contributing Partner solely of
gain from sale of the property contributed) with respect to all Contributed
Property received on or before the date of this Agreement, and (ii) select
any method allowed pursuant to Regulations section 1.704-3 with respect to
all Contributed Property received after the date of this Agreement. By
executing this Agreement, each Partner hereby agrees to report income, gain,
loss, and deduction on such Partner's Federal income tax return in a manner
that is consistent with the use of the method so selected. The General
Partner shall have the right to seek to revoke any tax election it makes,
including, without limitation, the election under section 754 of the Code,
upon the General Partner's determination, in its sole and absolute
discretion, that it could have caused the Partnership to refrain from making
such election in the first instance.
10.3 Tax Matters Partner.
A. The Company shall serve as the "tax matters partner" of
the Partnership for Federal income tax purposes for any taxable year of the
Partnership for which it is eligible to serve as such (regardless of whether
the Company is at the time of serving as such the General Partner). The
General Partner from time to time shall serve as the tax matters partner for
any other taxable year of the Partnership (regardless of whether the General
Partner was a partner in the Partnership at any time during such year). All
Partners and Assignees shall, at the request of a tax matters partner
described in the preceding sentence, take such actions as are necessary,
appropriate, or convenient to effect the designation of such tax matters
partner pursuant to section 301.6231(a)(7)-1 of the Regulations. Pursuant to
Section 6230(e) of the Code, upon receipt of notice from the Internal Revenue
Service of the beginning of an administrative proceeding with respect to the
Partnership, the tax matters partner shall furnish the Internal Revenue
Service with the name, address, taxpayer identification number, and profit
interest of each of the Limited Partners and the Assignees; provided, that
such information is provided to the tax matters partner by the Limited
Partners and the Assignees.
B. The tax matters partner is authorized, but not required:
(1) to enter into any settlement with the Internal
Revenue Service with respect to any administrative or judicial proceedings
for the adjustment of Partnership items required to be taken into account by
a Partner for income tax purposes (such administrative proceedings being
referred to as a "tax audit" and such judicial proceedings being referred to
as "judicial review"), and in the settlement agreement the tax matters
partner may expressly state that such agreement shall bind all Partners,
except that such settlement agreement shall not bind any Partner (i) who
(within the time prescribed pursuant to the Code and Regulations) files a
statement with the Internal Revenue Service providing that the tax matters
partner shall not have the authority to enter into a settlement agreement on
behalf of such Partner; or (ii) who is a "notice partner" (as defined in
section 6231(a)(8) of the Code) or a member of a "notice group" (as defined
in section 6223(b)(2) of the Code);
(2) in the event that a notice of a final administrative
adjustment at the Partnership level of any item required to be taken into
account by a Partner for tax purposes (a "final adjustment") is mailed to the
tax matters partner, to seek judicial review of such final adjustment,
including the filing of a petition for readjustment with the Tax Court, the
United States Claims Court or the District Court of the United States for the
district in which the Partnership's principal place of business is located;
(3) to intervene in any action brought by any other
Partner for judicial review of a final adjustment;
(4) to file a request for an administrative adjustment
with the Internal Revenue Service and, if any part of such request is not
allowed by the Internal Revenue Service, to file an appropriate pleading
(petition or complaint) for judicial review with respect to such request;
(5) to enter into an agreement with the Internal Revenue
Service to extend the period for assessing any tax which is attributable to
any item required to be taken account of by a Partner for tax purposes, or an
item affected by such item; and
(6) to take any other action on behalf of the Partners
or the Partnership in connection with any tax audit or judicial review
proceeding to the extent permitted by applicable law or regulations.
The taking of any action and the incurring of any expense by the tax matters
partner in connection with any such proceeding, except to the extent required
by law, is a matter in the sole and absolute discretion of the tax matters
partner and the provisions relating to indemnification of the General Partner
set forth in Section 7.6 shall also be fully applicable to the tax matters
partner in its capacity as such. Notwithstanding the foregoing provisions of
this Section 10.3B, no tax matters partner described in the second sentence
of Section 10.3A may, without the prior written consent of the Company (which
may be withheld in the Company's sole discretion), bind the Company, any of
its Affiliates, or any qualified REIT subsidiary, partnership, limited
liability company, or other Entity through which the Company or any of its
Affiliates was a partner in the Partnership to any settlement agreement under
section 6224 of the Code, file a petition for readjustment of partnership
items in any court other than the Tax Court, or extend the period for
assessing tax under section 6229 of the Code with respect to the Company, any
of its Affiliates, or any qualified REIT subsidiary, partnership, limited
liability company, or other Entity through which the Company or any of its
Affiliates was a partner in the Partnership. The tax matters partner shall
comply with the responsibilities imposed on it by section 301.6223(g)-1T of
the Regulations.
C. The tax matters partner shall receive no compensation for
its services. All third party costs and expenses incurred by the tax matters
partner in performing its duties as such (including legal and accounting fees
and expenses) shall be borne by the Partnership. Nothing herein shall be
construed to restrict the Partnership from engaging one or more law or
accounting firms to assist the tax matters partner in discharging its duties
hereunder, so long as the compensation paid by the Partnership for such
services is reasonable.
10.4 Withholding. Each Limited Partner hereby authorizes the
Partnership to withhold from, or pay on behalf of or with respect to, such
Limited Partner any amount of Federal, state, local, or foreign taxes that
the General Partner determines that the Partnership is required by law to
withhold or pay with respect to any amount distributable or allocable to such
Limited Partner pursuant to this Agreement, including, without limitation,
any taxes required to be withheld or paid by the Partnership pursuant to
sections 1441, 1442, 1445, or 1446 of the Code. Any amount so paid on behalf
of or with respect to a Limited Partner shall constitute a loan by the
Partnership to such Limited Partner, which loan shall be repaid by such
Limited Partner within fifteen (15) days after notice from the General
Partner that such payment must be made unless (i) the Partnership withholds
such payment from a distribution which would otherwise be made to the Limited
Partner; or (ii) the General Partner determines, in its sole and absolute
discretion, that such payment may be satisfied out of the available funds of
the Partnership which would, but for such payment, be distributed to the
Limited Partner. Any amounts withheld pursuant to the foregoing clauses (i)
or (ii) shall be treated as having been distributed to such Limited Partner.
Each Limited Partner hereby unconditionally and irrevocably grants to the
Partnership a security interest in such Limited Partner's Partnership
Interest to secure such Limited Partner's obligation to pay to the
Partnership any amounts required to be paid pursuant to this Section 10.4.
In the event that a Limited Partner fails to pay when due any amounts owed to
the Partnership pursuant to this Section 10.4, the General Partner may, in
its sole and absolute discretion, elect to make the payment to the
Partnership on behalf of such defaulting Limited Partner, and in such event
shall be deemed to have loaned such amount to such defaulting Limited Partner
and shall succeed to all rights and remedies of the Partnership as against
such defaulting Limited Partner. Without limitation, in such event, the
General Partner shall have the right to receive distributions that would
otherwise be distributable to such defaulting Limited Partner until such time
as such loan, together with all interest thereon, has been paid in full, and
any such distributions so received by the General Partner shall be treated as
having been distributed to the defaulting Limited Partner and immediately
paid by the defaulting Limited Partner to the General Partner in repayment of
such loan. Any amount payable by a Limited Partner hereunder shall bear
interest at the highest base or prime rate of interest published from time to
time by any of Citibank, N.A., Chase Manhattan Bank, and Morgan Guaranty
Trust Company of New York, plus four (4) percentage points, but in no event
higher than the maximum lawful rate of interest on such obligation, such
interest to accrue from the date such amount is due (i.e., fifteen (15) days
after demand) until such amount is paid in full. Each Limited Partner shall
take such actions as the Partnership or the General Partner shall request in
order to perfect or enforce the security interest created hereunder.
ARTICLE 11
Transfers and Withdrawals
11.1 Transfer.
A. The term "Transfer," when used in this Article 11 with
respect to an OP Unit, shall be deemed to refer to a transaction by which the
General Partner purports to assign or pledge all or any part of its General
Partner Interest to another Person or by which a Limited Partner purports to
assign or pledge all or any part of its Limited Partner Interest to another
Person. The term "Transfer" when used in this Article 11 does not include
any exchange of OP Common Units for Shares pursuant to Section 8.6 or any
grant of a security interest to the Partnership pursuant to Section 10.4.
B. No Partnership Interest shall be Transferred, in whole or
in part, except in accordance with the terms and conditions set forth in this
Article 11. Any Transfer or purported Transfer of a Partnership Interest not
made in accordance with this Article 11 shall be null and void.
11.2 Transfer of the General Partner's and
the Company's Partnership Interests.
A. The General Partner may not Transfer its General
Partnership Interest or withdraw as General Partner, but such Transfer or
withdrawal shall be permitted (1) if Limited Partners holding a Qualifying
Limited Partner Interest consent to such Transfer or withdrawal or (2) in the
case of a Transfer of all or a portion of the General Partner Interest to an
entity which is, directly or indirectly, wholly-owned by the Company
(including a qualified REIT subsidiary under section 856(i) of the Code). In
the case of any Transfer permitted by this Section 11.2A, the transferee may
be admitted as a General Partner with the consent of the transferor, but
without any requirement that any Limited Partner consent thereto, all as
provided in Section 12.1.
B. In the event the General Partner withdraws as General
Partner, except in accordance with clause (A), above, the General Partner's
General Partner Interest shall immediately be converted into a Limited
Partner Interest.
C. The Company may Transfer any of its Limited Partner
Interest without the Consent of the General Partner or any Limited Partner,
but may not transfer any OP Preferred Unit or Other OP Units except to a
successor General Partner.
D. Except in the case of a change in identity, form, or
place of organization of the Company, however, effected, the Company shall
not engage in any merger (including a triangular merger), consolidation, or
other combination with or into another person, sale of all or substantially
all of its assets, or reclassification, recapitalization, or change of
outstanding Shares (other than a change in par value, or from par value to no
par value, or as a result of a subdivision or combination as described in the
definition of "Adjustment Factor") ("Termination Transaction"), unless the
Termination Transaction has been approved by the consent of Partners holding
a majority or more of the then outstanding OP Units (including any OP Units
held by the General Partner) and in connection with the Termination
Transaction all Limited Partners either will receive or will have the right
to elect to receive, for each OP Unit, an amount of cash, securities, or
other property equal to the product of the Adjustment Factor and the greatest
amount of cash, securities, or other property paid to a holder of Shares in
consideration of one Share at any time during the period from and after the
date on which the Termination Transaction is consummated; provided that, if,
in connection with the Termination Transaction, a purchase, tender, or
exchange offer shall have been made to and accepted by the holders or more
than 50% of the outstanding Shares, each holder of OP Units shall receive or
shall have the right to elect to receive the greatest amount of cash,
securities, or other property which such holder would have received had it
exercised the Redemption Right and received Shares in exchange for its OP
Units immediately prior to the expiration of such purchase, tender, or
exchange offer and had thereupon accepted such purchase, tender, or exchange
offer. Any Termination Transaction permitted under this Section 11.2D shall
be permitted notwithstanding the provisions of Section 7.4 or any other
provision of this Article 11.
11.3 Limited Partners' Rights to Transfer.
A. (1) Subject to the provisions of Sections 11.3C, 11.3D,
11.3E, and 11.4, a Limited Partner (other than the Company) may, without the
consent of the General Partner:
(a) Transfer such Limited Partner's OP Units to any
other Limited Partner, to a member of the family (as defined in section
267(c)(4) of the Code) of such transferring Limited Partner, or to a trust
all of the beneficiaries of which are members of the family of such
transferring Limited Partner, or pursuant to Section 8.6; and
(b) pledge such Limited Partner's OP Units to any
financial institution as collateral for any loan with respect to which such
Limited Partner is personally liable.
(2) Subject to the provisions of Sections 11.3C, 11.3D
and 11.3E, a Limited Partner may Transfer any of such Limited Partner's OP
Units, otherwise than in accordance with clause (1), above, only with the
prior written consent of the General Partner.
B. If a Limited Partner is subject to Incapacity, the
executor, administrator, trustee, committee, guardian, conservator, or
receiver of such Limited Partner's estate shall have all of the rights of a
Limited Partner, but not more rights than those enjoyed by other Limited
Partners, for the purpose of settling or managing the estate and such power
as the Incapacitated Limited Partner possessed to Transfer all or any part of
the Incapacitated Limited Partner's interest in the Partnership. The
Incapacity of a Limited Partner, in and of itself, shall not dissolve or
terminate the Partnership.
C. The General Partner may prohibit any Transfer by a
Limited Partner of its OP Units if, in the opinion of legal counsel to the
Partnership, such Transfer would require filing of a registration statement
under the Securities Act of 1933, as amended, or would otherwise violate any
Federal or state securities laws or regulations applicable to the Partnership
or the OP Units. The General Partner may require (but shall not be obligated
to accept) an opinion of legal counsel to the Limited Partner, in form and
substance acceptable to the General Partner, to the effect that such filing
would not be required and that such laws and regulations would not be
violated.
D. No Transfer by a Limited Partner of its OP Units may be
made to any Person if: (i) in the opinion of legal counsel for the
Partnership, it would result in the Partnership's being treated as an
association or a publicly traded partnership taxable as a corporation; (ii)
such Transfer would cause the Partnership to become, with respect to any
employee benefit plan subject to Title I of ERISA other than a plan
maintained by the General Partner or any Affiliate thereof, a
"party-in-interest" (as defined in section 3(14) of ERISA) or, with respect
to any "plan" (as defined in section 4975(e)(1) of the Code) other than a
plan maintained by the General Partner or any Affiliate thereof, a
"disqualified person" (as defined in section 4975(e)(2) of the Code); (iii)
such Transfer would, in the opinion of legal counsel for the Partnership,
cause any portion of the assets of the Partnership to constitute assets of
any employee benefit plan pursuant to Department of Labor Regulations section
2510.3-101; (iv) such Transfer would subject the General Partner, any of its
Affiliates, or the Partnership to be regulated under the Investment Company
Act of 1940, the Investment Advisors Act of 1940, or the Employee Retirement
Income Security Act of 1974, each as amended; (v) except with the consent of
the General Partner, such Transfer is a sale or exchange, and such sale or
exchange would, when aggregated with all other sales and exchanges during the
12-month period ending on the date of the proposed Transfer, result in 50% or
more of the interests in Partnership capital and profits being sold or
exchanged; (vi) it would require the Partnership to register under the
Investment Company Act of 1940; (vii) except with the consent of the General
Partner, it would cause the Partnership to be considered for purposes of
section 1.7704-1(h)(1)(ii) of the Regulations to have more than 100 partners
at any time during any taxable year; or (viii) in the opinion of legal
counsel to the General Partner, it could adversely affect the ability of the
Company to continue to qualify as a REIT to which the provisions of part II
of subchapter M of chapter 1 of the Code apply (and as a "corporation subject
to a tax imposed by subchapter M," within the meaning of section 11(c) of the
Code), subject the Company to additional taxes or other liability under the
Code, or violate any law or regulation of any governmental body or agency
having jurisdiction over the General Partner, its Affiliates, the
Partnership, or their respective securities or properties.
E. Section 11.3A shall not prohibit a Limited Partner from
taking the following actions, to the extent otherwise permitted under this
Agreement: (i) exercising any options to purchase Shares issued to such
Limited Partner under a Stock Option Plan, (ii) in connection with an
exercise permitted by the preceding clause (i), delivering to the Company
Shares in payment of the exercise price of such options or the withholding
taxes payable in connection with such exercise, or (iii) transferring OP
Units or Shares to a Permitted Transferee of such Limited Partner, provided
that such transferee agrees in writing to the transfer restrictions contained
in this Agreement (including this Section 11.3E).
11.4 Substituted Limited Partners.
A. Subject in each case to Section 11.4D: (1) the General
Partner shall have the right to add or substitute a transferee which receives
OP Units pursuant to Section 11.2C as a Limited Partner and (2) each Limited
Partner shall have the right to substitute a Permitted Transferee which
receives OP Units pursuant to Section 11.3A(1) as a Limited Partner in such
Limited Partner's place.
B. The General Partner shall have the right to consent to
the admission of a transferee who receives OP Units pursuant to Section
11.3A(2), which consent may be given or withheld by the General Partner in
its sole and absolute discretion. The General Partner's failure or refusal
to permit such transferee to become a Substituted Limited Partner shall not
give rise to any cause of action against the Partnership or any Partner.
C. A transferee who has been admitted as a Substituted
Limited Partner in accordance with this Article 11 shall have all the rights
and powers and be subject to all the restrictions and liabilities of a
Limited Partner under this Agreement.
D. No Permitted Transferee will be admitted as a Substituted
Limited Partner unless (i) such transferee has furnished to the General
Partner (a) evidence of acceptance in form satisfactory to the General
Partner of all of the terms and conditions of this Agreement, including,
without limitation, the power of attorney granted in Section 2.4, and (b)
such other documents or instruments as may be required in the reasonable
discretion of the General Partner in order to effect such Person's admission
as a Substituted Limited Partner and (ii) in the case of a transferee who
receives OP Units in accordance with Section 11.3A(2), the General Partner
has consented to such admission in accordance with Section 11.4B. Upon the
admission of a Substituted Limited Partner, the General Partner shall reflect
the name, address, number of OP Common Units, and Percentage Interest of such
Substituted Limited Partner on the records of the Partnership and eliminate
or adjust, if necessary, the name, address, and interest of the predecessor
of such Substituted Limited Partner.
11.5 Assignees. If the General Partner, in its sole and absolute
discretion, does not consent to the admission of any transferee as a
Substituted Limited Partner, such transferee shall be considered an Assignee
for purposes of this Agreement. An Assignee shall be deemed to have had
assigned to it and shall be entitled to receive distributions from the
Partnership and the share of Net Income, Net Losses, and any other items,
gain, loss deduction, and credit of the Partnership attributable to the OP
Units assigned to such transferee and, as to the OP Units which were
transferred to such Person in a manner permitted under this Agreement, shall
have the rights and obligations set forth in Section 8.6 as though a Limited
Partner, but shall not be deemed to be a holder of OP Units for any other
purpose under this Agreement, and shall not be entitled to vote such OP Units
in any matter presented to the Limited Partners for a vote (such OP Units
being deemed, to the extent permitted by law, to have been voted on such
matter in the same proportion as all other OP Units held by Limited Partners
are voted). In the event any such transferee desires to make a further
assignment of any such OP Units, such transferee shall be subject to all of
the provisions of this Article 11 to the same extent and in the same manner
as any Limited Partner desiring to make an assignment of OP Units.
11.6 General Provisions.
A. No Limited Partner may withdraw from the Partnership
otherwise than as a result of a permitted Transfer of all of such Limited
Partner's OP Units in accordance with this Article 11 or pursuant to an
exchange of all of its OP Units pursuant to Section 8.6.
B. Any Limited Partner who shall Transfer all of its OP
Units in a Transfer permitted pursuant to this Article 11 shall cease to be a
Limited Partner upon the admission of all Assignees of such OP Units as
Substituted Limited Partners. Similarly, any Limited Partner who shall
Transfer all of its OP Units pursuant to an exchange of all of its OP Units
pursuant to Section 8.6 shall cease to be a Limited Partner.
C. Except with the consent of the General Partner, transfers
pursuant to this Article 11 (other than Transfers pursuant to Section 8.6B)
may be made only as of the first day of each calendar month.
D. If any Partnership Interest is transferred or assigned
during the Partnership's fiscal year in compliance with the provisions of
this Article 11 or exchanged pursuant to Section 8.6 on any day other than
the first day of a Partnership Year, then Net Income, Net Losses, each item
thereof, and all other items attributable to such interest for such
Partnership Year shall be divided and allocated between the transferor
Partner and the transferee Partner by taking into account their varying
interests during the Partnership Year in accordance with section 706(d) of
the Code, using such method as the General Partner shall determine in its
sole discretion. Solely for purposes of making such allocations, each of
such items for the calendar month in which the Transfer or assignment occurs
shall be allocated to the transferee Partner, and none of such items for the
calendar month in which an exchange occurs shall be allocated to the
exchanging Partner, provided, however, that the General Partner may adopt
such other conventions relating to allocations in connection with transfers,
assignments, or exchanges as it determines are necessary or appropriate. All
distributions of Available Cash attributable to such OP Units with respect to
which the Partnership Record Date is before the date of such transfer,
assignment, or exchange shall be made to the transferor Partner or the
exchanging Partner, as the case may be, and in the case of a Transfer or
assignment other than an exchange, all distributions of Available Cash
thereafter attributable to such OP Units shall be made to the transferee
Partner.
E. Ownership of an OP Unit shall be determined by the
identity of the registered holder thereof on the books of the Partnership.
Transfer of an OP Unit can be made only in conformity with all provisions of
this Agreement and upon compliance with the further requirement that such
transfer can be made only upon presentation of the certificate evidencing
such OP Unit, if any, accompanied by satisfactory and duly executed
instruments of transfer.
ARTICLE 12
Admission of Partners
12.1 Admission of Successor General Partner. A successor to all of
the General Partner Interest pursuant to Section 11 hereof who is proposed to
be admitted as a successor General Partner shall be admitted to the
Partnership as the General Partner, effective upon such transfer, and such
admission shall occur, and for all purposes shall be deemed to have occurred,
immediately prior to the time the assignor ceases to be a general partner of
the Partnership. Any such transferee shall carry on the business of the
Partnership without dissolution. In each case, the admission shall be
subject to the successor General Partner's executing and delivering to the
Partnership an acceptance of all of the terms and conditions of this
Agreement and such other documents or instruments as may be required to
effect the admission. In the case of such admission on any day other than
the first day of a Partnership Year, all items attributable to the General
Partner Interest for such Partnership Year shall be allocated between the
transferring General Partner and such successor as provided in Section 11.6D.
12.2 Admission of Additional Limited Partners.
A. The limited partners named in the signature pages are all
admitted, or will be admitted as provided in Section 2.1 hereof, to the
Partnership as Limited Partners with the OP Common Units set forth opposite
the name of such Limited Partner on Exhibit I. After the admission to the
Partnership of the Limited Partners on the date hereof, a Person who makes a
Capital Contribution to the Partnership in accordance with this Agreement
shall be admitted to the Partnership as an Additional Limited Partner only
upon furnishing to the General Partner (i) evidence of acceptance in form
satisfactory to the General Partner of all of the terms and conditions of
this Agreement, including, without limitation, the power of attorney granted
in Section 2.4, and (ii) such other documents or instruments as may be
required in the sole discretion of the General Partner in order to effect
such Person's admission as an Additional Limited Partner.
B. Notwithstanding anything to the contrary in this Section
12.2, no Person shall be admitted as an Additional Limited Partner without
the consent of the General Partner, which consent may be given or withheld in
the General Partner's sole and absolute discretion. The admission of any
Person as an Additional Limited Partner shall become effective on the date
upon which the name of such Person is recorded on the books and records of
the Partnership, following the consent of the General Partner to such
admission.
C. If any Additional Limited Partner is admitted to the
Partnership on any day other than the first day of a Partnership Year, then
Net Income, Net Losses, each item thereof, and all other items allocable
among Partners and Assignees for such Partnership Year shall be allocated
among such Additional Limited Partner and all other Partners and Assignees by
taking into account their varying interests during the Partnership Year in
accordance with section 706(d) of the Code, using such method as the General
Partner shall determine in its sole discretion. All distributions of
Available Cash with respect to which the Partnership Record Date is before
the date of such admission shall be made solely to Partners and Assignees,
other than the Additional Limited Partner, and all distributions of Available
Cash thereafter shall be made to all of the Partners and Assignees, including
such Additional Limited Partner.
12.3 Amendment of Agreement and Certificate of Limited Partnership.
For the admission to the Partnership of any Partner, the General Partner
shall take all steps necessary and appropriate under the Act to amend the
records of the Partnership and, if necessary, to prepare as soon as practical
an amendment of this Agreement and, if required by law, shall prepare and
file an amendment to the Certificate and may for this purpose exercise the
power of attorney granted pursuant to Section 2.4 hereof.
ARTICLE 13
Dissolution, Liquidation, and Termination
13.1 Dissolution. The Partnership shall not be dissolved by the
admission of Substituted Limited Partners or Additional Limited Partners or
by the admission of a successor General Partner in accordance with the terms
of this Agreement. In the event of the withdrawal of the General Partner,
any successor General Partner shall continue the business of the Partnership.
The Partnership shall dissolve, and its affairs shall be wound up, only upon
the first to occur of any of the following ("Liquidating Events"):
A. the expiration of its term as provided in Section 2.5;
B. an event of withdrawal of the General Partner, as defined
in the Act (other than an event of bankruptcy listed in Sections 17-402(4)
and (5) of the Act), unless, at the time, there is at least one other General
Partner, who is hereby permitted to carry on the business of the Partnership,
and such General Partner does so (in accordance with Section 12.1 or
otherwise) or, within 90 days after such event of withdrawal a majority in
interest of the remaining Partners agree in writing to continue the business
of the Partnership and to the appointment, effective as of the date of
withdrawal, of a successor General Partner;
C. an election to dissolve the Partnership made by the
General Partner;
D. entry of a decree of judicial dissolution of the
Partnership pursuant to the provisions of the Act;
E. the sale of all or substantially all of the assets and
properties of the Partnership;
F. a final and non-appealable judgment is entered by a court
of competent jurisdiction ruling that the General Partner is bankrupt or
insolvent, or a final and non-appealable order for relief is entered by a
court with appropriate jurisdiction against the General Partner, in each case
under any Federal or state bankruptcy or insolvency laws as now or hereafter
in effect, unless prior to the entry of such order or judgment all of the
remaining Partners agree in writing to continue the business of the
Partnership and to the appointment, effective as of a date prior to the date
of such order or judgment, of a substitute General Partner; and
G. at any time that there are no limited partners of the
Partnership, unless the business of the Partnership is continued in
accordance with the Act.
13.2 Winding Up.
A. Upon the occurrence of a Liquidating Event that results
in the dissolution of the Partnership, the Partnership shall continue solely
for the purposes of winding up its affairs in an orderly manner, liquidating
its assets, and satisfying the claims of its creditors and Partners. No
Partner shall take any action that is inconsistent with, or not necessary to
or appropriate for, the winding up of the Partnership's business and affairs.
The General Partner, or, in the event there is no remaining General Partner,
any Person elected by Limited Partners holding at least a majority of the
Limited Partnership Interests (the General Partner or such other Person being
referred to herein as the "Liquidator"), shall be responsible for overseeing
the winding up and termination of the Partnership and shall take full account
of the Partnership's liabilities and property and the Partnership property
shall be liquidated as promptly as is consistent with obtaining the fair
value thereof, and the proceeds therefrom (which may, to the extent
determined by the General Partner, include shares of beneficial interest or
other securities of the General Partner or an Affiliate thereof) shall be
applied and distributed in the following order:
(1) First, to the payment and discharge (or making
reasonable provision for paying) of all of the Partnership's debts and
liabilities to creditors other than the Partners;
(2) Second, to the payment and discharge of all of the
Partnership's debts and liabilities to the Partners;
(3) Third, to the General Partner to the extent required
under any OP Preferred Units or Other OP Units senior to the OP Common Units,
in accordance with the terms and priorities set forth in the respective OP
Unit Designations; and
(4) The balance, if any, to the Partners and Assignees
owning OP Common Units in proportion to their respective Percentage Interests
(and to the holders of any Other OP Units junior to OP Common Units, to the
extent of their entitlement, if any).
The General Partner shall not receive any additional compensation for any
services performed pursuant to this Article 13.
B. Notwithstanding the provisions of Section 13.2A which
require liquidation of the assets of the Partnership, but subject to the
order of priorities set forth therein, if prior to or upon dissolution of the
Partnership the Liquidator determines that an immediate sale of part or all
of the Partnership's assets would be impractical or would cause undue loss to
the Partners, the Liquidator may, in its sole and absolute discretion, defer
for a reasonable time the liquidation of any asset except those necessary to
satisfy liabilities of the Partnership (including to those Partners as
creditors) and/or distribute to the Partners, in lieu of cash, as tenants in
common and in accordance with the provisions of Section 13.2A, undivided
interests in such Partnership assets as the Liquidator deems not suitable for
liquidation. Any such distributions in kind shall be made only if, in the
good faith judgment of the Liquidator, such distributions in kind are in the
best interests of the Partners, and shall be subject to such conditions
relating to the disposition and management of such properties as the
Liquidator deems reasonable and equitable and to any agreements governing the
operation of such properties at such time. The Liquidator shall determine
the fair market value of any property distributed in kind using such
reasonable method of valuation as it may adopt.
C. In the sole discretion of the Liquidator, a pro rata
portion of the distributions that would otherwise be made to the General
Partner and Limited Partners pursuant to this Article 13 may be:
(1) distributed to a trust established for the benefit
of the General Partner and Limited Partners for the purposes of liquidating
Partnership assets, collecting amounts owed to the Partnership, and paying
any liabilities or obligations (including contingent) of the Partnership or
the General Partner arising out of or in connection with the Partnership.
The assets of any such trust shall be distributed to the General Partner and
Limited Partners from time to time, in the reasonable discretion of the
Liquidator, in the same priorities and proportions as the amount distributed
to such trust by the Partnership would otherwise have been distributed to the
General Partner and Limited Partners pursuant to this Agreement; or
(2) withheld or escrowed to provide a reasonable reserve
for Partnership liabilities (contingent or otherwise) and to reflect the
unrealized portion of any installment obligations owed to the Partnership,
provided that such withheld or escrowed amounts shall be distributed to the
General Partner and Limited Partners in the manner and order of priority set
forth in Section 13.2A as soon as practicable.
13.3 No Obligation to Contribute Deficit. If any Partner has a
deficit balance in such Partner's Capital Account (after giving effect to all
contributions, distributions and allocations for all taxable years, including
the year during which such liquidation occurs), such Partner shall have no
obligation to make any contribution to the capital of the Partnership with
respect to such deficit, and such deficit shall not be considered a debt owed
to the Partnership or to any other Person for any purpose whatsoever.
13.4 Rights of Limited Partners. Except as otherwise provided in
this Agreement, each Limited Partner shall look solely to the assets of the
Partnership for the return of its Capital Contributions and shall have no
right or power to demand or receive property other than cash from the
Partnership. Except as otherwise provided in this Agreement, no Limited
Partner shall have priority over any other Partner as to the return of its
Capital Contributions, distributions, or allocations.
13.5 Notice of Dissolution. In the event a Liquidating Event
occurs or an event occurs that would, but for the provisions of an election,
objection, consent, or agreement by one or more Partners pursuant to Section
13.1, result in a dissolution of the Partnership, the General Partner shall,
within thirty (30) days thereafter, provide written notice thereof to each of
the Partners.
13.6 Termination of Partnership and Cancellation of Certificate of
Limited Partnership. Upon the completion of the liquidation of the
Partnership's assets, as provided in Section 13.2, the Partnership shall be
terminated, a certificate of cancellation shall be filed, and all
qualifications of the Partnership as a foreign limited partnership in
jurisdictions other than the state of Delaware shall be canceled and such
other actions as may be necessary to terminate the Partnership shall be
taken.
13.7 Reasonable Time for Winding-Up. A reasonable time shall be
allowed for the orderly winding-up of the business and affairs of the
Partnership and the liquidation of its assets pursuant to Section 13.2 in
order to minimize any losses otherwise attendant upon such winding-up, and
the provisions of this Agreement shall remain in effect among the Partners
during the period of liquidation.
13.8 Waiver of Partition. Each Partner hereby waives any right to
partition of the Partnership property.
ARTICLE 14
Amendment of Partnership Agreement;
Action by Limited Partners
14.1 Amendments.
A. Amendments to this Agreement may be proposed by the
General Partner or in writing by any Limited Partner or Limited Partners
holding in the aggregate 25% or more of the Partnership Interests. Within
such reasonable period of time as shall be determined by the General Partner
following such proposal, the General Partner shall submit any proposed
amendment to the Limited Partners. The General Partner shall seek the
written vote of the Partners on the proposed amendment or shall call a
meeting on not less than 10 days' notice to vote thereon and to transact any
other business that it may deem appropriate. For purposes of obtaining a
written vote, the General Partner may require a response within a reasonable
specified time, but not less than fifteen (15) days, and failure to respond
in such time period shall constitute a vote which is consistent with the
General Partner's recommendation with respect to the proposal. Except as
provided in Section 14.1B or 14.1C, a proposed amendment shall be adopted and
be effective as an amendment hereto if it is approved by the General Partner
and it receives the consent of Partners holding a majority or more of the
then outstanding OP Units (including OP Units held by the General Partner)
(except for amendments to this Section 14.1 or Sections 4.3, 7.4, 7.5, 8.5A,
8.6, 9.3, 11.2 and 14.2, and the final sentence of Section 10.3B which, so
long as Limited Partners other than the General Partner own more than 5% of
all Limited Partner Interests, must be approved by Partners holding a
majority of the Limited Partner Interests (other than the General Partner)).
B. Notwithstanding Section 14.1A, the General Partner shall
have the power, without the consent of the Limited Partners, which consent is
hereby deemed to have been given, to amend this Agreement (other than this
Section 14.1 or Sections 4.3, 7.4, 7.5, 11.2, and 14.2) to the extent
expressly set forth herein (including, without limitation, in Section 8.6E)
or as may be required to facilitate or implement any of the following
purposes:
(1) to add to the obligations of the General Partner or
surrender any right or power granted to the General Partner or any Affiliate
of the General Partner for the benefit of the Limited Partners;
(2) to reflect the admission, substitution, termination,
or withdrawal of Partners, or changes in the number or type of OP Units held
by a Partner, accomplished in accordance with this Agreement;
(3) to set forth the designations, rights, powers,
duties, and preferences of the holders of any additional Partnership
Interests issued pursuant to Section 4.3 hereof;
(4) to reflect a change that is of an inconsequential
nature or does not adversely affect the Limited Partners in any material
respect; to cure any ambiguity, correct, or supplement in an inconsequential
manner any provision in this Agreement not inconsistent with law or with
other provisions; or to make other changes with respect to matters arising
under this Agreement that will not be inconsistent with law or with the
provisions of this Agreement; and
(5) to satisfy any requirements, conditions, or
guidelines contained in any order, directive, opinion, ruling, or regulation
of a Federal or state agency or contained in Federal or state law, rules or
regulations.
After taking any action under this Section 14.1B, the General Partner shall
provide notice to the Limited Partners of the taking of such action.
C. Notwithstanding Section 14.1A and 14.1B, this Agreement
shall not be amended without the consent of the General Partner and each
Limited Partner materially adversely affected if such amendment would (i)
convert a Limited Partner's interest in the Partnership into a general
partner interest; (ii) modify the limited liability of a Limited Partner in a
manner adverse to such Limited Partner; (iii) alter a Partner's right to
receive distributions by specifically amending Section 5.1 or Section 13.2,
or specifically alter the allocations specified in Article 6 by amending
Article 6, Section 7.3B or Exhibit B (except as permitted pursuant to Article
4 and Sections 5.4 and 14.1B(3)), provided that any amendment of any
provision of this Agreement that, in the good faith judgment of the General
Partner, does not have the effect of amending in a manner materially adverse
to the Limited Partners considered as a whole Section 5.1, Section 13.2,
Article 6, Section 7.3B or Exhibit B shall not be subject to this Section
14.1C(iii); (iv) cause the termination of the Partnership prior to the time
set forth in Sections 2.5 and 13.1; or (v) amend Section 7.1A(3) or this
Section 14.1C (or, in the case of an amendment pursuant to Section 14.1B,
amend Sections 8.5A, 8.6, or 9.3, the final sentence of Section 10.3B, or,
except as provided in Article 4, Exhibit A).
14.2 Action by Limited Partners.
A. Meetings of the Partners may be called by the General
Partner and shall be called upon the receipt by the General Partner of a
written request by Limited Partners holding 25 percent or more of the
Partnership Interests. The request shall state the nature of the business to
be transacted. Notice of any such meeting shall be given to all Partners not
less than seven (7) days nor more than thirty (30) days prior to the date of
such meeting. Partners may vote in person or by proxy at such meeting.
Whenever the vote or consent of the Limited Partners is permitted or required
under this Agreement, such vote or consent may be given at a meeting of the
Partners by the holders of such percentage of the Percentage Interests or OP
Common Units as is expressly required by this Agreement or may be given in
accordance with the procedure prescribed in Section 14.1A or in accordance
with the procedure prescribed in Section 14.2B.
B. Any vote or consent of the Limited Partners permitted or
required under this Agreement and action required or permitted to be taken at
a meeting of the Partners may be taken without a meeting if written
consent(s) setting forth the action so taken is signed by the holders of such
percentage of the Percentage Interests or the OP Common Units as is expressly
required by this Agreement. Such consent may be in one instrument or in
several instruments. Such consent shall be filed with the records of the
Partnership.
C. Each Limited Partner may authorize any Person or Persons
to act for such Limited Partner by proxy on all matters in which a Limited
Partner is entitled to participate, including waiving notice of any meeting,
or voting or participating at a meeting. Every proxy must be signed by the
Limited Partner or such Limited Partner's attorney-in-fact. No proxy shall
be valid after the expiration of eleven (11) months from the date thereof
unless otherwise provided in the proxy. Every proxy shall be revocable at
the pleasure of the Limited Partner executing it, such revocation to be
effective upon the Partnership's receipt of written notice of such revocation
from the Limited Partner executing such proxy.
D. Each meeting of the Partners shall be conducted by the
General Partner or such other Person as the General Partner may appoint
pursuant to such rules for the conduct of the meeting as the General Partner
or such other Person deems appropriate.
ARTICLE 15
General Provisions
15.1 Addresses and Notice. Any notice, demand, request, or report
required or permitted to be given or made to a Partner or Assignee under this
Agreement shall be in writing and shall be deemed given or made when
delivered in person or three business days after being sent by first class
United States mail or one business day after being sent by nationally
recognized overnight delivery service or, upon receipt, when sent by
facsimile transmission to the Partner or Assignee at the address set forth in
Exhibit A or such other address of which the Partner shall notify the General
Partner in writing.
15.2 Titles and Captions. All article or section titles or
captions in this Agreement are for convenience only. They shall not be
deemed part of this Agreement and in no way define, limit, extend, or
describe the scope or intent of any provisions hereof.
15.3 Certain Terms. Whenever the context may require, any pronoun
used in this Agreement shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns, pronouns and verbs shall
include the plural and vice versa. References to the "sole discretion" of
the General Partner or Liquidator mean the sole and absolute discretion of
the General Partner or Liquidator, as the case may be.
15.4 Effectiveness of Certain Provisions. The provisions of this
Agreement relating to the Persons who will be admitted as limited partners in
the Partnership in connection with the transactions contemplated by the
Contribution Agreement shall not be effective with respect to each such
Person until consummation of the transactions contemplated by the
Contribution Agreement and admission of such Person as a limited partner of
the Partnership which admission shall occur without any further action of any
Person upon such consummation.
15.5 Further Action. The parties shall execute and deliver all
documents, provide all information, and take or refrain from taking action as
may be necessary or appropriate to achieve the purposes of this Agreement.
15.6 Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their heirs, executors,
administrators, successors, legal representatives, and permitted assigns.
15.7 Creditors. Other than as expressly set forth herein with
respect to the Indemnitees, none of the provisions of this Agreement shall be
for the benefit of, or shall be enforceable by, any creditor of the
Partnership.
15.8 Waiver. No failure by any party to insist upon the strict
performance of any covenant, duty, agreement, or condition of this Agreement
or to exercise any right or remedy consequent upon a breach thereof shall
constitute waiver of any such breach or any other covenant, duty, agreement,
or condition.
15.9 Counterparts. This Agreement may be executed in counterparts,
all of which together shall constitute one agreement binding on all of the
parties hereto, notwithstanding that all such parties are not signatories to
the original or the same counterpart. Each party shall become bound by this
Agreement immediately upon affixing its signature hereto.
15.10 Applicable Law. This Agreement shall be construed and
enforced in accordance with and governed by the laws of the State of
Delaware, without regard to the principles of conflicts of laws thereof.
15.11 Invalidity of Provisions. If any provision of this
Agreement is or becomes invalid, illegal, or unenforceable in any respect,
the validity, legality, and enforceability of the remaining provisions
contained herein shall not be affected thereby.
15.12 Entire Agreement. This Agreement contains the entire
understanding and agreement among the Partners with respect to the subject
matter hereof and supersedes any other prior written or oral understandings
or agreements among them with respect thereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first written above.
GENERAL PARTNER:
KRT TRUST
By:________________________________
Print Name:
Title:
. LIMITED PARTNERS:
KRT TRUST I LLC
By:________________________________
Print Name:
Title:
<PAGE>
COUNTERPART SIGNATURE PAGE
TO AMENDED AND RESTATED AGREEMENT
OF
LIMITED PARTNERSHIP
OF
KRAMONT OPERATING PARTNERSHIP, L.P.
The undersigned agrees to be bound as successor General Partner by
all of the terms and conditions of the Amended and Restated Agreement of
Limited Partnership of Kramont Operating Partnership, L.P.
KRAMONT REALTY TRUST
By:________________________________
Name:
Title:
Address for Notice:
Dated: _____________, 2000
<PAGE>
COUNTERPART SIGNATURE PAGE
TO AMENDED AND RESTATED AGREEMENT
OF
LIMITED PARTNERSHIP
OF
KRAMONT OPERATING PARTNERSHIP, L.P.
The undersigned agrees to be bound as a Limited Partner by all of
the terms and conditions of the Amended and Restated Agreement of Limited
Partnership of Kramont Operating Partnership, L.P.
Name:
By:________________________________
Name:
Title:
Address for Notice:
Dated: _____________, 2000
</TABLE>
<TABLE>
<CAPTION>
Exhibit A
to the Kramont
Partnership Agreement
[To be updated]
Partners' Contributions and Partnership Interests as of ___________, 2000
Gross Asset Value
Name and Address Cash of Contributed Total Net Op Common Percentage
of Partner Contributions Property(1) Liabilities(1) Contribution(2) Units Interest(3)
- ---------------- ------------- ---------------- -------------- --------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
General Partner
- ---------------
Kramont Realty Trust 1 0.000005%
580 West Germantown Pike
Plymouth Meeting, PA 19462
Limited Partners
- ----------------
Kramont Realty Trust 18,529,452 92.728727%
580 West Germantown Pike
Plymouth Meeting, PA 19462
Louis P. Meshon, Sr. 570,338 2.854198%
580 West Germantown Pike
Plymouth Meeting,
PA 19462
Louis P. Meshon 89,909 0.449940%
& Patricia G. Meshon
580 West Germantown
Pike
Plymouth Meeting, PA 19462
Other Limited Partners 792,729 3.967130%
---------- -----------
19,982,429(4) 100.000000%
========== ===========
</TABLE>
1. All assets, including partnership interests, should be valued "gross"
and all liabilities should be separately listed hereon. All capitalized
terms used in the notes to this Exhibit A and not otherwise defined
herein shall have the meanings ascribed to them in this Amended and
Restated Agreement of Limited Partnership of Kramont Operating
Partnership, L.P.
2. Provided that the Kranzco Reorganization and the Trust Merger (as those
terms are defined in the Agreement and Plan of Reorganization and Merger
among Kranzco Realty Trust, KRT Trust, CV Reit, Inc. and Kramont Realty
Trust, dated as of December 10, 1999 (the "Plan of Reorganization"))
shall have occurred immediately prior to the Effective Time (as defined
in the Plan of Reorganization) and that the transactions described in
section 5.3 of the Plan of Reorganization shall have occurred
immediately after the Effective Time, it is appropriate to treat, and
this Exhibit A accordingly does treat, all of the assets that are being
contributed to the Partnership through the date hereof as having been
contributed in a single transaction, without any need for revaluation
under clause 2 of the definition of "Gross Asset Value."
For purposes of this footnote, "Newco Preferred Amount" means the
liquidation preference (exclusive of accumulated or accrued and unpaid
dividends) of the Kramont Preferred Shares (as defined in the Plan of
Reorganization) corresponding to the OP Preferred Units issued to the
Company (hereafter "Kramont") on the date hereof, as such value is
determined by Kramont in its reasonable discretion.
All of Kranzco's (as defined in the Plan of Reorganization) and its
qualified REIT subsidiaries' existing tangible and intangible assets,
including goodwill and going concern value will be transferred to the
Partnership, and all assets acquired by Kramont in the CV Merger (as
defined in the Plan of Reorganization), including specifically, but
without limitation, the interest of Montgomery CV Realty Trust (f/k/a
Montgomery CV Trust) in Montgomery CV Realty L.P. (as such terms are
defined in the Plan of Reorganization), except for (1) stock and
beneficial interests in qualified REIT Subsidiaries, and (2) the Florida
Land, will be contributed to the Partnership. The foregoing
contributions will be subject to and the Partnership will assume all of
Kranzco's and CV Reit, Inc.'s ("CV") (and their respective qualified
REIT subsidiaries') liabilities. No cash will be retained at the
Kramont level, except, possibly, cash needed to pay dividends declared
(or relating to the current quarter), but not yet paid, on the closing
date. Kramont's total net contribution (to which liabilities will be
added back and from which cash contributed will be subtracted to
determine the Gross Asset Value of Kramont's contribution of property
other than cash) will be set at fair market value, which Kramont may
determine to be not higher than the highest of and not lower than the
lowest of (1) $___________ [an agreed upon fair market value of Kramont
on a pro forma basis reflecting the Newco Preferred Amount and the
values used to establish the exchange ratios used in the Reorganization
(as defined in the Plan of Reorganization)], (2) the sum of the Newco
Preferred Amount plus 175.42% of the excess of Kranzco's net GAAP book
value on the date of signing of the Plan of Reorganization over the
Newco Preferred Amount, (3) the sum of the Newco Preferred Amount plus
175.42% of the excess of Kranzco's net GAAP book value immediately prior
to the Effective Time over the Newco Preferred Amount, (4) the sum of
the Newco Preferred Amount plus the product of 18,529,453 multiplied by
the price per share of one common share of beneficial interest in
Kramont (such product, "Kramont's Market Capitalization") on the date of
signing of the Plan of Reorganization, and (5) the sum of the Newco
Preferred Amount plus Kramont's Market Capitalization immediately prior
to the Effective Time, in each case appropriately adjusted for payment
of transaction costs and retention of cash by Kramont.
After subtracting the Newco Preferred Amount from Kramont's total net
contribution (as determined above), the total net contributions for all
Partners will be proportionate to their OP Common Units.
3. Percentage Interests may not add to exactly 100.000000% due to rounding.
Kramont will also be issued the following OP Preferred Units: 11,155
Series A-1 OP Preferred Units; 274,029 Series B-1 OP Preferred Units;
909,248 Series B-2 OP Preferred Units; and 1,800,000 Series D Preferred
Units. The Capital Contributions attributable to each of the OP
Preferred Units shall be equal to their respective liquidation
preferences (excluding accumulated or accrued and unpaid dividends) of
the corresponding Kramont Preferred Shares, as determined by Kramont in
its reasonable discretion.
4. Derived as follows and assuming participation by (i) Kramont, (ii) all
former limited partners in Montgomery CV Realty L.P. who contribute such
limited partner interests to CV Partner Holdings, L.P. ("Holdings") and
then contribute their interests in Holdings to the Partnership (except
Louis P. Meshon, Sr., as to a 0.1% indirect interest in Montgomery CV
Realty L.P.), and (iii) all other limited partners in Montgomery CV
Realty L.P. and without "rounding up for cash": There are currently
outstanding 9,429,026 OP Units in Montgomery CV Realty L.P., of which
direct and indirect interests in 99.9%, or 9,419,597 are assumed to be
exchanged for 9,419,597 OP Common Units in the Partnership, at an
exchange ratio of 1:1. Kranzco has outstanding today (prior to the
Reorganization) 10,562,832 Common Shares. In exchange for transferring
the Kranzco net assets to the Partnership, Kramont will be issued
10,562,832 OP Common Units plus the OP Preferred Units described in note
3 above. The sum of 9,419,597 and 10,562,832 is 19,982,429.
The number of OP Common Units issued to Kramont equals the sum of
10,562,832 plus 7,966,621 (the number of OP Units in Montgomery CV
Realty L.P. owned by CV and acquired by Kramont in the CV Merger). The
number of OP Common Units issued to Louis P. Meshon, Sr. equals the
excess of 579,767 (the number of OP Units in Montgomery CV Realty L.P.
owned by him) over 9,429 (0.1% of the total number of OP Units, which
0.1% is to be retained by him indirectly through Holdings). The number
of OP Common Units issued to Louis P. Meshon and Patricia G. Meshon
equals 89,909 (the number of OP Units now owned by them). The OP
Common Units for the other Limited Partners would be computed similarly.
It is acknowledged that, pursuant to the Unit Contribution Agreement,
the number of OP Units retained by Louis P. Meshon, Sr. indirectly
through Holdings will in fact be less than 9,429 and that, the number of
OP Common Units issued to him and the aggregate number of OP Common
Units will increase in like amount.
<PAGE>
Exhibit B
to the Kramont
Partnership Agreement
Allocations of Partnership Items
1. Allocation of Net Income and Net Loss.
(a) Net Income. (1) Except as otherwise provided in Section 7.3B, this
Exhibit B and any OP Unit Designation, Net Income (or items thereof) for any
fiscal year or other applicable period shall be allocated to the OP Common
Unit Partners in accordance with their respective Percentage Interests.
(2) Notwithstanding paragraph 1(a)(1) above, Net Income (or items
thereof) shall first be allocated among the OP Preferred Unit Partners, in
proportion to the amounts of Net Loss (or items thereof) that have been
allocated to them pursuant to paragraph 1(b)(2) below, until the cumulative
amounts of Net Income (or items thereof) allocated hereunder to each OP
Preferred Unit Partner equals the cumulative amounts of Net Loss (or items
thereof) theretofore allocated to each such OP Preferred Unit Partner.
(b) Net Loss. (1) Except as otherwise provided in this Exhibit B, Net
Loss (or items thereof) of the Partnership for each fiscal year or other
applicable period shall be allocated to the OP Common Unit Partners in
accordance with the OP Common Unit Partners' respective Percentage Interests.
Notwithstanding the preceding sentence, to the extent any Net Loss (or items
thereof) allocated to an OP Common Unit Partner under this subparagraph
(b)(1) would cause such OP Common Unit Partner (hereinafter, a "Restricted
Partner") to have an Adjusted Capital Account Deficit, or increase the amount
of an existing Adjusted Capital Account Deficit, as of the end of the fiscal
year or other applicable period to which such Net Loss relates, such Net Loss
shall not be allocated to such Restricted Partner and instead shall be
allocated to the other OP Common Unit Partner(s) (hereinafter, the "Permitted
Partners") pro rata in accordance with each Permitted Partner's Percentage
Interest.
(2) If there is no OP Common Unit Partner who does not have an
Adjusted Capital Account Deficit, then Net Loss (or items thereof) shall be
allocated among the OP Preferred Unit Partners in accordance with their
respective positive Capital Account balances until such balances reach zero.
(c) Terminating Capital Transaction; Liquidation. Allocations of Net
Income or Net Loss (or items thereof) in connection with a Terminating
Capital Transaction or Liquidation (as defined in Treasury Regulation section
1.704-1(b)(2)(ii)(g)) of the Partnership shall be made so that, to the extent
possible, (i) first, the OP Preferred Unit Partners' respective Capital
Account balances are equal (as nearly as possible) to the amounts they are
entitled to receive pursuant to their respective OP Unit Designations, and
(ii) second, the OP Common Unit Partners' respective Capital Account balances
are proportionate to their Percentage Interests. In the event that the
Capital Account balance of more than one OP Common Unit Partner is
disproportionate to such OP Common Unit Partner's Percentage Interest, the
largest such relative disproportion shall be cured first, until it is equal,
on a relative basis, to the next largest such disproportion, and so on, to
the extent Net Income or Net Loss (or items thereof) are available.
Notwithstanding the preceding sentence, to the extent any Net Loss (or items
thereof) would be allocated to a Restricted Partner under this subparagraph
(c), such Net Loss shall not be allocated to such Restricted Partner and
instead shall be allocated to the Permitted Partners pro rata in accordance
with each Permitted Partner's Percentage Interest.
(d) Rules of Construction.
(1) Capital Account Increases. For purposes of making
allocations pursuant to subparagraph 1(c) of this Exhibit B, a
Partner's Capital Account balance shall be deemed to be increased
by such Partner's share of any Partnership Minimum Gain and Partner
Minimum Gain remaining at the close of the fiscal period in respect
of which such allocations are being made.
(2) Change in Percentage Interests. In the event any
Partner's Percentage Interest changes during a fiscal year for any
reason, including without limitation, the Transfer of any interest
in the Partnership, the tax allocations contained in this Exhibit B
shall be applied as necessary to reflect the varying interests of
the Partners during such year.
2. Special Allocations.
Notwithstanding any provisions of paragraph 1 of this Exhibit B, the
following special allocations shall be made.
(a) Minimum Gain Chargeback (Nonrecourse Liabilities). Except as
otherwise provided in section 1.704-2(f) of the Regulations, if there is a
net decrease in Partnership Minimum Gain for any Partnership fiscal year,
each Partner shall be specially allocated items of Partnership income and
gain for such year (and, if necessary, subsequent years) in an amount equal
to such Partner's share of the net decrease in Partnership Minimum Gain to
the extent required by Regulations section 1.704-2(f). The items to be so
allocated shall be determined in accordance with sections 1.704-2(f) and (i)
of the Regulations. This subparagraph 2(a) is intended to comply with the
minimum gain chargeback requirement in said section of the Regulations and
shall be interpreted consistently therewith. Allocations pursuant to this
subparagraph 2(a) shall be made in proportion to the respective amounts
required to be allocated to each Partner pursuant hereto.
(b) Partner Minimum Gain Chargeback. Except as otherwise provided in
section 1.704-2(i)(4) of the Regulations, if there is a net decrease in
Partner Minimum Gain attributable to a Partner Nonrecourse Debt during any
fiscal year, each Partner who has a share of the Partner Minimum Gain
attributable to such Partner Nonrecourse Debt, determined in accordance with
section 1.704- 2(i)(5) of the Regulations, shall be specially allocated items
of Partnership income and gain for such year (and, if necessary, subsequent
years) in an amount equal to that Partner's share of the net decrease in the
Partner Minimum Gain attributable to such Partner Nonrecourse Debt to the
extent and in the manner required by section 1.704-2(i) of the Regulations.
The items to be so allocated shall be determined in accordance with sections
1.704-2(i)(4) and (j)(2) of the Regulations. This subparagraph 2(b) is
intended to comply with the minimum gain chargeback requirement with respect
to Partner Nonrecourse Debt contained in said section of the Regulations and
shall be interpreted consistently therewith. Allocations pursuant to this
subparagraph 2(b) shall be made in proportion to the respective amounts
required to be allocated to each Partner pursuant hereto.
(c) Qualified Income Offset. In the event a Partner unexpectedly
receives any adjustments, allocations, or distributions described in section
1.704-1(b)(2)(ii)(d)(4), (5), or (6) of the Regulations, and such Partner has
an Adjusted Capital Account Deficit, items of Partnership income (including
gross income) and gain shall be specially allocated to such Partner in an
amount and manner sufficient to eliminate the Adjusted Capital Account
Deficit as quickly as possible as required by the Regulations. This
subparagraph 2(c) is intended to constitute a "qualified income offset" under
section 1.704-1(b)(2)(ii)(d) of the Regulations and shall be interpreted
consistently therewith.
(d) Other Chargeback of Impermissible Negative Capital Account. To the
extent any Partner has an Adjusted Capital Account Deficit at the end of any
Partnership fiscal year, each such Partner shall be specially allocated items
of Partnership income (including gross income) and gain in the amount of such
excess as quickly as possible, provided that an allocation pursuant to this
paragraph 2(d) shall be made if and only to the extent that such Partner
would have an Adjusted Capital Account Deficit after all other allocations
provided for in this Exhibit B have been tentatively made as if this
paragraph 2(d) were not in the Agreement.
(e) Nonrecourse Deductions. Nonrecourse Deductions for any fiscal year
or other applicable period shall be allocated to the Partners in accordance
with their respective Percentage Interests.
(f) Partner Nonrecourse Deductions. Partner Nonrecourse Deductions for
any fiscal year or other applicable period with respect to a Partner
Nonrecourse Debt shall be specially allocated to the Partner that bears the
economic risk of loss for such Partner Nonrecourse Debt (as determined under
sections 1.704-2(b)(4) and 1.704-2(i)(1) of the Regulations).
(g) Intent of Allocations. The parties intend that the allocation
provisions of this Exhibit B shall result in final Capital Account balances
of the (i) OP Preferred Unit Partners, equal to the amounts they are entitled
to receive pursuant to their respective OP Unit Designations, and (ii) OP
Common Unit Partners, that are in proportion to the OP Common Unit Partners'
respective Percentage Interests, so that when liquidating distributions are
made in accordance with Sections 13.2A(3) and (4), such distributions will be
made to the (a) OP Preferred Unit Partners, in amounts equal to their
respective Capital Account balances, and (b) OP Common Unit Partners, in
proportion to respective Percentage Interests. To the extent that such final
Capital Account balances would not so reflect the provisions of this Exhibit
B, income and loss of the Partnership for the current year and future years,
as computed for book purposes, shall be allocated among the OP Preferred Unit
Partners and the OP Common Unit Partners so as to result in final Capital
Account balances reflecting the provisions of this Exhibit B. This
subparagraph shall control notwithstanding any reallocation of income, loss,
or items thereof, as computed for book purposes, by the Internal Revenue
Service or any other taxing authority.
(h) Section 754 Adjustment. To the extent an adjustment to the
adjusted tax basis of any asset of the Partnership pursuant to section 734(b)
of the Code or section 743(b) of the Code is required, pursuant to section
1.704-1(b)(2)(iv)(m) of the Regulations, to be taken into account in
determining Capital Accounts, the amount of such adjustment to the Capital
Accounts shall be treated as an item of gain (if the adjustment increases the
basis of the asset) or loss (if the adjustment decreases such basis) and such
gain or loss shall be specially allocated among the Partners in a manner
consistent with the manner in which each of their respective Capital Accounts
are required to be adjusted pursuant to such section of the Regulations.
3. Tax Allocations.
(a) Items of Income or Loss. Except as is otherwise provided in this
Exhibit B or in the Code and Regulations, an allocation of Partnership Net
Income or Net Loss to a Partner shall be treated as an allocation to such
Partner of the same share of each item of income, gain, loss, deduction, and
item of tax-exempt income or Code section 705(a)(2)(B) expenditure (or item
treated as such expenditure pursuant to Regulations section
1.704-1(b)(2)(iv)(i)) ("Tax Items") that is taken into account in computing
Net Income or Net Loss. Tax Items with respect to Partnership property that
is subject to Code section 704(c) and/or Regulations section
1.704-1(b)(2)(iv)(f) shall be allocated in accordance with Code section
704(c) and Regulations section 1.704-3.
(b) Section 1245/1250 Recapture. To the extent not otherwise required
by the Code or Regulations, if any portion of gain from the sale of
Partnership assets is treated as gain which is ordinary income by virtue of
the application of Code section 1250 ("Affected Gain"), then such Affected
Gain shall be allocated among the Partners in the same proportion that the
depreciation and amortization deductions giving rise to the Affected Gain
were allocated. This subparagraph 3(b) shall not alter the amount of Net
Income (or items thereof) allocated among the Partners, but merely the
character of such Net Income (or items thereof). Items governed by section
1.1245-1(e) of the Regulations shall be allocated in accordance with that
section.
(c) Excess Nonrecourse Liabilities. Each Partner who has contributed
an asset to the Partnership shall be allocated, to the extent possible, a
share of "excess nonrecourse liabilities" of the Partnership which results in
such Partner's being allocated nonrecourse liabilities in an amount which is
at least equal to the amount of income that would otherwise be realized by
such Partner pursuant to section 731 of the Code in connection with the
contribution of such asset to the Partnership or with any reduction in
"section 704(c) minimum gain" with respect thereto prior to the end of the
taxable year of the contribution (the "Liability Shortfall"). In the event
there is an insufficient amount of nonrecourse liabilities to allocate to
each Partner an amount of nonrecourse liabilities equal to the Liability
Shortfall, then an amount of nonrecourse liabilities in proportion to, and to
the extent of, the Liability Shortfall shall be allocated to each Partner.
(d) References to Regulations. Any reference in this Exhibit B or the
Agreement to a provision of proposed and/or temporary Regulations shall, in
the event such provision is modified or renumbered, be deemed to refer to the
successor provision as so modified or renumbered, but only to the extent such
successor provision applies to the Partnership under the effective date rules
applicable to such successor provision.
(e) Successor Partners. For purposes of this Exhibit B, a transferee
of a Partnership Interest shall be deemed to have been allocated the Net
Income, Net Loss, and other items of Partnership income, gain, loss,
deduction, and credit allocable to the transferred Partnership Interest that
previously have been allocated to the transferor Partner pursuant to this
Agreement.
For purposes of this Exhibit B the following terms have the
meanings set forth below:
"OP Common Unit Partner" means a holder of one or more OP Common
Units; and
"OP Preferred Unit Partner" means a holder of one or more OP
Preferred Units.
Exhibit C
to the Kramont
Partnership Agreement
Form of Notice of Redemption
To:
Kramont Realty Trust
580 West Germantown Pike
Plymouth Meeting, PA 19462
1. The undersigned (the "Redeeming Partner") hereby elects to redeem ______
OP Units, pursuant to Section 8.6 of that certain Amended and Restated
Agreement of Limited Partnership of Kramont Operating Partnership, L.P.,
dated as of ________, 1999, and entered into by and among ________ (the
"Company"), a Maryland real estate investment trust, and certain other
parties set forth on Exhibit A thereto (the "Partnership Agreement").
Capitalized terms used in this Notice of Redemption and not otherwise defined
shall have the meanings given to such terms in the Partnership Agreement.
2. The Redeeming Partner, intending that the Company, its Affiliates, and
Kramont Operating Partnership, L.P. (the "Partnership") rely on the
representations and warranties in this Notice of Redemption, hereby
represents and warrants as follows:
(i) The Redeeming Partner is the registered holder of ______ OP Units
evidenced by Certificate number(s) _______ enclosed with this Notice of
Redemption (the "Certificate") (to the extent OP Units are evidenced by
certificates); (ii) the Redeeming Partner is the sole legal and beneficial
owner (with any exceptions noted below) of the OP Units evidenced by the
Certificate, free and clear of all liens, claims, encumbrances,
restrictions, agreements or rights of third parties of any kind whatsoever
("Liens"); (iii) the Redeeming Partner has full power and authority to
execute this Certificate and redeem the OP Units to which it relates and this
Certificate is enforceable against the Redeeming Partner in accordance with
its terms.
[State exceptions to full legal and beneficial ownership of the OP Units by
the Redeeming Partner, free and clear of Liens, if any:]
3. The Redeeming Partner understands that, upon receipt of this Notice by
the Partnership, General Partner may, in its sole and absolute discretion,
elect (the "Payment Election") to assume directly and satisfy the Redemption
Right being exercised herewith either by paying to the Redeeming Partner the
Cash Amount or, with certain qualifications more fully detailed in the
Partnership Agreement, issuing to the Redeeming Partner the Shares Amount.
4. In order for the General Partner to make an informed decision regarding
the Payment Election, the Redeeming Partner hereby confirms, acknowledges,
represents, and warrants that assuming the Redeeming Partner were to receive
Shares in lieu of the Cash Amount:
(i) the Redeeming Partner understands that, subject to certain
registration rights in the Partnership Agreement, offer and sale of the
Shares are restricted under the Federal securities laws;
(ii) the Redeeming Partner will not offer, sell, or otherwise
transfer the Shares without registration under the Securities Act or an
exemption therefrom and compliance with and any applicable state securities
laws;
(iii) the Redeeming Partner is not domiciled in nor a resident of
California (nor is any direct or indirect owner of the Redeeming Partner
domiciled in or a resident of California);
(iv) the Redeeming Partner is not a "benefit plan investor" within
the meaning of 29 C.F.R. Section 2510.3-101;
(v) the Redeeming Partner is able to bear the economic risk
attendant with the ownership of the Shares;
(vi) the Redeeming Partner agrees that the following legend or a
substantially similar legend may be placed on the certificates representing
the Shares and a stop transfer order may be placed with respect thereto:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND CAN NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT WHICH, IN THE OPINION OF COUNSEL
FOR THE HOLDER, IS AVAILABLE, WHICH COUNSEL AND OPINION ARE REASONABLY
SATISFACTORY TO COUNSEL FOR THIS CORPORATION.";
(vii) No provision of the Redeeming Partner's certificate of
incorporation or by-laws, or of any agreement, instrument, or understanding
to which the Redeeming Partner is a party or by which it is bound, has been
or would be violated by the execution and delivery of this Notice of
Redemption or the transactions contemplated hereby, and all requisite
corporate and other authorizations for such execution, delivery, performance,
and satisfaction of this Notice of Redemption or the transactions
contemplated hereby shall have been, at or prior to the delivery of this
Notice of Redemption, duly obtained;
(viii) If the General Partner shall transfer Shares to the Redeeming
Partner in satisfaction of the Redemption Right and the Redeeming Partner
shall be entitled to include such Shares under a Registration Statement of
the Company, the Redeeming Partner:
[check whichever is applicable]
___ Does
___ Does Not
intend to offer and to sell the Shares received under such Registration
Statement and will provide such information and sign such documents as the
Company shall reasonably request with respect to inclusion of the sale of
such Shares in such Registration Statement.
4. If the General Partner elects to satisfy the Redemption Rights which are
the subject of this Notice of Redemption by paying to the Redeeming Partner
the Shares Amount, please issue a certificate or certificates representing
the Shares Amount such Redeeming Partner is entitled receive in the name of
the Redeeming Partner.
5. To the extent OP Units are evidenced by a certificate, please issue a
new certificate of OP Unit ownership evidencing the number of OP Units owned
by the Redeeming Partner subsequent to the redemption which is the subject of
this Notice of Redemption.
6. The Redeeming Partner hereby agrees to indemnify and save the General
Partner and its Affiliates harmless from and defend it from and against any
and all demands, claims, actions, liabilities, losses, costs, damages or
expenses whatsoever (including, but not limited to, any and all expenses
whatsoever reasonably incurred in investigating, preparing or defending
against any litigation commenced or threatened or any claim whatsoever)
arising out of or based upon any inaccuracy or breach of any representation
or warranty of the Redeeming Partner contained in this Notice of Redemption.
Dated: ______________
For Corporate, Partnership, Limited For Individual Investors:
Liability Company, Trust, Employee
Benefit Plan or Other Entity Redeeming
Partner:
_______________________________ ______________________________
(Print Name of Entity) (Signature)
By: ___________________________ Print Name: ___________________
(Signature)
Print Name: ____________________
Title: _________________________
Exhibit D
to the Kramont
Partnership Agreement
Properties to Which
Section 7.1A(3)(a) Is Applicable
Property Individuals Date
Chesterbrook Shopping Paul H. Cohen July 31, 2002
Center Louis P. Meshon, Sr.
Patricia Meshon
Carol D. Cohen
Woodbourne Square Paul Cohen August 1, 2000
Shopping Center Louis P. Meshon, Sr.
Marlton Crossing Shopping Marlton Crossing June 24, 2002
Shopping
Center Phase I Center Limited Partnership
The rights under Section 7.1A(3) and the final sentence of Section 10.1
granted to the persons listed on this Exhibit D shall terminate as to any
such person when such person no longer owns, directly or indirectly (giving
effect to the principles of section 267(c)(1) of the Code), any interest in
the Partnership.
<PAGE>
Exhibit E
to the Kramont
Partnership Agreement
Form of Letter
Kramont Operating Partnership, L.P.
580 West Germantown Pike
Plymouth Meeting, PA 19462
Kranzco Realty Trust
580 West Germantown Pike
Plymouth Meeting, PA 19462
Gentlemen:
This letter is being issued pursuant to Section 8.6A(i) of the
Amended and Restated Agreement of Limited Partnership (the "Partnership
Agreement") of Kramont Operating Partnership, L.P. (the "Partnership"), dated
as of ____________, 1999, under which the General Partner of the Partnership
has consented to reduce, from one year to ___ months, the period of time
following which I, as a holder of OP Units, may elect to exercise the
Redemption right provided under Section 8.6A of the Partnership Agreement, on
condition that I provide to the Partnership, the General Partner, and their
respective Affiliates certain representations and indemnities relating to
such consent. (Unless otherwise indicated, all capitalized terms used herein
shall have the same meaning as contained in the Partnership Agreement.)
Accordingly, I hereby acknowledge that my exercise of the
Redemption Right pursuant to Section 8.6A of the Partnership Agreement is
being undertaken with full knowledge and understanding of the income tax
consequences of such exercise and that no representations or warranties have
been or are being made to me with respect to my ability to maintain my tax
basis in the property contributed by me to the Partnership or to avoid the
recognition of gain and the incurrence of tax liability in connection with
the structure or completion of any of the transactions contemplated by the
Partnership Agreement (including but not limited to the granting by the
General Partner of the consent referred to in the preceding paragraph). I
hereby agree that neither the Partnership, the General Partner, nor any of
their respective Affiliates (including the Company), nor any of their
respective general partners, limited partners, members, trustees, officers,
directors, or employees shall have any liability or obligations in connection
with any such occurrences and I hereby agree to protect, defend, indemnify,
and hold harmless each of such Persons from and against any and all claims,
demands, losses, expenses, and other damages (including without limitation
taxes, fines and penalties, legal fees, and expenses) incurred by them, or
any of them, as a result of any such liability or obligation or otherwise
arising out of the reduction of such time period or such exercise.
Very truly yours,
Exhibit F
to the Kramont
Partnership Agreement
OP UNIT DESIGNATION OF THE
CLASS A OP PREFERRED UNITS
OF KRAMONT OPERATING PARTNERSHIP, L.P.
1. NUMBER OF UNITS AND DESIGNATION.
A class of OP Preferred Units is hereby designated as "Class A OP
Preferred Units," and the number of OP Preferred Units constituting such
class shall be 11,155.
2. DEFINITIONS.
For purposes of the Class A OP Preferred Units, the following terms
shall have the meanings indicated in this Section 2, and capitalized terms
used and not otherwise defined herein shall have the meanings assigned
thereto in the Agreement:
"Agreement" shall mean the Amended and Restated Agreement of Limited
Partnership of the Partnership, dated as of ______, 2000, as amended from
time to time.
"Class A OP Preferred Unit" means an OP Preferred Unit with the
designations, preferences and relative, participating, optional or other
special rights, powers and duties as are set forth in this Exhibit F. It is
the intention of the General Partner that each Class A OP Preferred Unit
shall be substantially the economic equivalent of one Series A Preferred
Share.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, or any successor statute thereto. Reference to any provision of
the Code shall mean such provision as in effect from time to time, as the
same may be amended, and any successor thereto, as interpreted by any
applicable regulations or other administrative pronouncements as in effect
from time to time.
"Common Shares" shall mean the Common Shares of Beneficial Interest,
$.01 par value per share, of the General Partner.
"Distribution Payment Date" shall mean any date on which cash
distributions are paid on the Series A Preferred Shares.
"Junior OP Units" shall have the meaning set forth in paragraph (c) of
Section 8 of this Exhibit F.
"Parity OP Units" shall have the meaning set forth in paragraph (b) of
Section 8 of this Exhibit F.
"Partnership" shall mean Kramont Operating Partnership, L.P., a Delaware
limited partnership.
"Series A Preferred Shares" means the Series A-1 Increasing Rate
Cumulative Convertible Preferred Shares of Beneficial Interest, par value
$0.01 per share, of the General Partner.
"Senior OP Units" shall have the meaning set forth in paragraph (a) of
Section 8 of this Exhibit F.
3. DISTRIBUTIONS.
On every Distribution Payment Date, the General Partner as holder of
Class A OP Preferred Units shall be entitled to receive distributions payable
in cash in an amount per Class A OP Preferred Unit equal to the per share
distribution payable on the Series A Preferred Shares on such Distribution
Payment Date. No distribution or other payment with respect to redemption,
purchase or other acquisition of OP Common Units or of any other Junior OP
Units (other than distributions in OP Common Units or in any other Junior OP
Units) shall be declared or paid or set apart for payment or other
distribution upon the OP Common Units or upon any other Junior OP Units,
unless full cumulative distributions on the Class A OP Preferred Units have
been paid or declared and a sum sufficient for such full payment on the next
Distribution Payment Date set apart in trust for payment for all past
distribution periods. Each such distribution shall be payable to the General
Partner as holder of the Class A OP Preferred Units, as they appear on the
records of the Partnership at the close of business on the record date (the
"Record Date") for the distribution payable with respect to the Series A
Preferred Shares on such Distribution Payment Date. The General Partner, as
holder of Class A OP Preferred Units, shall not be entitled to any
distributions on the Class A OP Preferred Units, whether payable in cash,
property or stock, except as provided herein.
4. LIQUIDATION PREFERENCE.
(a) In the event of any liquidation, dissolution or winding up of
the affairs of the Partnership, whether voluntary or otherwise, after payment
or provision for payment of the debts and other liabilities of the
Partnership, the General Partner as holder of Class A OP Preferred Units
shall be entitled to receive, in cash, out of the remaining assets of the
Partnership legally available therefor, the amount of One Thousand Dollars
($1,000) per Class A OP Preferred Unit (the "Liquidation Preference"), plus
an amount per Class A OP Preferred Unit equal to all distributions accrued
and unpaid on each Series A Preferred Share up to the date of such
distribution of assets before any payment or distribution shall be made to
the holders of OP Common Units or any other holders of Junior OP Units. If
upon any liquidation, dissolution or winding up of the Partnership, the
assets of the Partnership, or proceeds thereof, distributable among the
General Partner as holder of Class A OP Preferred Units and holders of all
Parity OP Units shall be insufficient to pay in full the preferential amount
aforesaid and preferential amounts on any Parity OP Units, then the entire
assets of the Partnership thus distributable shall be distributed ratably
among the General Partner as holder of Class A OP Preferred Units and any
holders of such Parity OP Units in proportion to the respective amounts that
would be payable per Unit if all amounts payable thereon were paid in full.
(b) For purposes of this Section 4, a distribution of assets in
any dissolution, winding up or liquidation shall not include (i) any
consolidation or merger of the Partnership with or into any other entity,
(ii) any dissolution, liquidation, winding up or reorganization of the
Partnership immediately followed by organization of another entity to which
such assets are distributed or (iii) a sale or other disposition of all or
substantially all of the Partnership's assets to another entity; provided,
however, that, in each case, effective provision is made in the organization
documents of the resulting and surviving entity or otherwise for the
recognition, preservation and protection of the rights of the General Partner
as holder of Class A OP Preferred Units.
(c) Upon any liquidation, dissolution or winding up of the
Partnership, after the payment of the full preferential amounts set forth
herein to the General Partner as holder of Class A OP Preferred Units and any
holders of Parity OP Units, as provided in this Section 4 or funds necessary
for such payment have been set aside in trust for the holders thereof, such
holders of the Class A OP Preferred Units shall be entitled to no other or
further participation in the distribution of the assets of the Partnership.
5. REDEMPTION.
(a) At any time that the General Partner redeems any Series A
Preferred Shares for cash, the General Partner shall concurrently cause the
Partnership to redeem an equal number of Class A OP Preferred Units, at a
redemption price per Class A OP Preferred Unit payable in cash and equal to
the redemption price paid by the General Partner for such Series A Preferred
Shares.
(b) From and after any date fixed for redemption of the Class A OP
Preferred Units pursuant to paragraph (a) of this Section 5 (unless the
Partnership shall fail to make available the amount of cash necessary to
effect such redemption), (i) except for payment of the redemption price, all
distributions on the Class A OP Preferred Units so called for redemption
shall cease to accrue, (ii) said units shall no longer be deemed to be
outstanding, and (iii) all rights of the General Partner as holder of Class A
OP Preferred Units of the Partnership shall cease and terminate except the
rights to receive the cash payable upon such redemption, without interest
thereon.
6. STATUS OF REACQUIRED UNITS.
All Class A OP Preferred Units which shall have been issued and
reacquired in any manner by the Partnership shall be deemed cancelled.
7. CONVERSION.
Class A OP Preferred Units shall be convertible by the General Partner
as holder thereof as follows:
(a) Upon conversion of any number of Series A Preferred Shares
into Common Shares, an equal number of Class A OP Preferred Units shall
automatically be converted into OP Common Units. The conversion ratio in
effect from time to time for the conversion of Class A OP Preferred Units
into OP Common Units pursuant to this Section 7 shall at all times be equal
to, and shall be automatically adjusted as necessary to reflect, the
conversion ratio in effect from time to time for the conversion of Series A
Preferred Shares into Common Shares.
(b) The General Partner, as holder of Class A OP Preferred Units
shall be entitled, with respect to such Class A OP Preferred Units held, at
the close of business on a Record Date, to receive the distribution payable
on such units on the corresponding Distribution Payment Date (the period with
respect which a distribution is made on a Distribution Payment Date called
the "quarter"); provided, however, that if Class A OP Preferred Units are
converted during the period between the close of business on any Record Date
and the opening of business on the corresponding Distribution Payment Date
then the General Partner as such holder, in addition to all accrued and
unpaid distributions with respect to prior quarters, shall be entitled to
receive a pro rata portion of the distribution which would have been payable
on such converted Class A OP Preferred Units had such Units been outstanding
for the entire quarter determined by multiplying the amount of the
distribution which would have been payable on such converted Class A OP
Preferred Unit had such Units been outstanding for the entire such quarter by
a fraction the numerator of which is the number of days in the current
quarter elapsed through the day immediately preceding the date of conversion
of such converted Class A OP Preferred Units and the denominator of which is
the total number of days in the current quarter; provided, further, that the
General Partner as such converting holder will be required to pay to the
Partnership (and the Partnership shall be entitled to deduct from the pro
rata distribution which the General Partner as such holder is entitled to
receive with respect to the converted Class A OP Preferred Units for such
quarter) at the time of such conversion a pro rata portion of the
distribution which the General Partner as such converting holder is expected
to receive on the OP Common Units into which his Class A OP Preferred Units
were converted for such quarter determined by multiplying the amount of the
distribution which would have been payable on such OP Common Units for the
immediately preceding quarter by a fraction the numerator of which is the
number of days in the current quarter elapsed through the day immediately
preceding the date of conversion of such converted Class A OP Preferred Units
and the denominator of which is the total number of days in the current
quarter. In the event that the distribution on the OP Common Units for the
quarter in which the Class A OP Preferred Units are converted to OP Common
Units is less than the distribution on the OP Common Units for the
immediately preceding quarter, the Partnership will pay the General Partner
as such holder an amount equal to the difference between (i) the pro rata
portion of the distribution on the OP Common Units which the General Partner
as holder was expected to receive and which was deducted by the Partnership
pursuant to the last proviso of the preceding sentence and (ii) the pro rata
portion of the distribution on the OP Common Units which the holder actually
received.
(c) No fractional OP Common Units shall be issued upon conversion
of Class A OP Preferred Units. Instead of any fractional OP Common Units that
would otherwise be deliverable upon the conversion of Class A OP Preferred
Units, the Partnership shall pay to the General Partner as holder of such
converted units an amount in cash equal to the cash payable to a holder of an
equivalent number of converted Series A Preferred Shares in lieu of
fractional Common Shares.
(d) The Partnership will pay any and all documentary stamp, issue
or transfer taxes, and any other similar taxes, payable in respect of (i) the
issue or delivery of OP Common Units or other securities or property on
conversion or redemption of Class A OP Preferred Units pursuant hereto, and
(ii) the issue or delivery of Common Shares or other securities or property
on conversion or redemption of Series A Preferred Shares pursuant to the
terms of the General Partner's Declaration of Trust, as the same may be
amended, restated or supplemented from time to time.
8. RANKING.
Any class or series of OP Units of the Partnership shall be deemed to
rank:
(a) prior or senior to the Class A OP Preferred Units, as to the
payment of distributions or as to distributions of assets upon liquidation,
dissolution or winding up, as the case may be, if the holders of such class
or series shall be entitled to the receipt of distributions or of amounts
distributable upon liquidation, dissolution or winding up, as the case may
be, in preference or priority to the holders of Class A OP Preferred Units
("Senior OP Units");
(b) (i) on a parity with the Class A OP Preferred Units, as to the
payment of distributions and as to distribution of assets upon liquidation,
dissolution or winding up, whether or not the distribution rates,
distribution payment dates or redemption or liquidation prices per unit or
other denomination thereof be different from those of the Class A OP
Preferred Units if such class or series of OP Units shall be Class B-1 OP
Preferred Units or Class D OP Preferred Units, and (ii) on a parity with the
Class A OP Preferred Units, as to the payment of distributions or as to the
distribution of assets upon liquidation, dissolution or winding up, as the
case may be, whether or not the distribution rates, distribution payment
dates or redemption or liquidation prices per unit or other denomination
thereof be different from those of the Class A OP Preferred Units, if the
holders of such class or series of OP Units and the Class A OP Preferred
Units shall be entitled to the receipt of distributions or of amounts
distributable upon liquidation, dissolution or winding up, as the case may
be, in proportion to their respective amounts of accrued and unpaid
distributions per Unit or other denomination or liquidation preferences,
without preference or priority one over the other (the OP Units referred to
in clauses (i) and (ii) of this paragraph being hereinafter referred to,
collectively, as "Parity OP Units"); and
(c) (i) junior to the Class A OP Preferred Units, as to the
payment of distributions and as to the distribution of assets upon
liquidation, dissolution or winding up, if such class or series of OP Units
shall be OP Common Units and (ii) junior to the Class A OP Preferred Units,
as to the payment of distributions or as to the distribution of assets upon
liquidation, dissolution or winding up, as the case may be, the General
Partner as holder of Class A OP Preferred Units shall be entitled to receipt
of distributions or of amounts distributable upon liquidation, dissolution or
winding up, as the case may be, in preference or priority to the holders of
such class or series of OP Units (the OP Units referred to in clauses (i) and
(ii) of this paragraph being hereinafter referred to, collectively, as
"Junior OP Units").
9. SPECIAL ALLOCATIONS.
(a) Gross income and, if necessary, gain shall be allocated to the
General Partner as holder of Class A OP Preferred Units for any Fiscal Year
(and, if necessary, subsequent Fiscal Years) to the extent that the General
Partner as holder of Class A OP Preferred Units receive distributions on any
Class A OP Preferred Units (other than an amount included in any redemption
pursuant to Sections 4 or 5 hereof) with respect to such Fiscal Year
(including distributions received after the end of such Fiscal Year but are
made with respect to such Fiscal Year).
(b) If any Class A OP Preferred Units are redeemed pursuant to
Sections 4 or 5 hereof, for the Fiscal Year that includes such redemption
(and, if necessary, for subsequent Fiscal Years) (a) gross income and gain
(in such relative proportions as the General Partner in its discretion shall
determine) shall be allocated to the General Partner as holder of Class A OP
Preferred Units to the extent that the redemption amounts paid or payable
with respect to such Class A OP Preferred Units so redeemed exceeds the
aggregate Capital Account balance allocable to the Class A OP Preferred Units
so redeemed and (b) deductions and losses (in such relative proportions as
the General Partner in its discretion shall determine) shall be allocated to
the General Partner as holder of Class A OP Preferred Units to the extent
that the aggregate Capital Account balance allocable to the Class A OP
Preferred Units so redeemed exceeds the redemption amount paid or payable
with respect to the Class A OP Preferred Units so redeemed. The Capital
Account balance of the General Partner as holder of Class A OP Preferred
Units shall be determined solely with respect to Class A OP Preferred Units
immediately prior to the redemption and after taking into account all other
allocations of Net Income and Net Loss and distributions.
10. RESTRICTIONS ON OWNERSHIP.
The Class A OP Preferred Units shall be owned and held solely by the
General Partner but may be transferred to a successor General Partner.
11. VOTING RIGHTS.
The General Partner, as holder of Class A OP Preferred Units, shall not
be entitled to vote on any matters.
12. GENERAL.
(a) The ownership of Class A OP Preferred Units may (but need not,
in the sole and absolute discretion of the General Partner) be evidenced by
one or more certificates. The General Partner shall amend Exhibit A to the
Agreement from time to time to the extent necessary to reflect accurately the
issuance of, and subsequent conversion, redemption, or any other event having
an effect on the ownership of, Class A OP Preferred Units.
(b) The rights of the General Partner in its capacity as holder of
the Class A OP Preferred Units, are in addition to and not in limitation of
any other rights or authority of the General Partner in any other capacity
under the Agreement or applicable law. In addition, nothing contained herein
shall be deemed to limit or otherwise restrict the authority of the General
Partner under the Agreement, other than in its capacity as holder of the
Class A OP Preferred Units.
Exhibit G
to the Kramont
Partnership Agreement
OP UNIT DESIGNATION OF THE
CLASS B-1 OP PREFERRED UNITS
OF KRAMONT OPERATING PARTNERSHIP, L.P.
1. NUMBER OF UNITS AND DESIGNATION.
A class of OP Preferred Units is hereby designated as "Class B-1 OP
Preferred Units," and the number of OP Preferred Units constituting such
class shall be 1,235,000.
2. DEFINITIONS.
For purposes of the Class B-1 OP Preferred Units, the following terms
shall have the meanings indicated in this Section 2, and capitalized terms
used and not otherwise defined herein shall have the meanings assigned
thereto in the Agreement:
"Agreement" shall mean the Amended and Restated Agreement of Limited
Partnership of the Partnership, dated as of ______, 2000, as amended from
time to time.
"Class B-1 OP Preferred Unit" means an OP Preferred Unit with the
designations, preferences and relative, participating, optional or other
special rights, powers and duties as are set forth in this Exhibit G. It is
the intention of the General Partner that each Class B-1 OP Preferred Unit
shall be substantially the economic equivalent of one Series B-1 Preferred
Share.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, or any successor statute thereto. Reference to any provision of
the Code shall mean such provision as in effect from time to time, as the
same may be amended, and any successor thereto, as interpreted by any
applicable regulations or other administrative pronouncements as in effect
from time to time.
"Common Shares" shall mean the Common Shares of Beneficial Interest,
$.01 par value per share, of the General Partner.
"Distribution Payment Date" shall mean any date on which cash
distributions are paid on the Series B-1 Preferred Shares.
"Distribution Period" shall mean each quarterly period from and
including any Distribution Payment Date (or from ________, 2000 if there has
been no Distribution Payment Date since the date of the Agreement) to, but
not including, the next Distribution Date.
"Junior OP Units" shall have the meaning set forth in paragraph (c) of
Section 8 of this Exhibit G.
"Parity OP Units" shall have the meaning set forth in paragraph (b) of
Section 8 of this Exhibit G.
"Partnership" shall mean Kramont Operating Partnership, L.P., a Delaware
limited partnership.
"Series B-1 Preferred Shares" means the 9.75% Series B-1 Cumulative
Convertible Preferred Shares of Beneficial Interest, par value $0.01 per
share, of the General Partner.
"Senior OP Units" shall have the meaning set forth in paragraph (a) of
Section 8 of this Exhibit G.
3. DISTRIBUTIONS.
(a) On every Distribution Payment Date, the General Partner as
holder of Class B-1 OP Preferred Units shall be entitled to receive
distributions payable in cash in an amount per Class B-1 OP Preferred Unit
equal to the per share distribution payable on the Series B-1 Preferred
Shares on such Distribution Payment Date. Except as provided in the next
sentence, if any Class B-1 OP Preferred Units are outstanding, no
distributions (other than in Junior OP Units or OP Common Units) shall be
authorized, declared, set apart for payment or paid on any class or series of
Junior OP Units or Parity OP Units unless all accrued distributions on the
Class B-1 OP Preferred Units for all prior Distribution Periods and the then
current Distribution Period have been or contemporaneously are authorized,
declared, set apart for payment or paid. When distributions are not so paid
in full (or a sum sufficient for such full payment is not so set apart for
payment) upon the Class B-1 OP Preferred Units and any other class or series
of Parity OP Units, all distributions authorized or declared upon the Class
B-1 OP Preferred Units and any such class or series of Parity OP Units shall
be authorized or declared pro rata so that the amount of distributions
authorized or declared per Unit on the Class B-1 OP Preferred Units and such
class or series of Parity OP Units shall in all areas bear to each other the
same ratio that accrued and unpaid distributions per Unit on the Class B-1 OP
Preferred Units and such class or series of Parity OP Units bear to each
other. Each such distribution shall be payable to the General Partner as
holder of the Class B-1 OP Preferred Units, as they appear on the records of
the Partnership at the close of business on the record date (the "Record
Date") for the distribution payable with respect to the Series B-1 Preferred
Shares on such Distribution Payment Date. The General Partner as holder of
Class B-1 OP Preferred Units, shall not be entitled to any distributions on
the Class B-1 OP Preferred Units, whether payable in cash, property or stock,
except as provided herein.
(b) Except as provided in Section 3(a) hereof, unless all accrued
distributions on the Class B-1 OP Preferred Units have been or
contemporaneously are authorized, declared, set apart for payment or paid for
all prior Distribution Periods and the then current Distribution Period, no
Junior OP Units or Parity OP Units shall be redeemed, purchased or otherwise
acquired for any consideration (or any moneys be paid to or made available
for a sinking fund for the redemption of any such Units) by the Partnership
(except by conversion into or exchange for Junior OP Units or OP Common
Units).
4. LIQUIDATION PREFERENCE.
(a) Upon any voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Partnership, before any distribution shall
be made to the holders of any Junior OP Units, and subject to the payment or
provision or reserve for payment of the debts and liabilities (whether
absolute, accrued, asserted or unasserted, contingent or otherwise) and the
preferences of Senior OP Units, if any, of the Partnership, the General
Partner as holder of Class B-1 OP Preferred Units shall be entitled to
receive, out of the assets of the Partnership legally available for payment
of distributions, liquidating distributions in cash (or property at its fair
market value as determined in good faith by the General Partner (or a
combination thereof)), in the amount of Twenty-five Dollars ($25.00) per
Class B-1 OP Preferred Unit (the "Liquidation Preference"), plus an amount
per Class B-1 OP Preferred Unit equal to all distributions accrued and unpaid
(whether or not authorized or declared, and whether or not there would be
assets legally available for the payment of such distribution) to the date of
such liquidation, dissolution or winding up. After the payment of the full
amount of liquidating distributions to which they are entitled as provided
herein in this Section 4(a), the General Partner as holder of Class B-1 OP
Preferred Units will have no right or claim to any of the remaining assets of
the Partnership and shall not be entitled to any other distribution.
(b) Notwithstanding the provisions of Section 4(a) hereof, in the
event that, upon any voluntary or involuntary liquidation, dissolution or
winding up of the Partnership, the assets legally available for payment of
distributions are insufficient to pay (x) the full amount of the liquidating
distributions to which the General Partner as holder of Class B-1 OP
Preferred Units would otherwise be entitled pursuant to Section 4(a) hereof
and (y) the corresponding amounts of the liquidating distributions to which
holders of Parity OP Units would be entitled upon liquidation, dissolution or
winding up of the affairs of the Partnership, then the General Partner as
holder of the Class B-1 OP Preferred Units and the holders of the Parity OP
Units shall share ratably in any such distribution of assets in proportion to
the full liquidating distributions to which they otherwise would be
respectively entitled.
5. REDEMPTION.
(a) At any time that the General Partner redeems any Series B-1
Preferred Shares for cash, the General Partner shall concurrently cause the
Partnership to redeem an equal number of Class B-1 OP Preferred Units, at a
redemption price per Class B-1 OP Preferred Unit payable in cash and equal to
the redemption price paid by the General Partner for such Series B-1
Preferred Shares.
(b) From and after any date fixed for redemption of the Class B-1
OP Preferred Units pursuant to paragraph (a) of this Section 5 (unless the
Partnership shall fail to make available the amount of cash necessary to
effect such redemption), (i) except for payment of the redemption price, all
distributions on the Class B-1 OP Preferred Units so called for redemption
shall cease to accrue, (ii) said units shall no longer be deemed to be
outstanding, and (iii) all rights of the General Partner as holder of Class
B-1 OP Preferred Units of the Partnership shall cease and terminate except
the rights to receive the cash payable upon such redemption, without interest
thereon.
6. STATUS OF REACQUIRED UNITS.
All Class B-1 OP Preferred Units which shall have been issued and
reacquired in any manner by the Partnership shall be deemed cancelled.
7. CONVERSION.
Class B-1 OP Preferred Units shall be convertible by the General Partner
as holder thereof as follows:
(a) Upon conversion of any number of Series B-1 Preferred Shares
into Common Shares, an equal number of Class B-1 OP Preferred Units shall
automatically be converted into OP Common Units. The conversion ratio in
effect from time to time for the conversion of Class B-1 OP Preferred Units
into OP Common Units pursuant to this Section 7 shall at all times be equal
to, and shall be automatically adjusted as necessary to reflect, the
conversion ratio in effect from time to time for the conversion of Series B-1
Preferred Shares into Common Shares.
(b) Notwithstanding the conversion of Class B-1 OP Preferred Units
into OP Common Units, all accrued distributions with respect to such Class B-
1 OP Preferred Units for any past Distribution Periods that are in arrears at
the time of such conversion shall be paid to the General Partner as holder of
such Class B-1 OP Preferred Units in the same manner as if the General
Partner continued to be the holder of such converted Class B-1 OP Preferred
Units following such conversion or, if upon conversion of such Class B-1 OP
Preferred Units there will be no more Class B-1 OP Preferred Units
outstanding, then at the time of such conversion. In addition, upon the
conversion of Class B-1 OP Preferred Units into OP Common Units, the General
Partner as holder of such converted Class B-1 OP Preferred Units shall be
entitled to receive a distribution on such Class B-1 OP Preferred Units
converted for the portion of the current Distribution Period such holder
owned the Class B-1 OP Preferred Units surrendered for conversion,
notwithstanding that the record date for the distribution payable for the
current Distribution Period may not have occurred, in an amount per Class B-1
OP Preferred Unit converted equal to the product of (i) the distribution
payable on each Class B-1 OP Preferred Unit converted for the current
Distribution Period, multiplied by (ii) a fraction, the numerator of which is
the number of calendar days in such Distribution Period elapsed to (but not
including) the date of conversion and the denominator of which is the total
number of calendar days in such Distribution Period.
If upon conversion of Class B-1 OP Preferred Units into OP Common
Units and as a result thereof the General Partner as holder of such converted
Class B-1 OP Preferred Units is or will be entitled to receive distributions
with respect to both such Class B-1 OP Preferred Units converted and such OP
Common Units into which such Class B-1 OP Preferred Units were converted for
the same period of time (the "Overlapping Period"), then, at the time of and
as a condition precedent to such conversion (or, if at the time of such
conversion the amount of the distribution with respect to such OP Common
Units has not yet been determined, at the time of such determination), the
Partnership shall withhold from any distribution payable on such Class B-1 OP
Preferred Units converted, an amount equal to the Excess Amount (defined
below), if any. If the amount of any distribution payable on such Class B-1
OP Preferred Units converted shall not be sufficient to pay any Excess
Amount, such holder hereby authorizes the Partnership to withhold from any
distribution payable to such holder on any Class B-1 OP Preferred Units owned
by such holder or, to the extent permissible, on any OP Common Units owned by
such holder, an amount equal to the Excess Amount. "Excess Amount" shall
mean an amount equal to the product of (i) the sum of the distributions
payable on each OP Common Unit into which such Class B-1 OP Preferred Units
were converted for the distribution period relating to the OP Common Units in
which the Overlapping Period occurs, multiplied by (ii) a fraction, the
numerator of which is the number of calendar days in the Overlapping Period
and the denominator of which is the total number of calendar days in such
distribution period relating to the OP Common Units in which the Overlapping
Period occurs.
(c) No fractional OP Common Unit or scrip representing a
fractional OP Common Unit shall be issued upon conversion of Class B-1 OP
Preferred Units. Instead of any fractional OP Common Units which would
otherwise be issuable upon the conversion of Class B-1 OP Preferred Units,
the Partnership shall pay to the General Partner as holder of such converted
units an amount in cash equal to the cash payable to a holder of an
equivalent number of converted Series B-1 Preferred Shares in lieu of
fractional Common Shares.
(d) The Partnership will pay, at the time of and as a condition
precedent to conversion, any documentary, stamp, or similar issue or transfer
tax due on the issuance of OP Common Units upon conversion. The holder,
however, shall pay to the Partnership the amount of any tax which is due (or
shall establish to the satisfaction of the Partnership payment thereof) if
the Units are to be issued in a name other than the name of the person in
whose name such Class B-1 OP Preferred Units are registered.
8. RANKING.
Any class or series of OP Units of the Partnership shall be deemed to
rank:
(a) prior or senior to the Class B-1 OP Preferred Units, as to the
payment of distributions or as to distributions of assets upon liquidation,
dissolution or winding up, as the case may be, if the holders of such class
or series shall be entitled to the receipt of distributions or of amounts
distributable upon liquidation, dissolution or winding up, as the case may
be, in preference or priority to the holders of Class B-1 OP Preferred Units
("Senior OP Units");
(b) (i) on a parity with the Class B-1 OP Preferred Units, as to
the payment of distributions and as to distribution of assets upon
liquidation, dissolution or winding up, whether or not the distribution
rates, distribution payment dates or redemption or liquidation prices per
unit or other denomination thereof be different from those of the Class B-1
OP Preferred Units if such class or series of OP Units shall be Class A OP
Preferred Units or Class D OP Preferred Units, and (ii) on a parity with the
Class B-1 OP Preferred Units, as to the payment of distributions or as to the
distribution of assets upon liquidation, dissolution or winding up, as the
case may be, whether or not the distribution rates, distribution payment
dates or redemption or liquidation prices per unit or other denomination
thereof be different from those of the Class B-1 OP Preferred Units if the
holders of such class or series of OP Units and the Class B-1 OP Preferred
Units shall be entitled to the receipt of distributions or of amounts
distributable upon liquidation, dissolution or winding up, as the case may
be, in proportion to their respective amounts of accrued and unpaid
distributions per Unit or other denomination or liquidation preferences,
without preference or priority one over the other (the OP Units referred to
in clauses (i) and (ii) of this paragraph being hereinafter referred to,
collectively, as "Parity OP Units"); and
(c) (i) junior to the Class B-1 OP Preferred Units, as to the
payment of distributions and as to the distribution of assets upon
liquidation, dissolution or winding up, if such class or series of OP Units
shall be OP Common Units and (ii) junior to the Class B-1 OP Preferred Units,
as to the payment of distributions or as to the distribution of assets upon
liquidation, dissolution or winding up, as the case may be, if the holders of
Class B-1 OP Preferred Units shall be entitled to receipt of distributions or
of amounts distributable upon liquidation, dissolution or winding up, as the
case may be, in preference or priority to the holders of such class or series
of OP Units (the OP Units referred to in clauses (i) and (ii) of this
paragraph being hereinafter referred to, collectively, as "Junior OP Units").
9. SPECIAL ALLOCATIONS.
(a) Gross income and, if necessary, gain shall be allocated to the
General Partner as holder of Class B-1 OP Preferred Units for any Fiscal Year
(and, if necessary, subsequent Fiscal Years) to the extent that the General
Partner as holder of Class B-1 OP Preferred Units receive distributions on
any Class B-1 OP Preferred Units (other than an amount included in any
redemption pursuant to Sections 4 or 5 hereof) with respect to such Fiscal
Year (including distributions received after the end of such Fiscal Year but
which are made with respect to such Fiscal Year).
(b) If any Class B-1 OP Preferred Units are redeemed pursuant to
Sections 4 or 5 hereof, for the Fiscal Year that includes such redemption
(and, if necessary, for subsequent Fiscal Years) (a) gross income and gain
(in such relative proportions as the General Partner in its discretion shall
determine) shall be allocated to the General Partner as holder of Class B-1
OP Preferred Units to the extent that the redemption amounts paid or payable
with respect to such Class B-1 OP Preferred Units so redeemed exceeds the
aggregate Capital Account balance allocable to the Class B-1 OP Preferred
Units so redeemed and (b) deductions and losses (in such relative proportions
as the General Partner in its discretion shall determine) shall be allocated
to the General Partner as holder of Class B-1 OP Preferred Units to the
extent that the aggregate Capital Account balance allocable to the Class B-1
OP Preferred Units so redeemed exceeds the redemption amount paid or payable
with respect to the Class B-1 OP Preferred Units so redeemed. The Capital
Account balance of the General Partner as holder of Class B-1 OP Preferred
Units shall be determined solely with respect to Class B-1 OP Preferred Units
immediately prior to the redemption and after taking into account all other
allocations of Net Income and Net Loss and distributions.
10. RESTRICTIONS ON OWNERSHIP.
The Class B-1 OP Preferred Units shall be owned and held solely by the
General Partner but may be transferred to a successor General Partner.
11. VOTING RIGHTS.
The General Partner, as holder of Class B-1 OP Preferred Units, shall
not be entitled to vote on any matters.
12. GENERAL.
(a) The ownership of Class B-1 OP Preferred Units may (but need
not, in the sole and absolute discretion of the General Partner) be evidenced
by one or more certificates. The General Partner shall amend Exhibit A to the
Agreement from time to time to the extent necessary to reflect accurately the
issuance of, and subsequent conversion, redemption, or any other event having
an effect on the ownership of, Class B-1 OP Preferred Units.
(b) The rights of the General Partner in its capacity as holder of
the Class B-1 OP Preferred Units, are in addition to and not in limitation of
any other rights or authority of the General Partner in any other capacity
under the Agreement or applicable law. In addition, nothing contained herein
shall be deemed to limit or otherwise restrict the authority of the General
Partner under the Agreement, other than in its capacity as holder of the
Class B-1 OP Preferred Units.
Exhibit H
to the Kramont
Partnership Agreement
OP UNIT DESIGNATION OF THE
CLASS D OP PREFERRED UNITS
OF KRAMONT OPERATING PARTNERSHIP, L.P.
1. NUMBER OF UNITS AND DESIGNATION.
A class of OP Preferred Units is hereby designated as "Class D OP
Preferred Units," and the number of OP Preferred Units constituting such
class shall be 2,070,000.
2. DEFINITIONS.
For purposes of the Class D OP Preferred Units, the following terms
shall have the meanings indicated in this Section 2, and capitalized terms
used and not otherwise defined herein shall have the meanings assigned
thereto in the Agreement:
"Agreement" shall mean the Amended and Restated Agreement of Limited
Partnership of the Partnership, dated as of ______, 2000, as amended from
time to time.
"Class D OP Preferred Unit" means an OP Preferred Unit with the
designations, preferences and relative, participating, optional or other
special rights, powers and duties as are set forth in this Exhibit H. It is
the intention of the General Partner that each Class D OP Preferred Unit
shall be substantially the economic equivalent of one Series D Preferred
Share.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, or any successor statute thereto. Reference to any provision of
the Code shall mean such provision as in effect from time to time, as the
same may be amended, and any successor thereto, as interpreted by any
applicable regulations or other administrative pronouncements as in effect
from time to time.
"Common Shares" shall mean the Common Shares of Beneficial Interest,
$.01 par value per share, of the General Partner.
"Distribution Payment Date" shall mean any date on which cash
distributions are paid on the Series D Preferred Shares.
"Distribution Period" shall mean each quarterly period from and
including any Distribution Payment Date (or from ________, 2000 if there has
been no Distribution Payment Date since the date of the Agreement) to, but
not including, the next Distribution Date.
"Junior OP Units" shall have the meaning set forth in paragraph (c) of
Section 7 of this Exhibit H.
"Parity OP Units" shall have the meaning set forth in paragraph (b) of
Section 7 of this Exhibit H.
"Partnership" shall mean Kramont Operating Partnership, L.P., a Delaware
limited partnership.
"Series D Preferred Shares" means the Series D Cumulative Redeemable
Preferred Shares of Beneficial Interest, par value $0.01 per share, of the
General Partner.
"Senior OP Units" shall have the meaning set forth in paragraph (a) of
Section 7 of this Exhibit H.
3. DISTRIBUTIONS.
(a) On every Distribution Payment Date, the General Partner as
holder of Class D OP Preferred Units shall be entitled to receive
distributions payable in cash in an amount per Class D OP Preferred Unit
equal to the per share distribution payable on the Series D Preferred Shares
on such Distribution Payment Date. Each such distribution shall be payable
to the General Partner as holder of the Class D OP Preferred Units, as they
appear on the records of the Partnership at the close of business on the
record date (the "Record Date") for the distribution payable with respect to
the Series D Preferred Shares on such Distribution Payment Date. The General
Partner, as holder of Class D OP Preferred Units, shall not be entitled to
any distributions on the Class D OP Preferred Units, whether payable in cash,
property or stock, except as provided herein.
(b) If any Class D OP Preferred Units are outstanding, no
distributions shall be authorized or paid or set apart for payment on any
other class or series of Junior OP Units or Parity OP Units for any period
unless full cumulative distributions have been or contemporaneously are
authorized and paid or authorized and a sum sufficient for the payment
thereof set apart for such payment on the Class D OP Preferred Units for all
past Distribution Periods and the then current Distribution Period. When
distributions are not so paid in full (or a sum sufficient for such full
payment is not so set apart) upon the Class D OP Preferred Units and any
other class or series of Parity OP Units, all distributions authorized or
declared upon the Class D OP Preferred Units and any such class or series of
Parity OP Units shall be authorized pro rata so that the amount of
distributions authorized per Unit on the Class D OP Preferred Units and such
class or series of Parity OP Units shall in all cases bear to each other the
same ratio that accrued and unpaid distributions per Unit on the Class D OP
Preferred Units and such class or series of Parity OP Units bear to each
other.
(c) Except as provided in Section 3(b) hereof, unless full
cumulative distributions on the Class D OP Preferred Units have been or
contemporaneously are authorized and paid or authorized and a sum sufficient
for the payment therefor set apart for payment for all past Distribution
Periods and the then current Distribution Period, no distributions (other
than in Junior OP Units) shall be authorized or paid or set apart for payment
or other distribution shall be authorized or made upon any Junior OP Units or
Parity OP Units nor shall any Junior OP Units or Parity OP Units be redeemed,
purchased or otherwise acquired for any consideration (or any moneys be paid
to or made available for a sinking fund for the redemption of any such Units)
by the Partnership (except by conversion into or exchange for Junior OP
Units).
4. LIQUIDATION PREFERENCE.
(a) Upon any voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Partnership, subject to the prior
preferences and other rights of any Senior OP Units as to liquidation
preferences, but before any distribution shall be made to the holders of any
Junior OP Units as to the distribution of assets upon any liquidation,
dissolution or winding up of the affairs of the Partnership, the holders of
Class D OP Preferred Units shall be entitled to receive, out of the assets of
the Partnership legally available for distribution to its partners,
liquidating distributions in cash or property at its fair market value as
determined by the General Partner in the amount of Twenty-Five Dollars
($25.00) per Class D OP Preferred Unit (the "Liquidation Preference"), plus
an amount per Class D OP Preferred Unit equal to all distributions accrued
and unpaid thereon (whether or not declared) to the date of such liquidation,
dissolution or winding up. After payment of the full amount of the
liquidating distributions to which they are entitled, the General Partner as
holder of Class D OP Preferred Units will have no right or claim to any of
the remaining assets of the Partnership and shall not be entitled to any
other distribution in the event of liquidation, dissolution or winding up of
the affairs of the Partnership.
(b) In the event that, upon any such voluntary or involuntary
liquidation, dissolution or winding up of the Partnership, the legally
available assets of the Partnership are insufficient to pay in full the
amount of the Liquidation Preference per Unit of Class D OP Preferred Units
plus an amount equal to all distributions accrued and unpaid on the Class D
OP Preferred Units and the corresponding amounts payable on all Parity OP
Units as to the distribution of assets upon liquidation, dissolution or
winding up, then the General Partner as holder of the Class D OP Preferred
Units and holders of all such Parity OP Units shall share ratably in any such
distribution of assets in proportion to the full liquidating distributions to
which they would otherwise be respectively entitled.
(c) Neither the consolidation or merger of the Partnership into or
with another entity nor the dissolution, liquidation, winding up or
reorganization of the Partnership immediately followed by organization of
another entity to which such assets are distributed nor the sale, lease,
transfer or conveyance of all or substantially all of the Partnership's
assets to another entity shall be deemed a liquidation, dissolution or
winding up of the affairs of the Partnership within the meaning of this
Section 4; provided, however, that, in each case, effective provision is made
in the organization documents of the resulting and surviving entity or
otherwise for the recognition, preservation and protection of the rights of
the General Partner as holder of Class D OP Preferred Units.
5. REDEMPTION.
(a) At any time that the General Partner redeems any Series D
Preferred Shares for cash, the General Partner shall concurrently cause the
Partnership to redeem an equal number of Class D OP Preferred Units, at a
redemption price per Class D OP Preferred Unit payable in cash and equal to
the redemption price paid by the General Partner for such Series D Preferred
Shares.
(b) From and after any date fixed for redemption of the Class D OP
Preferred Units pursuant to paragraph (a) of this Section 5 (unless the
Partnership shall fail to make available the amount of cash necessary to
effect such redemption), (i) except for payment of the redemption price, all
distributions on the Class D OP Preferred Units so called for redemption
shall cease to accrue, (ii) said units shall no longer be deemed to be
outstanding, and (iii) all rights of the General Partner as holder of Class D
OP Preferred Units of the Partnership shall cease and terminate except the
rights to receive the cash payable upon such redemption, without interest
thereon.
6. STATUS OF REACQUIRED UNITS.
All Class D OP Preferred Units which shall have been issued and
reacquired in any manner by the Partnership shall be deemed cancelled.
7. RANKING.
Any class or series of OP Units of the Partnership shall be deemed to
rank:
(a) prior or senior to the Class D OP Preferred Units, as to the
payment of distributions or as to distributions of assets upon liquidation,
dissolution or winding up, as the case may be, if the holders of such class
or series shall be entitled to the receipt of distributions or of amounts
distributable upon liquidation, dissolution or winding up, as the case may
be, in preference or priority to the holders of Class D OP Preferred Units
("Senior OP Units");
(b) (i) on a parity with the Class D OP Preferred Units, as to the
payment of distributions and as to distribution of assets upon liquidation,
dissolution or winding up, whether or not the distribution rates,
distribution payment dates or redemption or liquidation prices per unit or
other denomination thereof be different from those of the Class D OP
Preferred Units if such class or series of OP Units shall be Class A OP
Preferred Units or Class B-1 OP Preferred Units, and (ii) on a parity with
the Class D OP Preferred Units, as to payment of distributions or as to the
distribution of assets upon liquidation, dissolution or winding up, as the
case may be, whether or not the distribution rates, distribution payment
dates or redemption or liquidation prices per unit or other denomination
thereof be different from those of the Class D OP Preferred Units if the
holders of such class or series of OP Units and the Class D OP Preferred
Units shall be entitled to the receipt of distributions or of amounts
distributable upon liquidation, dissolution or winding up, as the case may
be, in proportion to their respective amounts of accrued and unpaid
distributions per Unit or other denomination or liquidation preferences,
without preference or priority one over the other (the OP Units referred to
in clauses (i) and (ii) of this paragraph being hereinafter referred to,
collectively, as "Parity OP Units"); and
(c) (i) junior to the Class D OP Preferred Units, as to the
payment of distributions and as to the distribution of assets upon
liquidation, dissolution or winding up, if such class or series of OP Units
shall be OP Common Units and (ii) junior to the Class D OP Preferred Units,
as to the payment of distribution or as to the distribution of assets upon
liquidation, dissolution or winding up, as the case may be, if the holders of
Class D OP Preferred Units shall be entitled to receipt of distributions or
of amounts distributable upon liquidation, dissolution or winding up, as the
case may be, in preference or priority to the holders of such class or series
of OP Units (the OP Units referred to in clauses (i) and (ii) of this
paragraph being hereinafter referred to, collectively, as "Junior OP Units").
8. SPECIAL ALLOCATIONS.
(a) Gross income and, if necessary, gain shall be allocated to the
General Partner as holder of Class D OP Preferred Units for any Fiscal Year
(and, if necessary, subsequent Fiscal Years) to the extent that the General
Partner as holder of Class D OP Preferred Units receive distributions on any
Class D OP Preferred Units (other than an amount included in any redemption
pursuant to Sections 4 or 5 hereof) with respect to such Fiscal Year
(including distributions received after the end of such Fiscal Year but are
made with respect to such Fiscal Year).
(b) If any Class D OP Preferred Units are redeemed pursuant to
Sections 4 or 5 hereof, for the Fiscal Year that includes such redemption
(and, if necessary, for subsequent Fiscal Years) (a) gross income and gain
(in such relative proportions as the General Partner in its discretion shall
determine) shall be allocated to the General Partner as holder of Class D OP
Preferred Units to the extent that the redemption amounts paid or payable
with respect to such Class D OP Preferred Units so redeemed exceeds the
aggregate Capital Account balance allocable to the Class D OP Preferred Units
so redeemed and (b) deductions and losses (in such relative proportions as
the General Partner in its discretion shall determine) shall be allocated to
the General Partner as holder of Class D OP Preferred Units to the extent
that the aggregate Capital Account balance allocable to the Class D OP
Preferred Units so redeemed exceeds the redemption amount paid or payable
with respect to the Class D OP Preferred Units so redeemed. The Capital
Account balance of the General Partner as holder of Class D OP Preferred
Units shall be determined solely with respect to Class D OP Preferred Units
immediately prior to the redemption and after taking into account all other
allocations of Net Income and Net Loss and distributions.
9. RESTRICTIONS ON OWNERSHIP.
The Class D OP Preferred Units shall be owned and held solely by the
General Partner but may be transferred to a successor General Partner.
10. VOTING RIGHTS.
The General Partner, as holder of Class D OP Preferred Units, shall not
be entitled to vote on any matters.
11. GENERAL.
(a) The ownership of Class D OP Preferred Units may (but need not,
in the sole and absolute discretion of the General Partner) be evidenced by
one or more certificates. The General Partner shall amend Exhibit A to the
Agreement from time to time to the extent necessary to reflect accurately the
issuance of, and subsequent conversion, redemption, or any other event having
an effect on the ownership of, Class D OP Preferred Units.
(b) The rights of the General Partner in its capacity as holder of
the Class D OP Preferred Units, are in addition to and not in limitation of
any other rights or authority of the General Partner in any other capacity
under the Agreement or applicable law. In addition, nothing contained herein
shall be deemed to limit or otherwise restrict the authority of the General
Partner under the Agreement, other than in its capacity as holder of the
Class D OP Preferred Units.
Exhibit I
to the Kramont
Partnership Agreement
Limited Partners
Exhibit J
to the Kramont
Partnership Agreement
Florida Land
PROPERTY
1. Century Village Administration Building
100 Century Boulevard
West Palm Beach, Florida
2. The Land of the Presidents
West Palm Beach, Florida
3. Village Marina
Griffin Road
Dania Beach, Florida
4. 2 parcels located at the
intersection of Palm Avenue
and Miramar Boulevard
Miramar, Florida
5. Mobil Station
2326 Okeechobee Boulevard
West Palm Beach, Florida
6. Partnership interests in Partnerships owning:
(a) Warehouse
4560 SW 72nd Avenue
Miami, Florida
(b) Warehouse
1547 N. Florida Mang Road
West Palm Beach, Florida
(c) Warehouse
4555 SW 72nd Avenue
Miami, Florida
Appendix F
KRAMONT REALTY TRUST
2000 INCENTIVE PLAN
KRAMONT REALTY TRUST, a Maryland real estate investment trust (the
"Company"), hereby establishes and adopts the following 2000 Incentive Plan
(the "Plan").
RECITALS
WHEREAS, the Company desires to encourage high levels of
performance by those individuals who are key to the success of the Company
and its subsidiaries and affiliates, to attract new individuals who are
highly motivated and who will contribute to the success of the Company and to
encourage such individuals to remain as officers, employees, consultants,
advisors and/or trustees of the Company and its subsidiaries and affiliates
by increasing their proprietary interest in the Company's growth and success.
WHEREAS, to attain these ends, the Company has formulated the Plan
embodied herein to authorize the granting of incentive awards through grants
of options to purchase shares ("Options"), grants of share appreciation
rights, grants of Share Purchase Awards (hereafter defined), grants of
Restricted Share Awards (hereafter defined), or any other award made under
the Plan to those persons (each such person a "Participant") whose judgment,
initiative and efforts are, have been, or will be responsible for the success
of the Company.
NOW, THEREFORE, the Company hereby constitutes, establishes and
adopts the following Plan and agrees to the following provisions:
ARTICLE 1.
PURPOSE OF THE PLAN
1.1. Purpose. The purpose of the Plan is to assist the Company in
attracting and retaining selected individuals to serve as Trustees, officers,
consultants, advisors, and employees of the Company who will contribute to
the Company's success and to achieve long-term objectives which will inure to
the benefit of all shareholders of the Company through the additional
incentive inherent in the ownership of the Company's Common Shares of
Beneficial Interest (the "Shares"). Options granted under the Plan will be
either "incentive stock options," intended to qualify as such under the
provisions of section 422 of the Internal Revenue Code of 1986, as from time
to time amended (the "Code"), or "nonqualified stock options." For purposes
of the Plan, the term "subsidiary" shall mean "subsidiary corporation," as
such term is defined in section 424(f) of the Code, and "affiliate" shall
have the meaning set forth in Rule 12b-2 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"). For purposes of the Plan, the term
"Award" shall include a grant of an Option, a grant of a share appreciation
right, a grant of a Share Purchase Award, a grant of a Restricted Share
Award, or any other award made under the terms of the Plan.
ARTICLE 2.
SHARES SUBJECT TO AWARDS
2.1. Number of Shares. Subject to the adjustment provisions of
Section 9.9 hereof, the aggregate number of Shares which may be issued under
Awards under the Plan, whether pursuant to Options, Share Purchase Awards,
Restricted Share Awards or any other award under the Plan shall not exceed
1,000,000 Shares. No Options to purchase fractional Shares shall be granted
and no fractional shares shall be issued under the Plan. For purposes of
this Section 2.1, the Shares that shall be counted toward such limitation
shall include all Shares:
(1) issued or issuable pursuant to Options that have been or may
be exercised;
(2) issued or issuable pursuant to Share Purchase Awards;
(3) issued as, or subject to issuance as a Restricted Share Award;
and
(4) issued or issuable under any other award granted under the
terms of the Plan.
2.2. Shares Subject to Terminated Awards. The Shares covered by
any unexercised portions of terminated Options granted under Articles 4 and
6, Shares forfeited as provided in Section 8.2(a) and Shares subject to any
Awards which are otherwise surrendered by the Participant without receiving
any payment or other benefit with respect thereto may again be subject to new
Awards under the Plan, other than grants of Options intended to qualify as
incentive stock options. In the event the purchase price of an Option is
paid in whole or in part through the delivery of Shares, the number of Shares
issuable in connection with the exercise of the Option shall not again be
available for the grant of Awards under the Plan. Shares subject to Options,
or portions thereof, which have been surrendered in connection with the
exercise of share appreciation rights shall not again be available for the
grant of Awards under the Plan.
2.3. Character of Shares. Shares delivered under the Plan may be
authorized and unissued Shares or Shares acquired by the Company, or both.
2.4. Limitations on Grants to Individual Participant. Subject to
adjustments pursuant to the provisions of Section 9.9 hereof, the maximum
number of Shares with respect to which Options or stock appreciation rights
may be granted hereunder to any employee during any fiscal year of the
Company shall be 100,000 Shares (the "Limitation"). If an Option is
canceled, the canceled Option shall continue to be counted toward the
Limitation for the year granted. An Option (or a share appreciation right)
that is repriced during any fiscal year is treated as the cancellation of the
Option (or share appreciation right) and a grant of a new Option (or share
appreciation right) for purposes of the Limitation for that fiscal year.
2.5. No Repricing. Notwithstanding anything in this Plan to the
contrary, an outstanding Option may not be modified to reduce the exercise
price thereof nor may a new Option at a lower price be substituted for a
surrendered Option, provided that (i) the foregoing shall not apply to
adjustments or substitutions in accordance with Section 9.9 and (ii) if an
Option is modified, extended or renewed and thereby deemed to be the issuance
of a new Option under the Code or the applicable accounting rules, the
exercise price of such Option may continue to be the original exercise price
even if less than the Fair Market Value (as defined below) of the Shares at
the time of such modification, extension or renewal.
ARTICLE 3.
ELIGIBILITY AND ADMINISTRATION
3.1. Awards to Employees, Trustees and Others. (a) Participants
who receive Options under Articles 4 and 6 hereof (including share
appreciation rights under Article 5) ("Optionees"), Share Purchase Awards
under Article 7 or Restricted Share Awards or other Share-based awards under
Article 8 (in either case, a "Participant") shall consist of such key
officers, employees, consultants, advisors and trustees of the Company or any
of its subsidiaries or affiliates as the Committee (hereinafter defined)
shall select from time to time. The Committee's designation of an Optionee
or Participant in any year shall not require the Committee to designate such
person to receive Awards or grants in any other year. The designation of an
Optionee or Participant to receive Awards or grants under one portion of the
Plan shall not require the Committee to include such Optionee or Participant
under other portions of the Plan.
(b) No Option that is intended to qualify as an "incentive
stock option" may be granted (x) to any individual that is not an employee of
the Company or any subsidiary thereof, or (y) to any employee who, at the
time of such grant, owns, directly or indirectly (within the meaning of
Sections 422(b)(6) and 424(d) of the Code), shares possessing more than ten
percent (10%) of the total combined voting power of all classes of shares of
the Company or any of its subsidiaries or a parent (within the meaning of
Section 424(e) of the Code), unless at the time of such grant, (i) the option
price is fixed at not less than 110% of the Fair Market Value (as defined
below) of the Shares subject to such Option, determined on the date of the
grant, and (ii) the exercise of such Option is prohibited by its terms after
the expiration of five (5) years from the date such Option is granted.
3.2. Administration. (a) The Plan shall be administered by a
committee (the "Committee") consisting of not fewer than two trustees of the
Company (the trustees of the Company being hereinafter referred to as the
"Trustees"), as designated by the Trustees. The Trustees may remove from,
add members to, or fill vacancies in the Committee. Unless otherwise
determined by the Trustees, each member of the Committee is intended to be a
"Non-Employee Director (Trustee)" within the meaning of Rule 16b-3 (or any
successor rule) of the Exchange Act and an "outside director (trustee)"
within the meaning of Section 162(m)(4)(C)(i) of the Code and the regulations
thereunder.
Any Award to a member of the Committee shall be on terms
consistent with Awards made to other Trustees who are not members of the
Committee and who are not employees, except where the Award is approved or
ratified by the Compensation Committee (excluding persons who are also
members of the Committee) of the Board of Trustees of the Company.
(b) The Committee is authorized, subject to the provisions of
the Plan, to establish such rules and regulations as it may deem appropriate
for the conduct of meetings and proper administration of the Plan. All
actions of the Committee shall be taken by majority vote of its members. The
Committee is also authorized, subject to the provisions of the Plan, to make
provisions in various Awards pertaining to a "change of control" of the
Company and, subject to Section 2.5, to amend or modify existing Awards.
(c) Subject to the provisions of the Plan, the Committee
shall have authority, in its sole discretion, to interpret the provisions of
the Plan and any Award thereunder and, subject to the requirements of
applicable law, including Rule 16b-3 of the Exchange Act, to prescribe,
amend, and rescind rules and regulations relating to the Plan or any Award
thereunder as it may deem necessary or advisable. All decisions made by the
Committee pursuant to the provisions of the Plan shall be final, conclusive
and binding on all persons, including the Company, its shareholders, Trustees
and employees, and Plan participants and beneficiaries.
3.3. Designation of Consultants/Liability.
(a) The Committee may designate employees of the Company
and professional advisors to assist the Committee in the administration of
this Plan and may grant authority to employees to execute agreements or other
documents on behalf of the Committee.
(b) The Committee may employ such legal counsel,
consultants and agents as it may deem desirable for the administration of
this Plan and may rely upon any opinion received from any such counsel or
consultant and any computation received from any such consultant or agent.
Expenses incurred by the Committee or the Board in the engagement of any such
counsel, consultant or agent shall be paid by the Company. The Committee,
its members and any person designated pursuant to Section 3.3(a) shall not be
liable for any action or determination made in good faith with respect to
this Plan. To the maximum extent permitted by applicable law, no officer or
former officer of the Company or member or former member of the Committee or
of the Board shall be liable for any action or determination made in good
faith with respect to this Plan or any Award granted under it. To the
maximum extent permitted by applicable law and to the extent not covered by
insurance, each officer or former officer and member or former member of the
Committee or of the Board shall be indemnified and held harmless by the
Company against any cost or expense (including reasonable fees of counsel
reasonably acceptable to the Company) or liability (including any sum paid in
settlement of a claim with the approval of the Company), and advanced amounts
necessary to pay the foregoing at the earliest time and to the fullest extent
permitted, arising out of any act or omission to act in connection with this
Plan, except to the extent arising out of such officer's or former officer's,
member's or former member's own fraud or bad faith. Such indemnification
shall be in addition to any rights of indemnification the officers, directors
or members or former officers, directors or members may have under applicable
law. Notwithstanding anything else herein, this indemnification will not
apply to the actions or determinations made by an individual with regard to
Awards granted to him or her under this Plan.
ARTICLE 4.
OPTIONS
4.1. Grant of Options. The Committee shall determine, within the
limitations of the Plan, those key officers, employees, consultants, advisors
and Trustees of the Company and its subsidiaries and affiliates to whom
Options are to be granted under the Plan, the number of Shares that may be
purchased under each such Option and the option price, and shall designate
such Options at the time of the grant as either "incentive stock options" or
"nonqualified stock options;" provided, however, that Options granted to
employees of an affiliate (that is not also a subsidiary) or to non-employees
of the Company may only be "nonqualified stock options."
All Options granted pursuant to this Article 4 and Article 6 herein
shall be authorized by the Committee and shall be evidenced in writing by
share option agreements ("Share Option Agreements") in such form and
containing such terms and conditions as the Committee shall determine that
are not inconsistent with the provisions of the Plan, and, with respect to
any Share Option Agreement granting Options that are intended to qualify as
"incentive stock options," are not inconsistent with Section 422 of the Code.
The granting of an Option pursuant to the Plan shall impose no obligation on
the recipient to exercise such Option. Any individual who is granted an
Option pursuant to this Article 4 and Article 6 herein may hold more than one
Option granted pursuant to such Articles at the same time and may hold both
"incentive stock options" and "nonqualified stock options" at the same time.
To the extent that any Option does not qualify as an "incentive stock option"
(whether because of its provisions, the time or manner of its exercise or
otherwise) such Option or the portion thereof which does not so qualify shall
constitute a separate "nonqualified stock option."
4.2. Option Price.
(a) Subject to Section 3.1(b), the option exercise price per
each Share purchasable under any "incentive stock option" granted pursuant to
this Article 4, any "nonqualified stock option" granted pursuant to Article 6
herein, or Options intended to be performance-based under Section 162(m) of
the Code shall not be less than 100% of the Fair Market Value (as hereinafter
defined) of such Share on the date of the grant of such Option.
(b) The option price per share of each Share purchasable
under any "nonqualified stock option" that is not intended to be performance-
based under Section 162(m) of the Code and is granted pursuant to this
Article 4 shall be such amount as the Committee shall determine at the time
of the grant of such Option.
4.3. Other Provisions. Options granted pursuant to this Article 4
shall be made in accordance with the terms and provisions of Article 9 hereof
and any other applicable terms and provisions of the Plan.
ARTICLE 5.
SHARE APPRECIATION RIGHTS
5.1. Grant and Exercise. Share appreciation rights may be granted
in conjunction with all or part of any Option granted under the Plan provided
such rights are granted at the time of the grant of such Option. A "share
appreciation right" is a right to receive cash or whole Shares, as provided
in this Article 5, in lieu of the purchase of a Share under a related Option.
A share appreciation right or applicable portion thereof shall terminate and
no longer be exercisable upon the termination or exercise of the related
Option, and a share appreciation right granted with respect to less than the
full number of Shares covered by a related Option shall not be reduced until,
and then only to the extent that, the exercise or termination of the related
Option exceeds the number of Shares not covered by the share appreciation
right. A share appreciation right may be exercised by the holder thereof
(the "Holder"), in accordance with Section 5.2 of this Article 5, by giving
written notice thereof to the Company and surrendering the applicable portion
of the related Option. Upon giving such notice and surrender, the Holder
shall be entitled to receive an amount determined in the manner prescribed in
Section 5.2 of this Article 5. Options which have been so surrendered, in
whole or in part, shall no longer be exercisable to the extent the related
share appreciation rights have been exercised.
5.2. Terms and Conditions. Share appreciation rights shall be
subject to such terms and conditions, not inconsistent with the provisions of
the Plan, as shall be determined from time to time by the Committee,
including the following:
(a) Share appreciation rights shall be exercisable only at
such time or times and to the extent that the Options to which they
relate shall be exercisable in accordance with the provisions of the
Plan.
(b) Upon the exercise of a share appreciation right, a Holder
shall be entitled to receive up to, but no more than, an amount in cash
or whole Shares equal to the excess of the then Fair Market Value of one
Share over the option exercise price per Share specified in the related
Option multiplied by the number of Shares in respect of which the share
appreciation right shall have been exercised. The Holder shall specify
in his written notice of exercise, whether payment shall be made in cash
or in whole Shares (unless otherwise provided in the agreement governing
the share appreciation right). Each share appreciation right may be
exercised only at the time and so long as a related Option, if any,
would be exercisable or as otherwise permitted by applicable law.
(c) Upon the exercise of a share appreciation right, the
Option or part thereof to which such share appreciation right is related
shall be deemed to have been exercised for the purpose of the limitation
of the number of Shares to be issued under the Plan, as set forth in
Section 2.1 of the Plan.
(d) With respect to share appreciation rights granted in
connection with an Option that is intended to be an "incentive stock
option," the following shall apply:
(i) No share appreciation right shall be transferable by
a Holder otherwise than by will or by the laws of descent and
distribution, and share appreciation rights shall be exercisable,
during the Holder's lifetime, only by the Holder.
(ii) Share appreciation rights granted in connection
with an Option may be exercised only when the Fair Market Value of
the Shares subject to the Option exceeds the option exercise price
at which Shares can be acquired pursuant to the Option.
ARTICLE 6.
RELOAD OPTIONS
6.1. Authorization of Reload Options. Concurrently with the award
of any Option (such Option hereinafter referred to as the "Underlying
Option") to any Participant in the Plan, the Committee may grant one or more
reload options (each, a "Reload Option") to such Participant to purchase for
cash or Shares (held for at least six months or such other period to avoid
accounting charges against the Company's earnings) a number of Shares as
specified below. A Reload Option shall be exercisable for an amount of
Shares equal to (i) the number of Shares delivered by the Optionee to the
Company to exercise the Underlying Option, and (ii) to the extent authorized
by the Committee, the number of Shares used to satisfy any tax withholding
requirement incident to the exercise of the Underlying Option, subject to the
availability of Shares under the Plan at the time of such exercise. Any
Reload Option may provide for the grant, when exercised, of subsequent Reload
Options to the extent and upon such terms and conditions consistent with this
Article 6, as the Committee in its sole discretion shall specify at or after
the time of grant of such Reload Option. Except as otherwise determined by
the Committee, a Reload Option will vest and become exercisable six months
after the exercise of an Underlying Option or Reload Option whereby the
Participant delivers to the Company Shares held by the Optionee for at least
6 months in payment of the exercise price and/or tax withholding obligations.
Notwithstanding the fact that the Underlying Option may be an "incentive
stock option," a Reload Option is not intended to qualify as an "incentive
stock option" under Section 422 of the Code.
6.2. Reload Option Amendment. Each Share Option Agreement shall
state whether the Committee has authorized Reload Options with respect to the
Underlying Option. Upon the exercise of an Underlying Option or other Reload
Option, the Reload Option will be evidenced by an amendment to the underlying
Share Option Agreement.
6.3. Reload Option Price. The option exercise price per Share
deliverable upon the exercise of a Reload Option shall be the Fair Market
Value of a Share on the date the corresponding Underlying Option is
exercised.
6.4. Term and Exercise. Except as otherwise determined by the
Committee, each Reload Option vests and is fully exercisable six months after
its grant (i.e., six months after the corresponding Underlying Option is
exercised). The term of each Reload Option shall be equal to the remaining
option term of the Underlying Option.
6.5. Termination of Employment. No additional Reload Options
shall be granted to Optionees when Options and/or Reload Options are
exercised pursuant to the terms of this Plan following termination of the
Optionee's employment unless the Committee, in its sole discretion, shall
determine otherwise.
6.6. Applicability of Other Sections. Except as otherwise
provided in this Article 6, the provisions of Article 9 applicable to Options
shall apply equally to Reload Options.
ARTICLE 7.
SHARE PURCHASE AWARDS
7.1. Grant of Share Purchase Award. The term "Share Purchase
Award" means the right to purchase Shares of the Company and to pay for such
Shares through a loan made by the Company to the Participant (a "Purchase
Loan") as set forth in this Article 7.
7.2. Terms of Purchase Loans.
(a) Purchase Loan. Each Purchase Loan shall be evidenced by
a promissory note. The term of the Purchase Loan shall be for a period of
years, as determined by the Committee, and the proceeds of the Purchase Loan
shall be used exclusively by the Participant for purchase of Shares from the
Company at a purchase price equal to the Fair Market Value on the date of the
Share Purchase Award.
(b) Interest on Purchase Loan. A Purchase Loan shall be non-
interest bearing or shall bear interest at whatever rate the Committee shall
determine (but not in excess of the maximum rate permissible under applicable
law), payable in a manner and at such times as the Committee shall determine.
Those terms and provisions as the Committee shall determine shall be
incorporated into the promissory note evidencing the Purchase Loan.
(c) Forgiveness of Purchase Loan. Subject to Section 7.4
hereof, the Company may forgive the repayment of up to 100% of the principal
amount of the Purchase Loan, subject to such terms and conditions as the
Committee shall determine and set forth in the promissory note evidencing the
Purchase Loan. A Participant's Purchase Loan can be prepaid at any time, and
from time to time, without penalty.
7.3. Security for Loans.
(a) Stock Power and Pledge. Purchase Loans granted to
Participants shall be secured by a pledge of the Shares acquired pursuant to
the Share Purchase Award. Such pledge shall be evidenced by a pledge
agreement (the "Pledge Agreement") containing such terms and conditions as
the Committee shall determine. The share certificates for the Shares
purchased by a Participant pursuant to a Share Purchase Award shall be issued
in the Participant's name, but shall be held by the Company as security for
repayment of the Participant's Purchase Loan together with a stock power
executed in blank by the Participant (the execution and delivery of which by
the Participant shall be a condition to the issuance of the Share Purchase
Award). Unless otherwise determined by the Committee, the Participant shall
be entitled to exercise all rights applicable to such Shares, including, but
not limited to, the right to vote such Shares and the right to receive
dividends and other distributions made with respect to such Shares. When the
Purchase Loan and any accrued but unpaid interest thereon has been repaid or
otherwise satisfied in full, the Company shall deliver to the Participant the
share certificates for the Shares purchased by a Participant under the Share
Purchase Award. Purchase Loans shall be recourse or non-recourse with
respect to a Participant, as determined by the Committee.
(b) Release and Delivery of Share Certificates During the
Term of the Purchase Loan. The Company shall release and deliver to each
Participant certificates for Shares purchased by a Participant pursuant to a
Share Purchase Award, in such amounts and on such terms and conditions as the
Committee shall determine, which shall be set forth in the Pledge Agreement.
(c) Release and Delivery of Share Certificates Upon Repayment
of the Purchase Loan. The Company shall release and deliver to each
Participant certificates for the Shares purchased by the Participant under
the Share Purchase Award and then held by the Company, provided the
Participant has paid or otherwise satisfied in full the balance of the
Purchase Loan and any accrued but unpaid interest thereon. In the event the
balance of the Purchase Loan is not repaid, forgiven or otherwise satisfied
within ninety (90) days after (i) the date repayment of the Purchase Loan is
due (whether in accordance with its term, by reason of acceleration or
otherwise), or (ii) such longer time as the Committee, in its discretion,
shall provide for repayment or satisfaction, the Company shall retain those
Shares then held by the Company in accordance with the Pledge Agreement.
(d) Recourse Purchase Loans. Notwithstanding Sections
7.3(a), (b) and (c) above, in the case of a recourse Purchase Loan, the
Committee may make a Purchase Loan on such terms as it determines, including
without limitation, not requiring a pledge of the acquired Shares.
7.4. Termination of Employment.
(a) Termination of Employment by Death, Disability or by the
Company Without Cause; Change of Control. In the event of a Participant's
termination of employment by reason of death, "disability" or by the Company
without "cause", or in the event of a "change of control", the Committee
shall have the right (but shall not be required) to forgive the remaining
unpaid amount (principal and interest) of the Purchase Loan in whole or in
part as of the date of such occurrence. "Change of Control", "disability"
and "cause" shall have the respective meanings as set forth in the promissory
note evidencing the Purchase Loan.
(b) Termination of Employment. Subject to Section 7.4(a)
above, in the event of a Participant's termination of employment for any
reason, the Participant shall repay to the Company the entire balance of the
Purchase Loan and any accrued but unpaid interest thereon, which amounts
shall become immediately due and payable, provided, however, that if the
Participant voluntarily resigns as an employee in good standing, such amounts
will become due and payable on the ninetieth (90th) day after the effective
date of such resignation.
7.5. Restrictions on Transfer. No Share Purchase Award or Shares
purchased through such an Award and pledged to the Company as collateral
security for the Participant's Purchase Loan (and accrued by unpaid interest
thereon) may be otherwise pledged, sold, assigned or transferred (other than
by will or by the laws of descent and distribution).
ARTICLE 8.
SHARE AWARDS
8.1. Restricted Share Awards. (a) A grant of Shares made
pursuant to Sections 8.1 and 8.2 is referred to as a "Restricted Share
Award." The Committee may grant to any Participant an amount of Shares in
such manner, and subject to such terms and conditions relating to vesting,
forfeitability and restrictions on delivery and transfer (whether based on
performance standards, periods of service or otherwise) as the Committee
shall establish (such Shares, "Restricted Shares"). The terms of any
Restricted Share Award granted under this Plan shall be set forth in a
written agreement (a "Restricted Share Agreement") which shall contain
provisions determined by the Committee and not inconsistent with this Plan.
The provisions of Restricted Share Awards need not be the same for each
Participant receiving such Awards.
(b) Issuance of Restricted Shares. As soon as practicable
after the date of grant of a Restricted Share Award by the Committee, the
Company shall cause to be transferred on the books of the Company, Shares
registered in the name of the Company, as nominee for the Participant,
evidencing the Restricted Shares covered by the Award, but subject to
forfeiture to the Company retroactive to the date of grant, if a Restricted
Share Agreement delivered to the Participant by the Company with respect to
the Restricted Shares covered by the Award is not duly executed by the
Participant and timely returned to the Company. All Restricted Shares
covered by Awards under this Article 8 shall be subject to the restrictions,
terms and conditions contained in the Plan and the Restricted Share Agreement
entered into by and between the Company and the Participant. Until the lapse
or release of all restrictions applicable to an Award of Restricted Shares,
the share certificates representing such Restricted Shares shall be held in
custody by the Company or its designee.
(c) Shareholder Rights. Beginning on the date of grant of
the Restricted Share Award and subject to execution of the Restricted Share
Agreement as provided in Sections 8.1(a) and (b), the Participant shall
become a shareholder of the Company with respect to all Shares subject to the
Restricted Share Agreement and shall have all of the rights of a shareholder,
including, but not limited to, the right to vote such Shares and the right to
receive distributions made with respect to such Shares; provided, however,
that any Shares or any other property (other than cash) distributed as a
dividend or otherwise with respect to any Restricted Shares as to which the
restrictions have not yet lapsed shall be subject to the same restrictions as
such Restricted Shares and shall be represented by book entry and held as
prescribed in Section 8.1(b).
(d) Restriction on Transferability. None of the Restricted
Shares may be assigned or transferred (other than by will or the laws of
descent and distribution), pledged or sold prior to lapse or release of the
restrictions applicable thereto.
(e) Delivery of Shares Upon Release of Restrictions. Upon
expiration or earlier termination of the forfeiture period without a
forfeiture and the satisfaction of or release from any other conditions
prescribed by the Committee, the restrictions applicable to the Restricted
Shares shall lapse. As promptly as administratively feasible thereafter,
subject to the requirements of Section 10.1, the Company shall deliver to the
Participant or, in case of the Participant's death, to the Participant's
beneficiary, one or more stock certificates for the appropriate number of
Shares, free of all such restrictions, except for any restrictions that may
be imposed by law.
8.2. Terms of Restricted Shares.
(a) Forfeiture of Restricted Shares. Subject to Section
8.2(b), all Restricted Shares shall be forfeited and returned to the Company
and all rights of the Participant with respect to such Restricted Shares
shall terminate unless the Participant continues in the service of the
Company as an employee until the expiration of the forfeiture period for such
Restricted Shares and satisfies any and all other conditions set forth in the
Restricted Share Agreement. The Committee in its sole discretion, shall
determine the forfeiture period (which may, but need not, lapse in
installments) and any other terms and conditions applicable with respect to
any Restricted Share Award.
(b) Waiver of Forfeiture Period. Notwithstanding anything
contained in this Article 8 to the contrary, the Committee may, in its sole
discretion and subject to the limitations imposed under Code Section 162(m)
and the Treasury Regulations thereunder in the case of a Restricted Share
Award intended to comply with the performance based exception under Code
Section 162(m), waive the forfeiture period and any other conditions set
forth at grant in any Restricted Share Agreement under appropriate
circumstances (including the death, disability or retirement of the
Participant or a material change in circumstances arising after the date of
an Award) as determined by the Committee in its sole discretion and subject
to such terms and conditions (including forfeiture of a proportionate number
of the Restricted Shares) as the Committee shall deem appropriate.
8.3. Other Share-Based Awards. The Committee is authorized to
grant other Share-based awards that are payable in, valued in whole or in
part by reference to, or otherwise based on or related to Shares, including
but not limited to, Shares awarded purely as a bonus and not subject to any
restrictions or conditions, Shares in payment of the amounts due under an
incentive or performance plan sponsored or maintained by the Company or an
affiliate, share appreciation rights (in tandem with Options), stock
equivalent units, and Awards valued by reference to book value of Shares.
Subject to the provisions of this Plan, the Committee shall have authority to
determine the persons to whom and the time or times at which such Awards
shall be made, the number of Shares to be awarded pursuant to or referenced
by such Awards, and all other conditions of the Awards. Grants of other
Share-based awards may be subject to such conditions, restrictions and
contingencies as the Committee may determine which may include, but are not
limited to, continuous service with the Company or an affiliate and/or the
achievement of performance goals.
8.4. Objective Performance Goals, Formulae or Standards. If the
grant of Restricted Shares or other Share-based awards or the lapse of
restrictions or vesting of Restricted Shares or other Share-based awards is
based on the attainment of performance goals, the Committee shall establish
the performance goals and the applicable vesting percentage of the Restricted
Share Award or other Share-based award applicable to each Participant or
class of Participants in writing prior to the beginning of the applicable
fiscal year or at such later date as otherwise determined by the Committee
and while the outcome of the performance goals are substantially uncertain.
Such performance goals may incorporate provisions for disregarding (or
adjusting for) changes in accounting methods, corporate transactions
(including, without limitation, dispositions and acquisitions) and other
similar type events or circumstances. With regard to a Restricted Share
Award or other Share-based award that is intended to comply with Section
162(m) of the Code, to the extent any such provision would create
impermissible discretion under Section 162(m) of the Code or otherwise
violate Section 162(m) of the Code, such provision shall be of no force or
effect. The applicable performance goals shall be based on one or more of
the Performance Criteria set forth in Exhibit A hereto. Other performance
goals may be used to the extent such goals satisfy Section 162(m) of the Code
or the Award is not intended to satisfy the requirements of Section 162(m) of
the Code.
8.5. Annual Limitation on Grants of Shares. Subject to
adjustments pursuant to the provisions of Section 9.9 hereof, the maximum
number of Shares subject to specified performance goals intended to satisfy
the requirements of Section 162(m) of the Code and in accordance with Section
8.4 hereof that may be granted as Restricted Shares to any employee or
subject to any other Share-based awards to any employee during any fiscal
year of the Company shall be 50,000 Shares.
ARTICLE 9.
GENERALLY APPLICABLE PROVISIONS
9.1. Option Period. Subject to Section 3.1(b), the period for
which an Option is exercisable shall be set by the Committee and shall not
exceed ten (10) years from the date such Option is granted. After the Option
is granted, the option period may not be reduced, subject to expiration due
to termination of employment.
9.2. Fair Market Value. If the Shares are listed or admitted to
trading on a securities exchange registered under the Exchange Act, unless
otherwise required by any applicable provision of the Code the "Fair Market
Value" of a Share as of a specified date shall mean the average of the high
and low price of the shares for the day immediately preceding the date as of
which Fair Market Value is being determined (or if there was no reported sale
on such date, on the last preceding date on which any reported sale occurred)
reported on the principal securities exchange on which the Shares are listed
or admitted to trading. If the Shares are not listed or admitted to trading
on any such exchange but are listed as a national market security on the
Nasdaq Stock Market, Inc. ("NASDAQ"), traded in the over-the-counter market
or listed or traded on any similar system then in use, the Fair Market Value
of a Share shall be the average of the high and low sales price for the day
immediately preceding the date as of which the Fair Market Value is being
determined (or if there was no reported sale on such date, on the last
preceding date on which any reported sale occurred) reported on such system.
If the Shares are not listed or admitted to trading on any such exchange, are
not listed as a national market security on NASDAQ and are not traded in the
over-the-counter market or listed or traded on any similar system then in
use, but are quoted on NASDAQ or any similar system then in use, the Fair
Market Value of a Share shall be the average of the closing high bid and low
asked quotations on such system for the Shares on the date in question. If
the Shares are not publicly traded, the method for determining Fair Market
Value shall be determined in good faith by the Committee in its sole
discretion. An Option shall be considered granted on the date the Committee
acts to grant the Option or such later date as the Committee shall specify.
9.3. Exercise of Options. Vested Options granted under the Plan
shall be exercised by the Optionee thereof (or by his or her executors,
administrators, guardian or legal representative, or by a Permitted Assignee,
as provided in Sections 9.4, 9.6 and 9.7 hereof) as to all or part of the
Shares covered thereby, by the giving of written notice of exercise to the
Company, specifying the number of Shares to be purchased, accompanied by
payment of the full purchase price for the Shares being purchased. Full
payment of such purchase price shall be made at the time of exercise and
shall be made (i) in cash or by certified check or bank check or wire
transfer of immediately available funds, (ii) with the consent of the
Committee, by delivery of a promissory note in favor of the Company upon such
terms and conditions as determined by the Committee, (iii) with the consent
of Committee, by tendering previously acquired Shares (valued at its Fair
Market Value, as determined by the Committee as of the date of tender) that
have been owned for a period of at least six months (or such other period to
avoid accounting charges against the Company's earnings), (iv) if Shares are
traded on a national securities exchange, the Nasdaq Stock Market, Inc. or
quoted on a national quotation system sponsored by the National Association
of Securities Dealers, Inc. and the Committee authorizes this method of
exercise, through the delivery of irrevocable instructions to a broker
approved by the Committee to deliver promptly to the Company an amount equal
to the purchase price, or (v) with the consent of the Committee, any
combination of (i), (ii), (iii) and (iv). In connection with a tender of
previously acquired Shares pursuant to clause (iii) above, the Committee, in
its sole discretion, may permit the Optionee to constructively exchange
Shares already owned by the Optionee in lieu of actually tendering such
Shares to the Company, provided that adequate documentation concerning the
ownership of the Shares to be constructively tendered is furnished in a form
satisfactory to the Committee. The notice of exercise, accompanied by such
payment, shall be delivered to the Company at its principal business office
or such other office as the Committee may from time to time direct, and shall
be in such form, containing such further provisions consistent with the
provisions of the Plan, as the Committee may from time to time prescribe. In
no event may any Option granted hereunder be exercised for a fraction of a
Share. The Company shall, subject to Section 10.4 herein, effect the
transfer of Shares purchased pursuant to an Option as soon as practicable,
and, within a reasonable time thereafter, such transfer shall be evidenced on
the books of the Company. No person exercising an Option shall have any of
the rights of a holder of Shares subject to an Option until certificates for
such Shares shall have been issued following the exercise of such Option. No
adjustment shall be made for cash dividends or other rights for which the
record date is prior to the date of such issuance.
9.4. Non-Transferability. Except as otherwise specifically
provided herein, no Award shall be transferable by the Participant otherwise
than by will or by the laws of descent and distribution. All Options shall
be exercisable, during the Participant's lifetime, only by the Participant.
Any attempt to transfer any Award, except as specifically provided herein,
shall be void, and no such Award shall in any manner be subject to the debts,
contracts, liabilities, engagements or torts of any person who shall be
entitled to such Award, nor shall it be subject to attachment or legal
process for or against such person. Notwithstanding the foregoing, the
Committee may determine at the time of grant or thereafter that an Award,
other than (x) an Option that is intended to be an incentive stock option (y)
a share appreciation right covered by Section 5.2(d)(i) and a Restricted
Share Award, that is otherwise not transferable pursuant to this Section 9.4
is transferable to a Family Member (defined below) in whole or in part and in
such circumstances, and under such conditions as specified by the Committee.
An Award that is transferred to a Family Member pursuant to the preceding
sentence (i) may not be subsequently transferred otherwise than by will or
by the laws of descent and distribution and (ii) remains subject to the terms
of this Plan and the Award agreement. "Family Member" means, solely to the
extent provided for in Securities Act Form S-8, any child, stepchild,
grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling,
niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law, or sister-in-law, including adoptive relationships, any
person sharing the employee's household (other than a tenant or employee), a
trust in which these persons have more than 50% of the beneficial interest, a
foundation in which these persons (or the employee) control the management of
assets, and any other entity in which these persons (or the employee) own
more than 50% of the voting interests or as otherwise defined in Securities
Act Form S-8.
9.5. Termination of Employment. Unless the Committee otherwise
determines, in the event of the termination of employment of an Optionee or
the termination or separation from service of an advisor, consultant or a
Trustee (who is an Optionee) for any reason (other than death or disability
as provided below), any Option(s) held by such Optionee (or its Permitted
Assignee) under this Plan and not previously exercised or expired, to the
extent vested on the date of such termination, shall be exercisable as of
such termination for a period not to exceed three months after the date of
such termination or separation, provided, however, that in no instance may
the term of the Option, as so extended, exceed the maximum term set forth in
Section 3.1(b)(ii) or 9.1 above. Notwithstanding the foregoing, in the event
of the separation from service of a non-employee Trustee (who is an Optionee)
by reason of death, disability or under conditions satisfactory to both the
Trustee and the Company, any nonqualified stock options held by such Trustee
(or its Permitted Assignee) under the Plan (to the extent vested on the date
of such termination) and not previously exercised or expired shall be
exercisable for a period not to exceed five (5) years after the date of such
separation, provided, however, that in no instance may the term of the
Option, as so extended, exceed the maximum term set forth in Section
3.1(b)(ii) or 9.1 above.
9.6. Death. In the event an Optionee dies while employed by the
Company or any of its subsidiaries or affiliates any Option(s) held by such
Optionee (or its Permitted Assignee) and not previously expired or exercised
shall, to the extent exercisable on the date of death, be exercisable by the
estate of such Optionee or by any person who acquired such Option by bequest
or inheritance, or by the Permitted Assignee at any time within one year
after the death of the Optionee, unless earlier terminated pursuant to its
terms, provided, however, that if the term of such Option would expire by its
terms within six months after the Optionee's death, the term of such Option
shall be extended until six months after the Optionee's death, provided
further, however, that in no instance may the term of the Option, as so
extended, exceed the maximum term set forth in Section 3.1(b)(ii) or 9.1
above.
9.7. Disability. In the event of the termination of employment
(or separation from service) of an Optionee due to total disability, the
Optionee, or his guardian or legal representative, or a Permitted Assignee
shall have the unqualified right to exercise any Option that has not expired
or been previously exercised and that the Optionee was eligible to exercise
as of the first date of total disability (as determined by the Committee), at
any time within one (1) year after such termination, unless earlier
terminated pursuant to its terms, provided, however, that if the term of such
Option would expire by its terms within six months after such termination,
the term of such Option shall be extended until six months after such
termination, provided further, however, that in no instance may the term of
the Option, as so extended, exceed the maximum term set forth in Section
3.1(b)(ii) or 9.1 above. The term "total disability" shall, for purposes of
this Plan, be defined in the same manner as such term is defined in Section
22(e)(3) of the Code.
9.8. Terms of Grant. Notwithstanding anything in Sections 9.5,
9.6 or 9.7 to the contrary, the Committee may grant an Option under such
terms and conditions as may be provided in the Share Option Agreement given
to the Optionee and, subject to Section 2.5, the Committee has the
discretion to modify the terms and conditions of an Option after grant as
long as no rights of the Participant are impaired, provided, however, that in
no instance may the term of the Option, as so extended, exceed the maximum
term established pursuant to Sections 3.1(b)(ii) or 9.1 above.
9.9. Adjustments. In the event that the Committee shall determine
that any dividend or other distribution (whether in the form of cash, Shares,
other securities, or other property), recapitalization, stock split, reverse
stock split, reorganization, merger, consolidation, split-up, spin-off, com-
bination, repurchase, or exchange of Shares or other securities, the issuance
of warrants or other rights to purchase Shares or other securities, or other
similar corporate transaction or event affects the Shares with respect to
which Options have been or may be issued under the Plan, such that an
adjustment is determined in good faith by the Committee to be appropriate in
order to prevent dilution or enlargement of the benefits or potential
benefits intended to be made available under the Plan, then the Committee
shall, in such manner as the Committee may deem equitable, adjust any or all
of (i) the number and type of Shares that thereafter may be made the subject
of Awards, (ii) the number and type of Shares subject to outstanding Awards,
and (iii) subject to Section 2.5, the grant or exercise price with respect to
any Option, or, if deemed appropriate, make provision for a cash payment to
the holder of any outstanding Option; provided, in each case, that with
respect to "incentive stock options," no such adjustment shall be authorized
to the extent that such adjustment would cause such options to violate
Section 422(b) of the Code or any successor provision; and provided further,
that the number of Shares subject to any Option denominated in Shares shall
always be a whole number. In the event of any reorganization, merger,
consolidation, split-up, spin-off, or other business combination involving
the Company (each, a "Reorganization"), the Committee may cause any Award
outstanding as of the effective date of the Reorganization to be canceled in
consideration of a cash payment or alternate Award made to the holder of such
canceled Award substantially equivalent in value to the fair market value of
such canceled Award. The determination of fair market value shall be made by
the Committee in its sole discretion.
9.10. Amendment and Modification of the Plan. The Compensation
Committee of the Board of Trustees of the Company may, from time to time,
alter, amend, suspend or terminate the Plan as it shall deem advisable,
subject to any requirement for shareholder approval imposed by applicable
law, including without limitation Sections 162(m) and 422 of the Code, or any
rule of any stock exchange or quotation system on which Shares are listed or
quoted; provided that such Compensation Committee may not amend the Plan,
without the approval of the Company's shareholders, to increase the number of
Shares that may be the subject of Options under the Plan (except for adjust-
ments pursuant to Section 9.9 hereof). In addition, no amendments to, or
termination of, the Plan shall in any way impair the rights of an Optionee or
a Participant (or a Permitted Assignee thereof) under any Award previously
granted without such Optionee's or Participant's consent.
9.11. Validity of Awards. The validity of any Award or grant of
Options made pursuant to this Plan shall remain in full force and effect and
shall not be affected by the compliance or noncompliance with Section 162(m)
of the Code or Rule 16b-3 of the Exchange Act.
ARTICLE 10.
MISCELLANEOUS
10.1. Tax Withholding. The Company shall have the right to make
all payments or distributions made pursuant to the Plan to an Optionee or
Participant (or a Permitted Assignee thereof) net of any applicable federal,
state and local taxes required to be paid as a result of the grant of any
Award, exercise of an Option or stock appreciation rights or any other event
occurring pursuant to this Plan. The Company shall have the right to
withhold from wages or other payments otherwise payable to such Optionee or
Participant (or a Permitted Assignee thereof) such withholding taxes as may
be required by law, or to otherwise require the Optionee or Participant (or a
Permitted Assignee thereof) to pay such withholding taxes. If the Optionee
or Participant (or a Permitted Assignee thereof) shall fail to make such tax
payments as are required, the Company or its subsidiaries or affiliates
shall, to the extent permitted by law, have the right to deduct any such
taxes from any payment of any kind otherwise due to such Optionee or
Participant or to take such other action as may be necessary to satisfy such
withholding obligations. In satisfaction of the requirement to pay required
withholding taxes, the Optionee or Participant (or Permitted Assignee) may
make a written election, which may be accepted or rejected in the discretion
of the Committee, to have withheld a portion of the Shares then issuable to
the Optionee (or Permitted Assignee) pursuant to the Plan, having an
aggregate Fair Market Value equal to the required withholding taxes.
10.2. Right of Discharge Reserved. Nothing in the Plan nor the
grant of an Award hereunder shall confer upon any employee, Trustee or other
individual 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 (or to demote or to exclude from future Awards
under the Plan) any such employee, Trustee or other individual at any time
for any reason. Except as specifically provided by the Committee, the
Company shall not be liable for the loss of existing or potential profit with
respect to an Award in the event of termination of an employment or other
relationship even if the termination is in violation of an obligation of the
Company or any subsidiary or affiliate of the Company to the Participant.
10.3. Legend. All certificates for Shares delivered under this
Plan shall be subject to such stock transfer orders and other restrictions as
the Committee may deem advisable under the rules, regulations and other
requirements of the Securities and Exchange Commission, any stock exchange
upon which the Shares are then listed or any national securities association
system upon whose system the Shares are then quoted, any applicable Federal
or state securities law, and any applicable corporate law, and the Committee
may cause a legend or legends to be put on any such certificates to make
appropriate reference to such restrictions.
10.4. Listing and Other Conditions.
(a) As long as the Shares are listed on a national securities
exchange or system sponsored by a national securities association, the issue
of any Shares pursuant to an Award shall be conditioned upon such shares
being listed on such exchange or system. The Company shall have no
obligation to deliver such shares unless and until such shares are so listed;
provided, however, that any delay in the delivery of such shares shall be
based solely on a reasonable business decision and the right to exercise any
Option with respect to such shares shall be suspended until such listing has
been effected.
(b) If at any time counsel to the Company shall be of the
opinion that any sale or delivery of Shares pursuant to any Award is or may
in the circumstances be unlawful or result in the imposition of excise taxes
on the Company under the statutes, rules or regulations of any applicable
jurisdiction, the Company shall have no obligation to make such sale or
delivery, or to make any application or to effect or to maintain any
qualification or registration under the Securities Act of 1933, as amended,
or otherwise with respect to Shares or Award, and the right to any Award
shall be suspended until, in the opinion of said counsel, such sale or
delivery shall be lawful or will not result in the imposition of excise taxes
on the Company.
(c) Upon termination of any period of suspension under this
Section 10.4, any Award affected by such suspension which shall not then have
expired or terminated shall be reinstated as to all shares available before
such suspension and as to shares which would otherwise have become available
during the period of such suspension, but no such suspension shall extend the
term of any Option.
(d) A Participant shall be required to supply the Company
with any certificates, representations and information that the Company
requests and otherwise cooperate with the Company in obtaining any listing,
registration, qualification, exemption, consent or approval the Company deems
necessary or appropriate.
(e) If the grant of any Award or any sale or delivery of sale
of Shares pursuant to any Award adversely affects the Company's qualification
as a real estate investment trust within the meaning of Sections 856 through
860 of the Code, the Company shall have no obligation to make such grant,
sale or delivery until such grant, sale or delivery will no longer adversely
affect such qualification.
10.5. Severability. If any provision of the Plan shall be held
unlawful or otherwise invalid or unenforceable in whole or in part, such
unlawfulness, invalidity or unenforceability shall not affect any other
provision of the Plan or part thereof, each of which shall remain in full
force and effect. If the making of any payment or the provision of any other
benefit required under the Plan shall be held unlawful or otherwise invalid
or unenforceable, such unlawfulness, invalidity or unenforceability shall not
prevent any other payment or benefit from being made or provided under the
Plan, and if the making of any payment in full or the provision of any other
benefit required under the Plan in full would be unlawful or otherwise
invalid or unenforceable, then such unlawfulness, invalidity or unenforce-
ability shall not prevent such payment or benefit from being made or provided
in part, to the extent that it would not be unlawful, invalid or
unenforceable, and the maximum payment or benefit that would not be unlawful,
invalid or unenforceable shall be made or provided under the Plan.
10.6. Gender and Number. In order to shorten and to improve the
understandability of the Plan document by eliminating the repeated usage of
such phrases as "his or her" and any masculine terminology herein shall also
include the feminine, and the definition of any term herein in the singular
shall also include the plural except when otherwise indicated by the context.
10.7. Termination of Plan. The Plan shall be effective on the
date of the approval of the Plan by the holders of a majority of the shares
entitled to vote thereon, provided such approval is obtained within 12 months
after the date of adoption of the Plan by the Board of Trustees. Awards may
be granted under the Plan at any time and from time to time after the
effective date of the Plan and on or prior to ___________ __, 2009, on which
date the Plan will expire except as to Awards and related share appreciation
rights then outstanding under the Plan. Such outstanding Awards and stock
appreciation rights shall remain in effect until they have been exercised or
terminated, or have expired.
10.8. Nature of Payments. All Awards made pursuant to the Plan
are in consideration of services performed for the Company and any subsidiary
or affiliate of the Company. Any income or gain realized pursuant to Awards
under the Plan and any share appreciation rights constitutes a special
incentive payment to the Optionee, Participant or Holder and shall not be
taken into account, to the extent permissible under applicable law, as
compensation for purposes of any of the employee benefit plans of the Company
or any subsidiary or affiliate of the Company, except as may be determined by
the Committee or by the Trustees or directors of the applicable subsidiary or
affiliate of the Company.
10.9. Captions. The captions in this Plan are for convenience of
reference only, and are not intended to narrow, limit or affect the substance
or interpretation of the provisions contained herein.
10.10. Successors and Assigns. This Plan shall be binding upon
and inure to the benefit of the respective successors and permitted assigns
of the Company and the Participants.
10.11. Governing Law. The Plan and all determinations made and
actions taken thereunder, to the extent not otherwise governed by the Code or
the laws of the United States, shall be governed by the laws of the State of
Maryland and construed accordingly.
EXHIBIT A
PERFORMANCE CRITERIA
Subject to the last sentence of Section 8.4 of the Plan,
performance goals established for purposes of conditioning the grant of an
Award of Restricted Shares or other Share-based awards based on performance
or the vesting of performance-based Awards of Restricted Shares shall be
based on one or more of the following performance criteria ("Performance
Criteria"): (i) the attainment of certain target levels of, or a specified
percentage increase in, revenues, income before income taxes and
extraordinary items, net income, earnings before income tax, earnings before
interest, taxes, depreciation and amortization, funds from operation of real
estate investments or a combination of any or all of the foregoing; (ii) the
attainment of certain target levels of, or a percentage increase in, after-
tax or pre-tax profits including, without limitation, that attributable to
continuing and/or other operations; (iii) the attainment of certain target
levels of, or a specified increase in, operational cash flow; (iv) the
achievement of a certain level of, reduction of, or other specified
objectives with regard to limiting the level of increase in, all or a portion
of, the Company's bank debt or other long-term or short-term public or
private debt or other similar financial obligations of the Company, which may
be calculated net of such cash balances and/or other offsets and adjustments
as may be established by the Committee; (v) the attainment of a specified
percentage increase in earnings per share or earnings per share from
continuing operations; (vi) the attainment of certain target levels of, or a
specified increase in return on capital employed or return on invested
capital; (vii) the attainment of certain target levels of, or a percentage
increase in, after-tax or pre-tax return on stockholders' equity; (viii) the
attainment of certain target levels of, or a specified increase in, economic
value added targets based on a cash flow return on investment formula; (ix)
the attainment of certain target levels in the fair market value of the
shares of the Company's Shares and (x) the growth in the value of an
investment in the Company's Shares assuming the reinvestment of dividends.
For purposes of item (i) above, "extraordinary items" shall mean all items of
gain, loss or expense for the fiscal year determined to be extraordinary or
unusual in nature or infrequent in occurrence or related to a corporate
transaction (including, without limitation, a disposition or acquisition) or
related to a change in accounting principle, all as determined in accordance
with standards established by Opinion No. 30 of the Accounting Principles
Board.
In addition, such Performance Criteria may be based upon the attainment
of specified levels of Company (or affiliate, division or other operational
unit of the Company) performance under one or more of the measures described
above relative to the performance of other real estate investment trusts. To
the extent permitted under Code Section 162(m) (including, without
limitation, compliance with any requirements for stockholder approval), the
Committee may: (i) designate additional business criteria on which the
Performance Criteria may be based or (ii) adjust, modify or amend the
aforementioned business criteria.
FORM OF PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
OF KRANZCO REALTY TRUST FOR THE SPECIAL MEETING, JUNE 6, 2000
The undersigned shareholder of Kranzco Realty Trust, a Maryland real
estate investment trust (the "Company"), hereby constitutes and appoints
Norman M. Kranzdorf and Robert H. Dennis, or either of them, his or her true
and lawful agents and proxies with full power of substitution in each of them
to attend the Special Meeting of shareholders of the Company to be held on
June 6, 2000, at 9:30 a.m., local time, at the Philadelphia Marriott West,
Matson Ford Road and Route 23, West Conshohocken, PA 19428, and any
adjournment(s) or postponement(s) thereof, to cast on behalf of the
undersigned all votes that the undersigned is entitled to cast at such
meeting and otherwise to represent the undersigned at the meeting with all
powers possessed by the undersigned.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE
BOXES, SET FORTH ON THE REVERSE SIDE, BUT YOU NEED NOT MARK ANY BOXES IF YOU
WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF TRUSTEES' RECOMMENDATIONS. YOUR
PROXY CANNOT BE VOTED UNLESS YOU SIGN, DATE AND RETURN THIS CARD OR FOLLOW
THE INSTRUCTIONS FOR TELEPHONIC VOTING SET FORTH ON THE REVERSE SIDE.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ALL OF THE
PROPOSALS AND WILL BE VOTED IN THE DISCRETION OF THE PROXIES UPON SUCH OTHER
MATTERS AS MAY PROPERLY COME BEFORE THE SPECIAL MEETING.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
KRANZCO REALTY TRUST
128 FAYETTE STREET
CONSHOHOCKEN, PA 19428-0805
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<PAGE>
THE VOTES ENTITLED TO BE CAST BY THE UNDERSIGNED WILL BE CAST IN
ACCORDANCE WITH THE INSTRUCTIONS BELOW. IF THIS PROXY IS EXECUTED BUT NO
INSTRUCTION IS GIVEN, THE VOTES ENTITLED TO BE CAST BY THE UNDERSIGNED WILL
BE CAST "FOR" THE APPROVAL OF THE PROPOSALS SET FORTH IN PARAGRAPHS 1 AND 2
BELOW, EACH AS DESCRIBED IN THE JOINT PROXY STATEMENT/PROSPECTUS OF THE
COMPANY DATED APRIL 14, 2000 HERETOFORE RECEIVED BY THE UNDERSIGNED, AND IN
THE DISCRETION OF THE PROXY HOLDERS ON ANY OTHER MATTERS THAT MAY PROPERLY
COME BEFORE THE MEETING OR ANY ADJOURNMENT(S) OR POSTPONEMENT(S) THEREOF.
PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE [X]
The approval of the merger (the "Merger") of KRT Trust, a Maryland
real estate investment trust, into Kramont Realty Trust, a Maryland
real estate investment trust ("Kramont"), pursuant to an Agreement
and Plan of Reorganization and Merger entered into by the Company,
KRT Trust, CV Reit, Inc. and Kramont Realty Trust, dated as of
December 10, 1999, as amended, including the amendment and
restatement of Kramont's declaration of trust.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The adoption and approval of the 2000 Incentive Plan of Kramont
Realty Trust.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
To vote and otherwise represent the undersigned on any other
matters which may properly come before the meeting or any
adjournment(s) or postponement(s) thereof in their discretion.
The undersigned acknowledges receipt of the Notice of Special Meeting of
Shareholders and the accompanying Joint Proxy Statement/Prospectus of the
Company dated April 14, 2000 relating to the Special Meeting.
[ ] MARK HERE IF YOU PLAN TO ATTEND THE MEETING IN PERSON.
Please sign exactly as your name appears hereon and date. If
the shares are held jointly, each holder should sign. When
signing as an attorney, executor, administrator, trustee,
guardian or as an officer signing for an entity or in another
representative capacity, please give the full title under
signature(s).
-------------------------------------------------------------
Signature
-------------------------------------------------------------
Signature, if held jointly
Dated:_________________________________________________, 2000
The undersigned hereby revokes all proxies heretofore given by the
undersigned to vote at said Special Meeting and any and all adjournments or
postponements thereof. IF NO BOXES ARE MARKED, THIS PROXY WILL BE VOTED IN
THE MANNER DESCRIBED ABOVE.
PLEASE SIGN, DATE AND MAIL THIS PROXY PROMPTLY IN THE RETURN ENVELOPE
whether or not you expect to attend the Special Meeting. You may
nevertheless vote in person if you do attend.
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<PAGE>
VOTE BY TELEPHONE OR INTERNET
QUICK****EASY****IMMEDIATE
Your telephone or Internet vote authorizes the named proxies to vote your
shares in the same manner as if you marked, signed and returned your proxy
card.
YOU WILL BE ASKED TO ENTER THE NUMBER LOCATED IN THE BOX MARKED "CONTROL
NUMBER." YOU WILL THEN HEAR THESE INSTRUCTIONS:
- -----------------------------------------------------------------------------
OPTION A: To vote as the Board of Trustees recommends on ALL proposals:
PRESS 1
- -----------------------------------------------------------------------------
OPTION B: If you choose to vote on each proposal separately, press 2.
You will hear these instructions:
- -----------------------------------------------------------------------------
To vote FOR, press 1; AGAINST, press 2; ABSTAIN, press 3. The
instructions are the same for all items to be voted.
WHEN ASKED, PLEASE CONFIRM YOUR VOTE BY PRESSING 1.
VOTE BY INTERNET: THE WEB ADDRESS IS http://www.directvote.com/krt
IF YOU VOTE BY
TELEPHONE OR INTERNET
DO NOT MAIL BACK
YOUR PROXY CARD
CALL**TOLL-FREE** ON A TOUCH-TONE TELEPHONE
1-888-216-1310 - ANYTIME
THERE IS NO CHARGE TO YOU FOR THIS CALL.
CONTROL NUMBER FOR
TELEPHONIC/INTERNET VOTING
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