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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
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(FEE REQUIRED) FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999.
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/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
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(NO FEE REQUIRED) FOR THE TRANSITION PERIOD FROM TO
.
COMMISSION FILE NUMBER 1-12514
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KEYSTONE PROPERTY TRUST
(Name of registrant as specified in its declaration of trust)
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MARYLAND 84-1246586
(State or other jurisdiction (IRS Employer Identification Number)
of incorporation or organization)
200 FOUR FALLS CORPORATE CENTER, SUITE 208 19428
WEST CONSHOHOCKEN, PENNSYLVANIA (Zip Code)
(Address of principal
executive offices)
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REGISTRANT'S TELEPHONE NUMBER (INCLUDED AREA CODE): (484) 530-1800
Securities registered under Section 12(b) of the Exchange Act:
Title of each Class:
Common Shares, $.001 Par Value
Name of each Exchange on which Registered: American Stock Exchange
Securities registered under Section 12(g) of the Exchange Act: NONE
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes /X/ No / /
Indicate by check if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained in this form, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. / /
The aggregate market value of the voting common shares held by
non-affiliates of the Registrant (based upon the closing price on the American
Stock Exchange) on March 27, 2000 was approximately $96.1 million. As of
March 27, 2000, there were 9,092,169 Common Shares, $.001 par value,
outstanding.
Portions of the proxy statement for the annual meeting of the shareholders
of Keystone Property Trust to be held in 2000 are incorporated by reference into
part III of this Form 10-K.
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TABLE OF CONTENTS
FORM 10-K
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PAGE
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PART I
Item 1. Business.................................................... 3
Item 2. Properties.................................................. 15
Item 3. Legal Proceedings........................................... 18
Item 4. Submission of Matters to a Vote of Security Holders......... 18
PART II
Item 5. Market for Registrant's Common Equity and Related
Shareholder Matters......................................... 20
Item 6. Selected and Summary Financial Data......................... 21
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 22
Item 7A. Quantitative and Qualitative Disclosure About Market Risk... 30
Item 8. Financial Statements and Supplementary Data................. 30
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................... 30
PART III.
Item 10. Trustees and Executive Officers of the Registrant........... 31
Item 11. Executive Compensation...................................... 31
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................. 31
Item 13. Certain Relationships and Related Transactions.............. 31
PART IV
Item 14. Exhibits, Financial Statement Schedule and Reports on Form
8-K......................................................... 32
Signatures.............................................................. II-1
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PART I.
ITEM 1. BUSINESS.
Keystone Property Trust (together with its subsidiaries, the "Company") is a
self-administered, self-managed real estate investment trust ("REIT") engaged in
the ownership, acquisition and development of industrial and office properties.
At December 31, 1999, the Company owned a portfolio of 133 properties (the
"Properties") comprised of 98 industrial properties, 34 office properties, and
an investment in a direct financing lease which aggregated approximately
18.6 million square feet. The Properties are located principally in the eastern
United States and were 98.9% leased to 331 tenants at December 31, 1999.
The Company's strategic focus continues to be the acquisition and
development of institutional quality, "big box" distribution facilities located
in proximity to skilled labor pools, interstate and regional road systems,
airports (primarily those containing major freight and express package delivery
hubs) and ports. The Company's office properties consist principally of modern
mid-rise and single-story suburban buildings, located in suburban office parks.
Substantially all of the office buildings are located within established and
growing business communities with convenient access to regional and interstate
road systems and highways.
The Company conducts substantially all of its activities through, and
substantially all of the Properties are held directly or indirectly by, Keystone
Operating Partnership, L.P. (the "Operating Partnership"). The Company is the
sole general partner of the Operating Partnership and owned, at December 31,
1999, approximately 56% of the limited partnership interests (the "OP Units") in
the Operating Partnership. The remaining OP Units are owned by limited partners
of the Operating Partnership. The officers and the trustees of the Company
currently own approximately 24% of the outstanding OP Units assuming the
conversion of all outstanding convertible preferred units of limited partnership
of the Operating Partnership ("Convertible Preferred Units") into OP Units. The
officers and the trustees of the Company currently own approximately 26% of the
outstanding common shares of beneficial interest of the Company ("Common
Shares"), assuming the conversion to Common Shares of all outstanding OP Units
and shares of convertible preferred stock ("Convertible Preferred Stock") and
Convertible Preferred Units. Each OP Unit may be redeemed by the holder for one
Common Share (subject to certain anti-dilution provisions), or, at the Company's
option, the cash value of one Common Share. With each such exchange, the
Company's percentage interest in the Operating Partnership will increase.
During the year ended December 31, 1999, the Company increased the portfolio
of owned real estate from approximately 11.9 million square feet to
18.6 million square feet and the undepreciated book value of its real estate
assets from $543 million to $860 million, respectively. The Company accomplished
this by acquiring 34 industrial facilities and one office building for an
aggregate purchase price of approximately $322 million. Industrial acquisitions
totaled $308 million, comprising 34 buildings and 6.5 million square feet, and
the purchase price for the office acquisition, which comprised 290,000 square
feet, was approximately $24 million. At December 31, 1999, the Company's
industrial and office real estate portfolio composition, on a square footage
basis, was 87% industrial (98 properties totaling 16.2 million square feet) and
12% office (34 buildings, totaling 2.3 million square feet).
As of December 31, 1999, the Company had an 80,000 square foot office
building located in Allentown, Pennsylvania under construction of which 66,000
square feet was leased to Aetna, Inc. In December 1999, the Company, through its
joint venture with Browning Investments, Inc. ("Browning"), completed the
construction of a 500,000 square foot distribution facility which is leased to
Brightpoint North America, Inc. and was the first building at Airtech Park
("Airtech"), a master planned industrial park of approximately 500 acres which
is adjacent to the Indianapolis International Airport. Airtech will accommodate
an additional 7.5 million square feet of industrial development. In
January 2000, the Company acquired Browning's 50% ownership interest in this
joint venture for $8.9 million. This joint
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venture was part of a strategic alliance that the Company formed with Browning,
a developer located in Indianapolis, Indiana, in December 1998. The terms of
this alliance give the Company an option and right of first refusal to develop
distinct land parcels in Airtech through joint ventures in which the Company
will have a 50% non-controlling ownership interest.
The Company also owns 112 acres of land which is under development and is
located adjacent to exit 8A of the New Jersey Turnpike in Middlesex County, New
Jersey. The Company also has options on several other tracks of land in Northern
New Jersey. Together, the Company's land holdings and the option land will
accommodate 4.5 million square feet of industrial development. The Company also
owns several industrial facilities located in Pennsylvania which have adjacent
land parcels on which the Company is in the process of planning the expansion of
the existing facilities. The aggregate square footage associated with the
expansion of these facilities is approximately 400,000 square feet.
Certain office and industrial properties which aggregate approximately
$160.4 million in gross book value and do not meet the Company's ongoing
investment strategy have been designated as being held for sale in the Company's
December 31, 1999 financial statements. These properties are currently being
marketed for sale in 2000. There is no assurance that the sale of these
properties will ultimately be consummated.
The Company was originally incorporated in Delaware in 1993 and was
re-incorporated in Maryland in 1994. In October 1999, the Company reorganized
from a Maryland corporation to a Maryland REIT and changed its name from
American Real Estate Investment Corporation to Keystone Property Trust.
Simultaneously, the name of the Operating Partnership was changed from American
Real Estate Investment, L.P. to Keystone Operating Partnership, L.P. The
Company's executive offices are located at 200 Four Falls Corporate Center,
Suite 208, West Conshohocken, Pennsylvania and its telephone number is
484-530-1800. The Company also maintains regional offices in Allentown,
Pennsylvania; Albany and Syracuse, New York; and Greenville, South Carolina.
MANAGEMENT AND EMPLOYEES
The Company conducts its real estate management activities through Keystone
Realty Services, Inc. (the "Management Company"). The name of the Management
Company was also changed at the time of the Company's re-organization as a
Maryland REIT from American Real Estate Management, Inc. At December 31, 1999,
all of the Company's Properties were managed by the Management Company. The
Company also manages, through the Management Company, additional properties on
behalf of third parties. As of March 1, 2000, the Management Company was
managing industrial and office properties containing an aggregate of
approximately 21.9 million square feet, of which approximately 18.6 million
square feet was owned by the Company. Of the 3.2 million square feet managed for
third parties, approximately 458,000 square feet was managed for a limited
partnership in which the Company's Chief Executive Officer is a general partner.
Through its ownership of 100% of the nonvoting preferred stock of the Management
Company, the Operating Partnership is entitled to receive 95% of amounts paid as
dividends by the Management Company. The Management Company's voting stock is
owned by three trustees of the Company.
The Company accounts for its investment in the Management Company in
accordance with the equity method of accounting as it does not control its
operations. The Management Company currently has 83 full-time employees,
including the Company's executive officers. Such persons provide services to
both the Company and the Operating Partnership.
BUSINESS OBJECTIVES AND STRATEGIES FOR GROWTH
The Company's primary business objectives are to maximize total return to
shareholders through growth in the Company's cash flow per share and through
increases in the net asset value of its portfolio. The Company intends to pursue
these objectives through aggressive asset and property
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management, by selectively acquiring and developing new properties, which
include state-of-the-art distribution facilities, with a view towards maximizing
cash flow and the selective disposition of non-core assets which include the
Company's office and certain industrial properties. Though the Company currently
is focusing its activities primarily in the eastern United States, particularly
the Northeast distribution corridor which includes New Jersey, New York,
Pennsylvania, Ohio and Indiana, no specific geographic limits have been
established.
The Company's strategy is to generate growth opportunities (i) in markets
where it has a significant local market presence through acquisitions of single
properties and portfolios, (ii) by focusing on the expansion of its distribution
center platform, and (iii) by entering targeted markets through strategic
transactions with dominant local partners, often through the issuance of OP
Units in tax deferred transactions. Management targets markets which exhibit
strong, stable supply and demand fundamentals, yet offer the opportunity to
acquire high quality assets at discounts to replacement cost with attractive
total returns or those which offer development opportunities with attractive
risk adjusted returns. In implementing its growth strategy, management generally
does not pursue transactions which involve competitive bid situations. Rather
the Company endeavors to seek out owners before they are actively marketing
their properties and establish relationships with entrenched local developers
who can supply the Company with a pipeline of attractively priced real estate.
The Company intends to accomplish its business objectives (i) through
contractual increases in rental rates from existing leases, (ii) by maintaining
and increasing occupancy levels in its properties, (iii) by increasing rental
rates through aggressive management and re-leasing of space, (iv) by acquiring
primarily new industrial properties which have potential for additional growth
through adaptive re-use and/or expansion, (v) by developing new state-of-the-art
distribution facilities on its land holdings, and (vi) by generating
build-to-suit development opportunities, particularly by maintaining strong
relationships with its tenants and establishing local market prominence.
POLICIES WITH RESPECT TO CERTAIN ACTIVITIES
The following is a discussion of the Company's current investment and
financing policies. The Company's policies with respect to these activities have
been determined by the Company's Board of Trustees and may be amended or revised
from time to time at the discretion of the Trustees without a vote of the
shareholders of the Company.
INVESTMENT POLICIES
The Company has not adopted any policy as to the amount or percentage of its
assets that can be invested in a single property. The key criterion for new
investments will be that they offer total returns likely to enhance shareholder
value and the opportunity for growth in cash flows from operating activities and
net asset value.
The Company may purchase or develop properties for long-term investment,
expand, renovate and improve its properties or sell any of its existing or
acquired properties, in whole or in part, when circumstances warrant. The
Company may also participate with other entities in property ownership through
joint ventures or other types of shared ownership. Equity investments may be
subject to existing mortgage financing and other indebtedness which have
priority over the equity interest of the Company.
Future investments are not limited (as to percentage of assets or otherwise)
to any geographic area or any specified type of property. The Company may
decide, under favorable economic circumstances, to develop additional
properties.
While the Company intends to emphasize equity real estate investments, it
may, in its discretion, invest in mortgages and other real estate interests.
Mortgage investments may include participating or
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convertible mortgages. The Company's investment in mortgages may include
investments as a strategy for ultimately acquiring a property, and might also
include the purchase of non-performing loans at a discounted price. Subject to
the percentage of ownership limitations and gross income and asset tests
necessary for REIT qualification, the Company may also invest in securities of
entities engaged in real estate activities or securities of other issuers. In
the future, the Company may acquire all or substantially all of the securities
or assets of other REITs or similar entities where such investments are
consistent with the Company's investment policies. In any event, the Company
does not intend that its investments in securities will require the Company to
register as an "investment company" under the Investment Company Act of 1940,
and the Company intends to divest securities before any such registration would
be required.
FINANCING POLICIES
The Company has not adopted any policy to limit the amount or percentage of
debt the Company may incur or to maintain any maximum debt-to-Total Market
Capitalization ratio. As of December 31, 1999, the Company had a debt-to-Total
Market Capitalization ratio of approximately 57.5% (based on the closing price
of $15.50 per Common Share on December 31, 1999). "Total Market Capitalization"
means the sum of the aggregate market value of the Company's outstanding Common
Shares and OP Units, the total debt of the Company and the liquidation value of
the Convertible Preferred Stock and Convertible Preferred Units on the date
thereof. The debt-to-total market capitalization ratio, which is based upon the
market value of the Company's equity and, accordingly, fluctuates with changes
in the price of the Common Shares, differs from a debt-to-book capitalization
ratio. To the extent the Company incurs or assumes indebtedness with respect to
properties in connection with pending or future acquisitions or development, the
Company's debt-to-Total Market Capitalization may change. The Company believes
that debt-to-Total Market Capitalization provides a more appropriate indication
of leverage for a company whose assets are primarily operating real estate. The
Company also considers its interest coverage and fixed charge coverage ratios to
be indicative of its level of leverage and ability to service its debt and fixed
charges. For the twelve months ended December 31, 1999 the Company's interest
coverage ratio and fixed charge coverage ratios were 2.14 and 1.81,
respectively.
The Company may in the future adopt a debt policy in light of then current
economic conditions, relative costs of debt and equity capital, market values of
properties, growth and acquisition opportunities and other factors, and may
modify any debt financing policy from time to time. If the Board of Trustees
determines that additional funding is required, the Company may raise such funds
through additional equity offerings (including offers of senior securities),
debt financing or retention of cash flow (subject to provisions in the Internal
Revenue Code of 1986, as amended (the "Code") concerning taxability of
undistributed REIT income), or a combination of these methods. The Company has
agreed as a result of certain acquisitions closed since December 1997 to use all
commercially reasonable efforts to maintain a certain level of indebtedness and
to permit certain holders of OP Units ("Unitholders") to guarantee such level of
indebtedness. At December 31, 1999, approximately $58.4 million, in the
aggregate, of the Company's outstanding indebtedness is guaranteed by these
Unitholders.
In the event the Board of Trustees determines to raise additional equity
capital, the Board of Trustees has the authority, without shareholder approval,
to issue additional Common Shares up to the maximum number authorized, or other
capital stock, on such terms and for such consideration it deems appropriate,
including in exchange for property. Any such offerings might cause a dilution of
a shareholder's investment in the Company.
To the extent that the Board of Trustees determines to obtain additional
debt financing, the Company intends to do so generally through loans secured by
mortgages on its properties and lines of credit. These mortgage loans may be
recourse, non-recourse or cross-collateralized and may contain cross-default
provisions. The Company does not have a policy limiting the number of mortgages
that
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may be placed on any particular property or the amount of the loans secured by
such mortgages, but mortgage financing instruments usually limit additional
indebtedness on such properties. Indebtedness incurred by the Company may be in
the form of bank borrowings, secured and unsecured, and publicly and privately
placed debt instruments. Such indebtedness may be with recourse to all or any
part of the property of the Company, or may be limited to the particular
property to which the indebtedness relates. The proceeds from any borrowings by
the Company may be used for the payment of distributions, for working capital,
to refinance existing indebtedness or to finance acquisitions of new properties
or expansions of existing or new properties.
The Company will acquire additional real estate assets using Common Shares
or OP Units to pay all or a portion of the purchase price when the Company feels
that such issuance would be additive to its intrinsic value on a per share
basis. The Company may also issue senior equity securities or shares of
preferred stock for this purpose. There can be no assurance that such issuances
may not be dilutive to the Company's existing shareholders. In addition, Common
Shares may be issued on terms which grant the recipient the right to require the
Company to register the shares under the Securities Act of 1933, as amended
("the "Securities Act"). Sales of those shares may adversely affect the market
price of the Company's outstanding Common Shares.
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SUMMARY OF INDEBTEDNESS
The following table sets forth the Company's mortgage indebtedness
outstanding, excluding debt premiums, at December 31, 1999.
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ANNUAL
DECEMBER 31, 1999 INTEREST MATURITY DATE AMOR- PAYMENTS
LENDER BALANCE (IN 000'S) RATE (MONTH/YEAR) TIZATION (IN 000'S) COLLATERAL
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USG Annuity and Life.......... $ 2,715 8.25% 09/00 20 $ 309 One Tabas Lane
USG Annuity and Life.......... 4,141 8.50% 09/05 20 479 Two Tabas Lane
USG Annuity and Life.......... 3,173 8.50% 09/05 20 367 1305 Goshen Parkway
M&T Real Estate, Inc.......... 1,561 8.68% 11/01 N/A 140 13 Columbia Circle
M&T Real Estate, Inc.......... 5,021 8.33% 11/05 N/A 432 3 Columbia Circle
M&T Real Estate, Inc.......... 6,808 8.53% 11/06 N/A 600 15 Columbia Circle
Independent Order of 4,478 8.50% 03/03 10 489 1 Columbia Circle
Foresters...................
Guardian Life Insurance 3,221 9.68% 02/07 20 453 1045 James Street
Company.....................
Nationwide Life Insurance 1,689 8.25% 09/02 N/A 139 8677 Logo Court
Company.....................
Nationwide Life Insurance 1,266 9.75% 09/02 N/A 124 8677 Logo Court
Company.....................
Nationwide Life Insurance 5,841 9.75% 09/02 N/A 569 8677 Logo Court
Company.....................
Column Financial, Inc......... 7,364 7.03% 02/08 30 601 One Philips Drive
Column Financial, Inc......... 16,687 7.03% 02/08 30 1,361 101 Commerce Drive
Column Financial, Inc......... 64,914 7.50% 10/08 30 5,496 Various (1)
Column Financial, Inc......... 29,123 7.55% 10/08 30 2,479 Various (2)
Berkshire Life Insurance 2,010 8.75% 07/13 25 259 5000 Campuswood Drive
Company.....................
AEGON USA Realty Advisors..... 6,344 6.92% 07/13 15 724 4400 West 96(th) Street
Nationwide Life Insurance 650 7.91% 04/06 N/A 51 6402 Corporate Drive
Company.....................
Nationwide Life Insurance 2,497 7.91% 04/06 N/A 198 6402 Corporate Drive
Company.....................
Nationwide Life Insurance 2,871 8.41% 04/06 N/A 242 6402 Corporate Drive
Company.....................
Nationwide Life Insurance 2,300 6.88% 06/04 N/A 158 351 West 10(th) Street
Company.....................
Nomura Asset Capital 43,714 7.71% 10/22 25 4,064 (3)
Corporation.................
Bank Boston, N.A. and various 141,980 8.00% 04/02 N/A 11,358 (4)(5)
lenders.....................
First Union National Bank 2,147 7.40% 04/01 N/A 159 3535 Winchester Road (6)
(6).........................
American States Insurance 10,020 8.75% 09/09 15 1,540 One Park Place
Company.....................
Kraft Foods, Inc.............. 1,650 7.00% 03/02 N/A 116 74 acres land in
Middlesex Co., NJ
Principal Financial........... 10,345 7.50% 03/07 N/A 776 409 Kennedy Drive
Principal Financial........... 4,434 7.50% 03/07 N/A 333 309 Kennedy Drive
Teachers Annuity and Assurance 98,000 7.45% 10/05 6 7,301 Various (7)
Association of America......
Prudential Insurance 12,000 7.87% 12/06 25 1,099 21 Roadway
Company.....................
Prudential Mortgage Company... 19,457 7.66% 10/04 5 1,754 221 South 10(th) Street
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TOTAL DEBT (8)................ 518,421 $44,170
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(1) Secured by a first lien on 17 properties (see Schedule III--Real Estate and
Accumulated Depreciation) subject to certain permitted release provisions.
The loan facility contains covenants and agreements customary in such
borrowings.
(2) Secured by a first lien on 4 properties (see Schedule III--Real Estate and
Accumulated Depreciation) subject to certain permitted release provisions.
The loan facility contains covenants and agreements customary in such
borrowings.
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(3) Secured by a first lien on 10 properties (see Schedule III--Real Estate and
Accumulated Depreciation) subject to certain permitted release provisions.
The loan facility contains covenants and agreements customary in such
borrowings.
(4) Secured by a first lien on 63 properties (see Schedule III--Real Estate and
Accumulated Depreciation) subject to certain permitted release provisions.
The loan facility contains covenants and agreements customary in such
borrowings.
(5) Debt service is interest only which is payable monthly, at LIBOR plus 2.25%
or the prime rate, at the Company's option. The LIBOR interest rate is based
on a sliding scale which is based on the Company's leverage. The scale
ranges from LIBOR plus 1.625% to LIBOR plus 2.25%. Rate as of December 31,
1999 was 8.00%. Annual payment is based on annual interest payments at
8.00%.
(6) This indebtedness is for a $8.2 million construction loan for an 80,000
square foot office building located in Allentown, Pennsylvania.
(7) Secured by a first lien on 8 properties (see Schedule III--Real Estate and
Accumulated Depreciation) subject to certain permitted release provisions.
(8) Excludes unamortized debt premiums of $3,691,000 at December 31, 1999.
RECENT ACQUISITIONS AND DISPOSITIONS
In January 2000, the Company acquired its 50% joint venture partners'
ownership interest in a limited partnership which constructed a 500,000 square
foot distribution facility in Indianapolis, Indiana for $8.9 million. The
consideration for this acquisition was $5.9 million in OP Units and
$3.0 million in cash.
In January 2000, the Company sold 243 St. Nicholas Avenue, a 15,000 square
foot industrial building for net proceeds of $900,000. This sale resulted in a
gain on sale of approximately $100,000.
The Company has a commitment to close the final phase of a transaction, of
which the first phase was closed in September 1999, with Reckson Morris
Operating Partnership, L.P. which requires the purchase of six big box
distribution facilities aggregating 2.2 million square feet and six acres of
land located in New Jersey for a purchase price of approximately $100.0 million.
The Company anticipates funding this acquisition with a combination of debt
financing and $5.6 million of Convertible Preferred Units to be issued to the
seller. The Company anticipates that this final phase of this transaction will
close in the second quarter of 2000. The Company has posted a $10.0 million
letter of credit as a deposit for this transaction.
The Company is currently evaluating several property acquisitions and
transactions which include strategic transactions designed to increase
shareholder value over the long-term. There can be no assurance that the Company
will pursue any of these potential acquisitions or transactions, or that, if
pursued, the Company will successfully acquire any such properties or complete
such transactions or that such properties or transactions once completed will
perform as expected.
COMPETITION
The Properties are primarily located in the Eastern United States. There are
numerous other industrial and office properties and real estate companies within
the market area of each of such properties which competes with the Company for
tenants and development and acquisition opportunities. The number of competitive
properties and real estate companies in such areas could have a material adverse
effect on the Company's (i) future operations, (ii) ability to rent its
properties and the rents charged, and (iii) development and acquisition
opportunities. The Company will compete for tenants and acquisitions with others
who may have greater resources. The Company's competitive position for tenants
is strongly influenced by economic conditions in its market areas. However, the
Company believes that its responsiveness to tenant needs will enable it to
attract and maintain high quality tenants in the markets in which the properties
are located. With respect to development and acquisition opportunities, the
Company competes with other REITs and investors in office and industrial
properties seeking to develop or acquire properties in the areas where the
Company will
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concentrate its activities. The Company will experience strong competition in
pursuing development and acquisition opportunities.
The Company's financial performance and its ability to make distributions to
shareholders continues to be particularly sensitive to the economic conditions
in northern New Jersey, central Pennsylvania, Indianapolis, Indiana, the
Greenville/Spartanburg region of South Carolina and New York State. Like other
real estate markets, these markets have experienced economic downturns in the
past, and future declines in any of these economies or real estate markets could
adversely affect the Company's operations or cash available for distribution.
The Company's revenues and the value of the Properties may be affected by a
number of factors, including the local economic climate (which may be adversely
impacted by business layoffs or downsizing, industry slowdowns, changing
demographics and other factors) and local real estate conditions (such as
oversupply of or reduced demand for office, industrial and other competing
commercial properties). These factors, when and if they occur in an area in
which the Properties are located, would adversely affect the Company's ability
to make distributions to its shareholders.
ENVIRONMENTAL AND OTHER REGULATORY MATTERS
Under various federal, state and local laws and regulations, an owner of
real estate is liable for the costs of removal or remediation of certain
hazardous or toxic substances on such property. Such laws often impose such
liability without regard to whether the owner knew of, or was responsible for,
the presence of such hazardous or toxic substances. The costs of remediation or
removal of such substances may be substantial, and the presence of such
substances, or the failure to promptly remediate such substances, may adversely
affect the owner's ability to sell such real estate or to borrow using such real
estate as collateral. In connection with its ownership and operation of the
Properties, the Company or the Operating Partnership, as the case may be, may be
potentially liable for such costs.
All of the Properties have been subject to Phase I or similar environmental
assessments, which are intended to discover information regarding, and to
evaluate the environmental condition of, the surveyed properties and surrounding
properties. The Phase I assessments included a historical review, a public
records review, a preliminary investigation of the site and surrounding
properties, screening for the presence of asbestos, polychlorinated biphenyls
("PCBs") and underground storage tanks and the preparation and issuance of a
written report, but do not include soil sampling or subsurface investigations.
Where Phase I assessments resulted in specific recommendations for remedial
actions, the recommended action has been taken.
The Phase I assessments have not revealed any environmental liability that
the Company believes would have a material adverse effect on the Company's
business, assets or results of operations, nor is the Company aware of any such
liability. Nevertheless, it is possible that these assessments do not reveal all
environmental liabilities of which the Company is unaware. Moreover, no
assurance can be given that (i) future laws, ordinances or regulations will not
impose any material environmental liability or (ii) the current environmental
condition of its properties will not be affected by tenants and occupants of its
properties, by the condition of properties in the vicinity of the Properties
(such as the presence of underground storage tanks) or by third parties
unrelated to the Operating Partnership or the Company.
Environmental inspections indicate that there are minor amounts of asbestos
containing materials ("ACMs") in certain of the Properties, primarily in the
form of floor tiles and ceiling materials, which are generally in good
condition. The presence of such amounts of ACMs is in compliance with current
law.
The Company believes that the Properties are in compliance in all material
respects with all federal, state and local ordinances and regulations regarding
hazardous or toxic substances. Neither the Company nor the Operating Partnership
has been notified by any governmental authority, or is
10
<PAGE>
otherwise aware, of any material noncompliance, liability or claim related to
hazardous or toxic substances in connection with any of its present Properties.
From time to time legislation is proposed which, if enacted, would require
installation of various items of safety equipment, such as smoke alarms and
sprinkler equipment. If such legislation should be enacted and be applicable to
the Properties, the Company could be required to expend material sums in
fulfilling these requirements.
DEPRECIATION
See "Schedule III--Real Estate and Accumulated Depreciation" herein.
GENERAL
In the opinion of management, the Properties are adequately covered by
insurance. The Company has no plans to make any material renovations or
improvements to any of the Properties.
EXECUTIVE OFFICERS
The following table sets forth certain information regarding named executive
officers and other executives of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- -------- --------
<S> <C> <C>
David F. McBride (1)(2)..... 53 Chairman
Jeffrey E. Kelter (1)(2).... 45 President and Chief Executive Officer
Timothy A. Peterson (1)..... 34 Executive Vice President and Chief Financial Officer
John B. Begier.............. 34 Executive Vice President--Acquisitions and Development
Stephen J. Butte (1)........ 40 Senior Vice President, Chief Investment Officer and
Secretary
Charles C. Lee, Jr.......... 36 Senior Vice President--Marketing and Leasing
Francis X. Ryan............. 40 Senior Vice President--Property Operations
Timothy E. McKenna (1)...... 36 Senior Vice President--Finance
Jennifer A. Pancoast........ 36 Vice President--Leasing
Jeffrey D. Anderson......... 47 Vice President--Operations
Matthew Marshall............ 34 Vice President--Industrial Leasing
George Hasenecz............. 32 Vice President--Acquisitions
Rosemarie Gentner........... 37 Vice President--Operations
Sandra Richardson........... 42 Vice President--Leasing
</TABLE>
- ------------------------
(1) This executive is a named executive officer of the Company.
(2) This executive is a trustee of the Company.
Mr. McBride has been Chairman of the Board of Trustees of the Company since
December 1997. He served as Secretary of the Company from January 1998 until
December 1998. He is currently a partner in the law firm of Harwood Lloyd, LLC.
He has served as Chief Executive Officer of McBride Enterprises, Inc. and an
affiliated family real estate, construction and brokerage companies since 1987
11
<PAGE>
and has been a director of McBride Enterprises, Inc. and these affiliates since
1975. He has been a member of the Georgetown University Board of Regents since
1990, and is a member of the Board of Directors of the Towne Center Bank.
Mr. McBride has served as a director of Midlantic Corporation, Midlantic
National Bank and various subsidiaries for thirteen years prior to its merger
with PNC Bank in 1996. Prior to 1987, he was a partner in the law firm of
Harwood Lloyd from 1981 to 1987, a partner in the law firm of Murphy, Ellis &
McBride from 1997 to 1981, and an associate in the law firm of Robinson,
Wayne & Greenberg from 1973 to 1977, all located in New Jersey. He is a member
of the bars of New Jersey and New York.
Mr. Kelter has been President of the Company since December 1997 and was
appointed Chief Executive Officer in December 1998. He has over 18 years of
experience in all phases of commercial real estate including development and
third-party management. Mr. Kelter began his career at Bankers Trust Corporation
where he was an assistant treasurer in the Corporate Finance division. In 1982,
Mr. Kelter was employed by Vector Properties in Tulsa, Oklahoma, where he was in
charge of the development and finance of several downtown Tulsa office building
renovations. In 1982, Mr. Kelter founded Penn Square Properties, Inc. in
Philadelphia and served as Chief Executive Officer and President. He has
developed, owned, managed and leased more than 4.5 million square feet of office
and warehouse projects throughout the Pennsylvania and New Jersey markets.
Mr. Peterson has served as Chief Financial Officer of the Company since
August 1998 and was Secretary from December 1998 until September 1999. He was
appointed Executive Vice President of the Company in December 1998. Prior to
joining the Company, Mr. Peterson held a variety of positions with Post
Properties, Inc. since 1989, including his most recent responsibility as
Executive Vice President, Finance. While at Post Properties, Mr. Peterson
managed all capital markets activities, maintained all rating agency
relationships and oversaw accounting, budgeting and financial reporting
functions. Mr. Peterson is a Certified Public Accountant, is a member of the
National Association of Real Estate Investment Trusts and currently serves as
Co-Chairman of its Accounting Committee and Adjunct member of the Best Financial
Practices Task Force. He is a member of University of Florida Real Estate
Advisory Board and serves on President's Council of the Real Estate Round Table.
Mr. Begier has served as Senior Vice President of the Company since
December 1997 with primary responsibility for the Company's acquisition and
development activities. In January 2000, he was appointed to Executive Vice
President. Mr. Begier joined Penn Square Properties, Inc. in 1995; prior to
working for Penn Square Properties he worked for eight years as a real estate
broker with the Pennsylvania office of Cushman & Wakefield where he was
responsible for leasing, sales and acquisition of commercial and industrial
properties.
Mr. Butte has served as Senior Vice President of the Company with primary
responsibility for acquisition and development due diligence since
December 1997. He was appointed Chief Investment Officer in March 1999 and
Secretary in September 1999. Prior to joining Penn Square Properties, Inc. in
1988, he spent five years in public accounting as a manager in the audit
department of Asher & Company, specializing in providing financial and
accounting services to companies in the real estate industry. Mr. Butte is a
Certified Public Accountant.
Mr. Lee has served as Senior Vice President of the Company since March 1998
with primary responsibility for the Company's leasing and marketing activities.
Mr. Lee joined Penn Square Properties, Inc. in 1987 where he was responsible for
leasing and marketing activities for various commercial properties. From
September 1997 until March 1998, when he re-joined the Company, Mr. Lee was the
regional leasing director for the Philadelphia region of Equity Office
Properties. Prior to working for Penn Square Properties, he was an Assistant
Portfolio Manager in the Private Banking Division of the Boston Safe Deposit and
Trust Company.
Mr. Ryan has served as Senior Vice President of the Company since
December 1997 with primary responsibility for the Company's property operations
and management activities. Mr. Ryan joined Penn
12
<PAGE>
Square Properties, Inc. in 1991 where he was responsible for the management of
various commercial offices and industrial properties. Prior to working for Penn
Square Properties, Mr. Ryan worked for four years as a senior property manager
for Cushman & Wakefield's Pennsylvania office and as a project manager for
American Building Maintenance from 1984 through 1986. Mr. Ryan is certified as a
Real Property Administrator by the Building Owners and Managers Association.
Mr. McKenna has served as Vice President-Finance of the Company from
January 1999 until June 1998 when he was promoted to Senior Vice
President-Finance. Mr. McKenna was previously employed as a senior manager in
the Real Estate Services Group of Arthur Andersen LLP's Philadelphia office.
Prior to joining the Company, he worked for over 12 years providing consulting
and accounting services to publicly and privately-owned real estate companies;
over 11 years of his experience was obtained as an employee of Arthur Andersen
LLP. Mr. McKenna is a Certified Public Accountant.
Ms. Pancoast has served as Vice President of the Company since
December 1997 with responsibility for the Company's leasing activities related
to office properties. Since January 2000, she is responsible for leasing
activities associated with the Company's industrial portfolio. Prior to
rejoining Penn Square Properties, Inc. in October 1995, she spent two years with
Bell Atlantic Properties, the real estate subsidiary of Bell Atlantic, where she
was director of property management for over 600,000 square feet of properties
located in the Philadelphia region. From September 1990 until September 1993 she
was responsible for leasing over 600,000 square feet of office properties
located in Philadelphia for Penn Square Properties, Inc. From September 1986
until September 1990, she worked as a real estate broker for The Flynn Company,
a manager and developer of office and industrial properties in the Philadelphia
region.
Mr. Anderson has served as Vice President of the Company since August 1998
with primary responsibility for the operations and management of the properties
located in New York state. Mr. Anderson was previously employed by Pioneer
Management Services Company, an affiliate of Pioneer Development LLC from
March 1996 until August 1998 as director of property management where he managed
over five million square feet of office and retail properties located in the
northeastern region of the United States. From March 1993 until March 1996, he
was vice president of property management for United Properties, Inc., a
developer and manager of commercial properties located in Minneapolis,
Minnesota. Prior to March 1993, he was director of property management for the
Trammell Crow Company's Milwaukee, Wisconsin office for thee years and managed
over six million square feet of office and industrial properties. He has over
twenty years of property management experience.
Mr. Marshall has served as Vice President of the Company since October 1999
with responsibility for the Company's leasing activities related to industrial
properties. Mr. Marshall was previously employed by Trammell Crow Company in
Wayne, Pennsylvania from August 1998 to October 1999 where he was Senior
Associate and was responsible for leasing and advisory services for
institutional and corporate clients. Prior to joining Trammell Crow Company, he
was employed by the Staubach Company in Palo Alto, California from March 1995 to
July 1998 where he was responsible for business development in Silicon Valley
and the northwest United States. He began his career in real estate in July 1989
with the Binswanger Company in Philadelphia, Pennsylvania where he remained as a
commercial broker until March 1993. Mr. Marshall has 11 years experience in the
commercial real estate industry, specializing in project leasing and tenant
advisory services.
Mr. Hasenecz joined the Company in October 1999 as a senior analyst before
being promoted to Vice President in January 2000. Mr. Hasenecz was previously
employed by Brandywine Realty Trust as the marketing and leasing director of
central New Jersey region since December 1998. Prior to that, Mr. Hasenecz
served as the senior acquisition analyst at Brandywine since December 1997
overseeing the acquisition of over three million square feet of office and
industrial properties with 71 acres of
13
<PAGE>
additional developable land at a total purchase price of $362 million. He joined
Brandywine in April 1997 as an acquisition analyst and handled the acquisition
of four million square feet of office and industrial properties and 200 acres of
developable land. Prior to that time, Mr. Hasenecz served as a senior accountant
for Jackson-Cross*ONCOR International, a Philadelphia-based private real estate
company, from April 1994 until April 1997.
Ms. Gentner joined Penn Square Properties in November 1997 as property
administrator. She was promoted to Vice President-Property Operations in
January 2000. Ms. Gentner is responsible for oversight of all the Company's
property managers, as well as risk management. She was previously employed by
Renaissance Properties since 1992 as senior property manager responsible for
overseeing and coordinating the day-to-day facilities management of a diverse
portfolio of assets, including commercial office, residential, and industrial
complexes aggregating over 3.0 million square feet and stretching from Maine to
Delaware. Ms. Gentner began her management career with Kevin F. Donohoe Company
in 1988 in Philadelphia as property manager responsible for 1.3 million square
feet of office space.
Ms. Richardson joined the Company in May 1998 as leasing director for the
office portfolio managed for third parties. She was promoted to Vice President
in February 2000. Currently, Ms. Richardson's responsibilities include the
leasing activities for the Company's office portfolio and the office assets
managed for third parties. She was previously employed by Compass, an Equitable
Real Estate affiliate, since May 1996 and Heitman Financial Services, a national
pension fund advisor, from May 1989 to May 1996 where she was responsible for
institutional leasing management and asset management. Prior to that, she worked
with a brokerage firm in Washington, DC since November 1986 handling leasing on
several accounts for national institutional investors.
14
<PAGE>
ITEM 2. DESCRIPTION OF PROPERTY
SUMMARY PROPERTY TABLE
The following table sets forth certain information with respect to each of
the Properties at December 31, 1999.
<TABLE>
<CAPTION>
% OF
PORTFOLIO
RENTABLE
# OF YEAR BUILT/ SQUARE SQUARE %
BUILDINGS BUILDINGS LOCATION RENOVATED FEET FEET LEASED
- ----------------------------------- --------- -------------------- ----------- ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
INDUSTRIAL:
100 Oakhill Road................... 1 Mountaintop, PA 1996 105,000 0.56% 100.0%
1701 Pollitt Drive (4)............. 1 Fair Lawn, NJ 1968 108,877 0.58% 100.0%
1905 Nevins Road (4)............... 1 Fair lawn, NJ 1955 151,700 0.81% 100.0%
2 Volvo Drive (4).................. 1 Rockleigh, NJ 1966/1995 67,460 0.36% 100.0%
5 Thornton Road (4)................ 1 Oakland, NJ 1973/81 151,874 0.81% 100.0%
1305 Goshen Parkway................ 1 West Chester, PA 1991 90,000 0.48% 100.0%
One Tabas Lane..................... 1 Exton, PA 1970 150,027 0.80% 100.0%
Two Tabas Lane..................... 1 Exton, PA 1970/91 150,000 0.80% 100.0%
1091 Arnold Road................... 1 Reading, PA 1996 133,055 0.71% 100.0%
1157 Arnold Road................... 1 Reading, PA 1995 219,120 1.17% 100.0%
101 Commerce Drive................. 1 Mechancisburg, PA 1997 597,100 3.20% 100.0%
1 Phillips Drive................... 1 Mountaintop, PA 1991-1993 400,000 2.14% 100.0%
1001, 1011 AIP Drive............... 2 Middletown, PA 1991 284,262 1.52% 100.0%
2400, 2404, 2410 Gettysburg Road... 3 Camp Hill, PA 1952/1993 182,770 0.98% 100.0%
4472 & 4480 Steelway Blvd.......... 4 Liverpool, NY 1977 655,500 3.50% 100.0%
Northeastern Industrial Park, Bldg.
21............................... 1 Albany, NY 1989 100,000 0.54% 100.0%
Northeastern Industrial Park, Bldg.
22............................... 1 Albany, NY 1988 104,000 0.55% 100.0%
Northeastern Industrial Park, Bldg.
8................................ 1 Albany, NY 1950/1997 192,645 1.03% 100.0%
4, 5 & 8 Marway Circle............. 3 Gates, NY 1976/77 171,300 1.05% 94.7%
1030 South Edgewood Drive.......... 1 Urbana, OH 1988 200,000 1.07% 100.0%
16725 Square Drive................. 1 Marysville, OH 1987 133,500 0.71% 100.0%
3530 East Pike..................... 1 Zanesville, OH 1991 300,000 1.61% 100.0%
5555 Massillon Road................ 1 Green, OH 1996 255,000 1.37% 100.0%
One Apollo Drive................... 1 Glens Falls, NY 1992 158,000 0.85% 100.0%
1440 Sheffler Drive................ 1 Chambersburg, PA 1996 355,200 1.90% 100.0%
1465 Nitterhouse Drive............. 1 Chambersburg, PA 1995 420,000 2.25% 100.0%
2294 Molly Pitcher Highway......... 1 Chambersburg, PA 1986 621,400 3.32% 100.0%
4400 W. 96(th) Street.............. 1 Indianapolis, IN 1998 100,000 0.54% 100.0%
6402 Corporate Drive............... 1 Indianapolis, IN 1996 162,608 0.87% 100.0%
8677 Logo Court.................... 1 Indianapolis, IN 1993 599,152 3.21% 100.0%
1221 South Batesville Road......... 1 Greer, SC 1970/1985 434,798 2.33% 99.2%
Augusta Road Industrial Park....... 2 Greenville, SC 1996 360,000 1.92% 100.0%
Buncombe Road Industrial Park...... 5 Greer, SC 1988/1995 350,000 1.88% 94.3%
Outlaw Industrial Park............. 3 Greenville, SC 1994/1997 302,000 1.62% 100.0%
Piedmont Highway Industrial Park... 3 Piedmont, SC 1995/1997 400,000 2.13% 100.0%
Rocky Creek Business Park.......... 5 Greenville, SC 1997 159,400 0.85% 100.0%
White Horse Industrial Park........ 7 Greenville, SC 1989/1997 390,000 2.09% 76.9%
104 Hidden Lake Circle............. 1 Duncan, SC 1986/1992 142,500 0.76% 100.0%
118 Moonachie...................... 1 Carlstadt, NJ 1989 243,751 1.30% 100.0%
122 Hidden Lake Circle............. 1 Duncan, SC 1998 303,091 1.62% 100.0%
1311 Majestic Drive................ 1 Fremont, OH 1993 143,400 0.77% 100.0%
135 Fieldcrest..................... 1 Edison, NJ 1980 77,975 0.42% 100.0%
1411 Majestic Drive................ 1 Fremont, OH 1995 181,350 0.96% 100.0%
18 Madison......................... 1 Fairfield, NJ 1979 14,000 0.08% 100.0%
200 Carter......................... 1 Edison, NJ 1985 105,910 0.57% 100.0%
200 Industrial Avenue.............. 1 Teterboro, NJ 1998 332,352 1.78% 100.0%
200-250 Kennedy.................... 1 Sayerville, NJ 1988 164,267 0.88% 100.0%
21 Cranbury........................ 1 Cranbury, NJ 1998 845,835 4.53% 100.0%
21 Roadway......................... 1 Harrisburg, PA 1988 407,100 2.18% 100.0%
22 Madison......................... 1 Fairfield, NJ 1980 39,875 0.21% 100.0%
221 South 10(th) Street............ 1 Lemoyne, PA 1997 885,802 4.75% 100.0%
24 Abeel........................... 1 Cranbury, NJ 1978 40,022 0.21% 100.0%
24 Madison......................... 1 Fairfield, NJ 1992 35,494 0.19% 100.0%
243 St. Nicholas (3)(4)............ 1 South Plainfield, NJ 1984 15,000 0.08% 100.0%
26 Madison......................... 1 Fairfield, NJ 1992 30,306 0.16% 100.0%
275-285 Pierce..................... 1 Franklin Twp., NJ 1988 102,735 0.55% 100.0%
300 Enterprise Drive............... 1 Bellevue, OH 1998 181,838 0.97% 100.0%
300-350 Kennedy.................... 1 Sayerville, NJ 1988 161,705 0.87% 100.0%
301-321 Herrod..................... 1 S. Brunswick, NJ 1989 610,949 3.28% 100.0%
309 Kennedy........................ 1 Sayerville, NJ 1996 202,000 1.08% 100.0%
34 Englehard....................... 1 Cranbury, NJ 1982 203,404 1.09% 100.0%
351 West 10(th) Street............. 1 Indianapolis, IN 1999 39,252 0.21% 100.0%
409 Kennedy........................ 1 Sayerville, NJ 1996 225,831 1.21% 100.0%
535 Secaucus....................... 1 Secaucus, NJ 1974 68,439 0.37% 100.0%
55 Carter.......................... 1 Edison, NJ 1986 108,548 0.58% 92.9%
600 Hagerty Drive.................. 1 Fremont, OH 1980/86/87 126,250 0.68% 100.0%
605 Hagerty Drive.................. 1 Fremont, OH 1991 76,464 0.41% 100.0%
670 Hagerty Drive.................. 1 Fremont, OH 1980/88/90 100,272 0.54% 100.0%
800 Hagerty Drive.................. 1 Fremont, OH 1987 30,150 0.16% 100.0%
Mt. Ebo............................ 1 Mt. Ebo, NY 1998 93,948 0.50% 100.0%
One Nixon.......................... 1 Edison, NJ 1987 192,829 1.03% 100.0%
--- ---------- ----- -----
Total Industrial Properties........ 98 16,248,392 87.11% 99.2%
<CAPTION>
ANNUALIZE
% OF RENT PER
PORTFOLIO LEASED
ANNUALIZED ANNUALIZED # OF SQUARE
BUILDINGS RENT (1) RENT LEASES FOOT (2) MAJOR TENANTS
- ----------------------------------- ----------- ---------- -------- ---------- ------------------------------
<S> <C> <C> <C> <C> <C>
INDUSTRIAL:
100 Oakhill Road................... $ 386,870 0.40% 1 $ 3.68 Dana Perfumes Corp.
1701 Pollitt Drive (4)............. 723,263 0.75% 4 6.64 MDA Services
1905 Nevins Road (4)............... 701,613 0.73% 1 4.63 Road-Con Systems
2 Volvo Drive (4).................. 502,572 0.52% 1 7.45 National Medical
5 Thornton Road (4)................ 1,050,512 1.09% 1 6.92 Aramis, Inc.
1305 Goshen Parkway................ 432,000 0.45% 1 4.80 Communication Test Design
One Tabas Lane..................... 450,084 0.47% 1 3.00 Alstrip
Two Tabas Lane..................... 762,520 0.79% 1 5.08 International Paper
1091 Arnold Road................... 465,696 0.48% 1 3.50 The Glidden Company
1157 Arnold Road................... 747,636 0.78% 3 3.41 HMG Intermark Worldwide
101 Commerce Drive................. 2,376,458 2.47% 1 3.98 Hershey Foods, Inc.
1 Phillips Drive................... 1,188,000 1.23% 1 2.97 Philips Lighting Co.
1001, 1011 AIP Drive............... 1,044,282 1.08% 6 3.67 Bayard Sales
2400, 2404, 2410 Gettysburg Road... 755,453 0.78% 4 4.13 Exel Logistics
4472 & 4480 Steelway Blvd.......... 1,770,745 1.84% 1 2.70 GATX Logistics, Inc.
Northeastern Industrial Park, Bldg.
21............................... 762,600 0.79% 2 7.63 Distribution Unlimited
Northeastern Industrial Park, Bldg.
22............................... 530,400 0.55% 1 5.10 Ameriserve Food
Northeastern Industrial Park, Bldg.
8................................ 659,097 0.68% 1 3.42 Moran Foods, Inc.
4, 5 & 8 Marway Circle............. 584,981 0.94% 10 3.42 Anixter, Inc.
1030 South Edgewood Drive.......... 440,000 0.46% 1 2.20 ODW Logistics, Inc.
16725 Square Drive................. 481,572 0.50% 1 3.61 Midwest Express, Inc.
3530 East Pike..................... 840,000 0.87% 1 2.80 Owens Brockway Glass
5555 Massillon Road................ 907,500 0.94% 2 3.56 General Electric
One Apollo Drive................... 1,323,104 1.37% 1 8.37 Niagra Mohawk
1440 Sheffler Drive................ 1,518,836 1.58% 3 4.28 Ingram Book Company
1465 Nitterhouse Drive............. 1,617,000 1.68% 1 3.85 Franklin Storage, Inc.
2294 Molly Pitcher Highway......... 2,330,256 2.42% 2 3.75 Franklin Storage, Inc.
4400 W. 96(th) Street.............. 930,000 0.97% 1 9.30 Support Net
6402 Corporate Drive............... 894,456 0.93% 2 5.50 Brightpoint, Inc.
8677 Logo Court.................... 1,527,838 1.59% 1 2.55 Logo 7
1221 South Batesville Road......... 1,188,560 1.23% 2 2.73 BMW
Augusta Road Industrial Park....... 1,026,000 1.07% 2 2.85 Benore Logistics Systems
Buncombe Road Industrial Park...... 898,500 0.93% 4 2.57 Spring Industries
Outlaw Industrial Park............. 588,504 0.61% 3 1.95 Graco
Piedmont Highway Industrial Park... 1,075,000 1.11% 3 2.69 Fabri-Kal Corp.
Rocky Creek Business Park.......... 529,300 0.55% 5 3.32 Export Packaging
White Horse Industrial Park........ 810,500 0.84% 6 2.08 Benore Logistics Systems
104 Hidden Lake Circle............. 550,960 0.57% 1 3.87 BMG Music
118 Moonachie...................... 1,828,128 1.90% 1 7.50 Coca Cola
122 Hidden Lake Circle............. 1,000,178 1.04% 1 3.30 BMG Music
1311 Majestic Drive................ 394,350 0.41% 1 2.75 Poly-Foam International, Inc.
135 Fieldcrest..................... 327,350 0.34% 2 4.20 Front Row
1411 Majestic Drive................ 498,713 0.52% 1 2.75 GMH Enterprises
18 Madison......................... 95,904 0.10% 1 6.85 Logotech, Inc.
200 Carter......................... 409,332 0.43% 2 3.86 Johnson Control
200 Industrial Avenue.............. 2,193,528 2.28% 1 6.60 Neuman Distributors, Inc.
200-250 Kennedy.................... 739,200 0.77% 1 4.50 Garden Bolt
21 Cranbury........................ 3,421,440 3.55% 4 4.05 Cosmetic Essence
21 Roadway......................... 1,567,332 1.63% 1 3.85 Dana Corporation
22 Madison......................... 215,724 0.22% 1 5.41 Gould Pumps
221 South 10(th) Street............ 3,080,119 3.20% 5 3.48 International Paper
24 Abeel........................... 190,000 0.20% 1 4.75 KAR Products
24 Madison......................... 226,323 0.24% 2 6.38 Crane Packing
243 St. Nicholas (3)(4)............ 82,500 0.09% 1 5.50 Vanguard
26 Madison......................... 170,466 0.18% 2 5.62 Intermarket Tech
275-285 Pierce..................... 436,581 0.45% 2 4.25 MBI Merchandising A
300 Enterprise Drive............... 551,013 0.57% 2 3.03 American Can
300-350 Kennedy.................... 707,328 0.73% 3 4.37 Enchante
301-321 Herrod..................... 2,291,064 2.38% 1 3.75 Herrod Distribution
309 Kennedy........................ 909,000 0.94% 1 4.50 Nippon Express
34 Englehard....................... 894,984 0.93% 1 4.40 SETCO
351 West 10(th) Street............. 368,580 0.38% 1 9.39 Office Works
409 Kennedy........................ 982,365 1.02% 1 4.35 Guest Supply
535 Secaucus....................... 410,634 0.42% 2 6.00 LTA Group
55 Carter.......................... 432,392 0.45% 4 3.98 Checkolite
600 Hagerty Drive.................. 347,187 0.36% 1 2.75 Poly-Foam International, Inc.
605 Hagerty Drive.................. 210,276 0.22% 1 2.75 Poly-Foam International, Inc.
670 Hagerty Drive.................. 300,816 0.31% 1 3.00 Poly-Foam International, Inc.
800 Hagerty Drive.................. 113,063 0.12% 1 3.75 Armstrong
Mt. Ebo............................ 898,143 0.93% 1 9.56 Schien Pharmaceutical
One Nixon.......................... 645,981 0.67% 2 3.35 Ultimate Distribution
----------- ----- --- ------
Total Industrial Properties........ $62,312,662 64.42% 137 $ 3.84
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
% OF
PORTFOLIO
RENTABLE
# OF YEAR BUILT/ SQUARE SQUARE %
BUILDINGS BUILDINGS LOCATION RENOVATED FEET FEET LEASED
- ----------------------------------- --------- -------------------- ----------- ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
128 Bauer Drive (4)................ 1 Oakland, NJ 1981 41,450 0.22% 100.0%
1500 Pollit Drive (4).............. 1 Fair Lawn, NJ 1970/1992 18,614 0.10% 100.0%
1600 Route 208 (4)................. 1 Fair Lawn, NJ 1983 52,748 0.28% 99.6%
1655 Valley Road (4)............... 1 Wayne, NJ 1989 155,700 0.83% 100.0%
1900 Pollitt Drive (4)............. 1 Fair Lawn, NJ 1970/84/95 77,262 0.41% 100.0%
22-08 Route 208 (4)................ 1 Fair Lawn, NJ 1968/1998 75,599 0.41% 97.0%
40 Potash Road (4)................. 1 Oakland, NJ 1992 60,994 0.33% 100.0%
95 Bauer Drive (4)................. 1 Oakland, NJ 1974/1991 6,792 0.04% 100.0%
99 Bauer Drive (4)................. 1 Oakland, NJ 1971 20,449 0.11% 100.0%
8 Airline Drive.................... 1 Albany, NY 1997 61,127 0.33% 100.0%
Fifteen Columbia Circle............ 1 Albany, NY 1995 82,608 0.44% 100.0%
Nine Columbia Circle............... 1 Albany, NY 1992 10,908 0.06% 98.4%
One Columbia Circle................ 1 Albany, NY 1991 68,895 0.37% 100.0%
Seventeen Columbia Circle.......... 1 Albany, NY 1995 66,000 0.35% 100.0%
Thirteen Columbia Circle........... 1 Albany, NY 1996 21,468 0.12% 100.0%
Three Columbia Circle.............. 1 Albany, NY 1992 78,971 0.42% 100.0%
6 British American Boulevard....... 1 Latham, NY 1980 70,550 0.38% 98.6%
Corporate Center 15 (4)............ 1 Mechanicsburg, PA 1979 55,574 0.30% 71.5%
Executive Park (4)................. 1 Wyomissing, PA 1979 52,841 0.28% 100.0%
Hillside Corporate Center (4)...... 1 Mechanicsburg, PA 1991 67,473 0.36% 98.2%
Treeview Corporate Center (4)...... 1 Wyomissing, PA 1991 63,084 0.34% 83.0%
Winchester Plaza Corp. Ctr. (4).... 1 Allentown, PA 1992/1998 146,000 0.78% 100.0%
1045 James Street.................. 1 Syracuse, NY 1992 50,000 0.27% 100.0%
125 Indigo Creek Drive............. 1 Greece, NY 1992 26,700 0.14% 100.0%
250 South Clinton Street........... 1 Syracuse, NY 1991 183,206 0.98% 97.5%
308 Maltbie Street................. 1 Syracuse, NY 1992 26,221 0.14% 100.0%
400 West Division Street........... 1 Syracuse, NY 1992 38,051 0.21% 84.7%
5000 Campuswood Drive.............. 1 East Syracuse, NY 1988 32,636 0.17% 100.0%
5009 Campuswood Drive.............. 1 East Syracuse, NY 1989 6,584 0.04% 100.0%
5010 Campuswood Drive.............. 1 East Syracuse, NY 1989 70,163 0.38% 98.5%
5015 Campuswood Drive.............. 1 East Syracuse, NY 1991 99,888 0.54% 99.6%
507 Franklin Square................ 1 Syracuse, NY 1991 71,449 0.38% 100.0%
One Clinton Square................. 1 Syracuse, NY 1991 39,609 0.21% 100.0%
One Park Place..................... 1 Syracuse, NY 1983 290,278 1.56% 91.7%
--- ---------- ----- -----
Sub-Total Office................... 34 2,289,892 12.28% 96.9%
OTHER:
88 Mary Street..................... 1 Paterson, NJ 1976 114,000 0.61% 100.0%
--- ---------- ----- -----
GRAND TOTAL........................ 133 18,652,284 100.0% 98.9%
=== ========== ===== =====
<CAPTION>
ANNUALIZE
% OF RENT PER
PORTFOLIO LEASED
ANNUALIZED ANNUALIZED # OF SQUARE
BUILDINGS RENT (1) RENT LEASES FOOT (2) MAJOR TENANTS
- ----------------------------------- ----------- ---------- -------- ---------- ------------------------------
<S> <C> <C> <C> <C> <C>
128 Bauer Drive (4)................ $ 244,469 0.25% 4 $ 5.90 N-D Industries
1500 Pollit Drive (4).............. 162,873 0.17% 1 8.75 Bell Atlantic-NJ, Inc.
1600 Route 208 (4)................. 834,090 0.87% 22 15.81 Fogarty & Hara
1655 Valley Road (4)............... 2,617,800 2.72% 1 16.81 Reckitt & Coleman, Inc.
1900 Pollitt Drive (4)............. 687,632 0.71% 1 8.90 Paid Prescriptions
22-08 Route 208 (4)................ 1,026,914 1.07% 10 13.58 Maxell Corporation
40 Potash Road (4)................. 1,216,377 1.26% 1 19.94 TCI-UA-Columbia
95 Bauer Drive (4)................. 88,296 0.09% 1 13.00 Greentree Learning
99 Bauer Drive (4)................. 141,303 0.15% 1 6.91 Stratton Travel, Inc.
8 Airline Drive.................... 882,053 0.92% 4 14.43 Homestead Funding
Fifteen Columbia Circle............ 970,644 1.01% 1 11.75 Prudential Insurance
Nine Columbia Circle............... 178,382 0.19% 4 16.35 Banc One Financial
One Columbia Circle................ 1,108,707 1.15% 6 16.09 Novalis
Seventeen Columbia Circle.......... 741,180 0.77% 2 11.23 CDPHP
Thirteen Columbia Circle........... 270,552 0.28% 4 12.60 Roemer, Wallens & Mineaux
Three Columbia Circle.............. 1,124,102 1.17% 18 14.23 Thompson Corp.--Delmar
6 British American Boulevard....... 490,750 0.51% 8 6.96 BOCES
Corporate Center 15 (4)............ 631,283 0.66% 6 11.36 Acordia Northeast
Executive Park (4)................. 883,832 0.92% 10 16.73 GE Capital
Hillside Corporate Center (4)...... 1,121,653 1.16% 9 16.62 Travelers
Treeview Corporate Center (4)...... 869,069 0.90% 11 13.78 Carpenter Technology
Winchester Plaza Corp. Ctr. (4).... 2,448,618 2.54% 3 16.77 Aetna Life & Casualty
1045 James Street.................. 825,996 0.86% 1 16.52 Royal Indemnity Co.
125 Indigo Creek Drive............. 346,500 0.36% 1 12.98 Park Ridge Health
250 South Clinton Street........... 3,195,601 3.32% 11 17.44 AT&T Communications
308 Maltbie Street................. 329,688 0.34% 3 12.57 First Fortis
400 West Division Street........... 539,015 0.56% 2 14.17 Royal Indemnity Co.
5000 Campuswood Drive.............. 546,085 0.57% 6 16.73 Cruise's Inc.
5009 Campuswood Drive.............. 96,427 0.10% 1 14.65 Children's Discovery Center
5010 Campuswood Drive.............. 1,150,919 1.20% 9 16.40 National Grange
5015 Campuswood Drive.............. 1,686,617 1.75% 8 16.89 Time Warner/Intermedia
507 Franklin Square................ 1,240,982 1.29% 2 17.37 Unity Mutual Life
One Clinton Square................. 763,297 0.79% 2 19.27 Fleet Bank
One Park Place..................... 4,436,158 4.59% 19 15.28 Hartford Fire Insurance
----------- ----- --- ------
Sub-Total Office................... $33,897,864 35.04% 193 $14.80
OTHER:
88 Mary Street..................... $ 525,000 0.54% 1 $ 4.61 St. Joseph's Hospital
----------- ----- --- ------
GRAND TOTAL........................ $96,735,526 100.0% 331 $ 5.19
=========== ===== === ======
</TABLE>
- ----------------------------------------
(1) Annualized Rent, as used throughout this report, represents the total
contractual base rent under existing leases for the month ended
December 31, 1999, before any abatement and excluding any expense
reimbursements, multiplied by 12.
(2) Annualized Rent Per Leased Square Foot, as used throughout this report,
represents Annualized Rent, as described in Footnote (1) above, divided by
the square footage of the property.
(3) This property was sold for net proceeds of approximately $900,000 in
January 2000. This sale resulted in a gain of approximately $100,000 for
financial reporting purposes.
(4) This property has been classified as held for sale in the Company's 1999
consolidated financial statements included herein.
16
<PAGE>
PRINCIPAL TENANTS
The following table sets forth information regarding the leases with respect
to the current ten (10) largest tenants at the Properties, based on the
Annualized Rent received from such tenants as of December 31, 1999.
<TABLE>
<CAPTION>
TERM % OF TOTAL % OF TOTAL
REMAINING PORTFOLIO PORTFOLIO
TENANT (1) PROPERTY IN MONTHS SQUARE FEET SQUARE FEET ANNUALIZED RENT ANNUALIZED RENT
- ---------- ----------------------- ---------- ----------- ----------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Franklin Storage....... 1440 Sheffler Drive
1465 Nitterhouse Drive
2294 Molly Pitcher
Highway 10-34 852,000 4.57% $ 3,243,560 3.37%
Reckitt & Colman,
Inc. ................ 1655 Valley Road (3) 48 155,700 0.84% 2,617,800 2.72%
Hershey Foods Corp. ... 101 Commerce Drive 156 597,100 3.20% 2,376,458 2.47%
Aetna Life & Winchester Plaza Corp.
Casualty............. Center (3) 88 133,082 0.71% 2,358,564 2.45%
Niagara Mohawk......... 507 Franklin Square
One Apollo Drive 21-168 188,449 1.01% 1,863,574 1.94%
Herrod Distribution.... 301-321 Herrod
Boulevard 26 610,949 3.28% 2,291,064 2.38%
Neuman Distributors,
Inc.................. 200 Industrial Avenue 160 332,352 1.78% 2,193,528 2.28%
Cosmetic Essence....... 21 Cranbury Road 108 483,507 2.59% 1,987,212 2.06%
International Paper.... 221 South 10(th) Street
Two Tabas Lane 36-89 461,707 2.48% 1,861,487 1.93%
Coca Cola.............. 118 Moonachie Avenue 13 243,751 1.31% 1,828,128 1.90%
------ --------- ----- ----------- ----
Total/Weighted
Average (2).......... 75 4,058,597 21.77% $22,621,375 23.5%
====== ========= ===== =========== ====
</TABLE>
- ------------------------------
(1) This list is not intended to be representative of the Company's tenants as a
whole.
(2) Weighted average calculations based on the total square footage leased by
each tenant.
(3) This property has been classified as held for sale in the Company's 1999
consolidated financial statements included herein.
17
<PAGE>
LEASE EXPIRATIONS
The following table sets forth the annual lease expirations and certain
other information for leases existing at the Properties as of December 31, 1999
(assuming that no tenants exercise renewal or cancellation options and that
there are no tenant bankruptcies or other tenant defaults):
<TABLE>
<CAPTION>
PERCENTAGE OF ANNUALIZED RENT PER
YEAR OF NUMBER OF SQUARE FOOTAGE OF TOTAL LEASED ANNUALIZED RENT OF LEASED SQUARE FOOT OF
LEASE EXPIRATION LEASES EXPIRING EXPIRING LEASES SQUARE FEET EXPIRING LEASES EXPIRING LEASES
- ---------------- --------------- ----------------- ------------- ------------------ ---------------------
<S> <C> <C> <C> <C> <C>
2000................. 76 3,356,942 18.20% $13,877,075 4.13
2001................. 42 1,681,317 9.12% 10,192,074 6.06
2002................. 49 3,706,963 20.10% 14,500,978 3.91
2003................. 47 1,396,691 7.57% 11,520,489 8.25
2004................. 38 1,213,717 6.58% 7,618,865 6.28
2005................. 18 715,706 3.88% 5,789,880 8.09
2006................. 25 1,395,763 7.57% 7,703,852 5.52
2007................. 9 1,607,460 8.72% 8,060,287 5.01
2008................. 8 772,111 4.19% 5,079,648 6.58
2009................. 7 726,515 3.94% 2,524,713 3.48
2011................. 3 348,023 1.89% 1,393,995 4.01
2012................. 2 658,094 3.57% 3,592,835 5.46
2013................. 3 491,430 2.67% 3,535,411 7.19
2014................. 3 229,414 1.24% 903,963 3.94
2018................. 1 139,703 0.76% 441,461 3.16
---- ---------- --------- ----------- -----------
Total................ 331 18,439,849 100.00% $96,735,526 $ 5.25
==== ========== ========= =========== ===========
</TABLE>
ITEM 3. LEGAL PROCEEDINGS.
Neither the Company nor the Properties are presently subject to any
litigation nor is the Company aware of any threatened litigation which the
Company believes will result in any liability that will be material to the
Company, other than routine litigation arising in the ordinary course of
business, substantially all of which is expected to be covered by liability
insurance.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On December 16, 1999, a Special Meeting of Shareholders was held in which
the following matters were submitted to a vote of the shareholders of the
Company.
1. To elect one Class I trustee to serve until the Annual Meeting of
Shareholders to be held in 2001 and until his successor is duly
elected and qualified and one Class II trustee to serve until the
Annual Meeting of Shareholders to be held in 2002 and until his
successor is duly elected and qualified.
2. To approve the issuance of up to 6.5 million Common Shares upon
conversion of the Company's Series B Convertible Preferred Stock and
Series C Convertible Preferred Units of the Operating Partnership,
which have been or may be issued to certain individuals and entities
in consideration for the Company's acquisition of certain entities
owning 28 industrial facilities pursuant to a contribution agreement
among the Company, the Operating Partnership and such individuals and
entities.
18
<PAGE>
The shareholders of the Company approved both matters by the following votes
in person or by proxy:
<TABLE>
<CAPTION>
VOTES CAST
------------------------------- BROKER
MATTER FOR AGAINST WITHHELD ABSTENTIONS NON-VOTES
- ------ --------- -------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
1............................ 4,902,908 -- 6,847 4,300 --
2............................ 4,198,391 86,958 -- 6,800 --
</TABLE>
Mr. Morris was elected to serve as a Class I trustee and Mr. Rechler was
elected to serve as a Class II trustee until the Annual Meeting of Shareholders
to be held in 2001 and 2002, respectively. Voting results for both Mr. Morris
and Mr. Rechler were as indicated above. After the Special Meeting of
Shareholders, Mr. Falcone and Mr. Galesi continued to serve as Class I trustees
until the Annual Meeting of Shareholders to be held in 2001, Mr. Kelter and
Mr. Platt continued to serve as Class II trustees until the Annual Meeting of
Shareholders to be held in 2002, and Mr. Lesser, Mr. McBride and Mr. Mulvihill
continued to serve as Class III trustees until the Annual Meeting of
Shareholders to be held in 2000.
19
<PAGE>
PART II.
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS.
The Company's Common Shares are traded on the American Stock Exchange
("AMEX") under the symbol "KTR". The high and low last sale prices as reported
by the AMEX for each calendar quarter from January 1, 1998 to December 31, 1999
and the dividends with respect to the Company's operations for each such
calendar quarter were as follows:
<TABLE>
<CAPTION>
SALES PRICE
---------------------------------------
YEAR/QUARTER HIGH LOW DIVIDENDS
- ------------ -------- -------- ---------
<S> <C> <C> <C>
1999:
1(st) Quarter................................... $15 5/8 $12 5/8 $0.26500
2(nd) Quarter................................... $16 7/8 $12 3/4 $0.26500
3(rd) Quarter................................... $16 1/2 $14 1/16 $0.29500
4(th) Quarter................................... $16 1/8 $14 1/2 $0.29500
1998:
1(st) Quarter................................... $20 $15 3/8 $0.22000
2(nd) Quarter................................... $20 $16 5/8 $0.22000
3(rd) Quarter................................... $18 3/8 $12 3/8 $0.26500
4(th) Quarter................................... $15 7/8 $11 7/8 $0.26500
</TABLE>
As of December 31, 1999, the Company had 144 shareholders of record and
believes that it had in excess of 1,200 beneficial holders.
The Company currently anticipates that comparable cash dividends will
continue to be paid in the future however, the payment and the amount of the
dividends is at the discretion of the Board of Trustees and will depend on
numerous factors including the Company's cash flow and its capital and annual
distribution requirements under the REIT provisions of the Internal Revenue Code
of 1986, as amended, and other factors that the Board of Trustees deems
relevant.
During the fourth quarter of 1999 and in January 2000, the Company sold an
aggregate of 1,379,311 Common Shares directly to Hudson Bay Partners II, L.P.
("Hudson Bay"), Hudson Bay Partners, Inc., Crescent Real Estate Equities Limited
Partnership ("Crescent"), David H. Lesser, Jeffrey E. Kelter, Michael J.
Falcone, Russell C. Platt, Francesco Galesi, David F. McBride (collectively, the
"Holders") and several members of the McBride family, and funds affiliated with
Morgan Stanley Asset Management at a purchase price of $14.50 per share. The
market price of the Common Shares was $14.50 on August 3, 1999, the date the
Board of Trustees approved the issuance of the Common Shares (based upon the
closing price on the day prior to the meeting of the Board of trustees). The
Common Shares were sold as follows: on October 12, 1999, the Company issued and
sold 68,966 of these Common Shares to Mr. Galesi; on October 29, 1999, the
Company issued and sold 586,207 of these Common Shares to Mr. Kelter; on
December 10, 1999, the Company issued and sold 89,655 of these Common Shares to
Hudson Bay; on December 29, 1999, the Company issued and sold 6,620 of these
Common Shares to Hudson Bay, 252 of these Common Shares to Hudson Bay
Partners, Inc., 406,559 of these Common Shares to Crescent, 47,317 of these
Common Shares to David H. Lesser, and 3,000 of these Common Shares to Russell C.
Platt; on January 18, 2000, the Company issued and sold 2,236 of these Common
Shares to David F. McBride.
In connection with the issuance of Common Shares to the Holders, the
Operating Partnership issued to Hudson Bay and to Messrs. Kelter and David F.
McBride (the "OP Unit Recipients") 278,034 OP Units in exchange for certain
warrants to acquire 300,000 Common Shares and the cancellation of certain
warrants to acquire 375,000 Units at an exercise price of $11.00 per share or OP
Unit, which were held by Hudson Bay and Messrs. Kelter and David F. McBride.
20
<PAGE>
In December 1999, the Company issued 5,602 Common Shares, in aggregate, to
its trustees as compensation for services provided to the Company in their
capacity as members of the Board of Trustees during the second and third
quarters of our 1999 fiscal year.
ITEM 6. SELECTED AND SUMMARY FINANCIAL DATA
The following table sets forth selected financial data for the Company for
each of the five years in the period ended December 31, 1999. The information
set forth below should be read in conjunction with Management's Discussion and
Analysis of Financial Condition and Results of Operations and the consolidated
financial statements and notes thereto appearing elsewhere in this annual
report.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
(IN 000'S, EXCEPT FOR PER SHARE DATA)
----------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
OPERATING DATA
Total revenue....................................... $ 84,526 $ 41,028 $ 8,197 $ 10,240 $ 9,966
Property operating expenses......................... 15,096 7,693 3,112 4,350 4,107
Management fees paid to affiliate................... 3,048 1,121 -- -- --
General and administrative expenses................. 3,650 759 732 515 653
Depreciation and amortization....................... 16,359 6,911 909 1,366 1,304
Buy out of employment agreements,
options and warrants.............................. -- -- 3,203 -- --
Interest expense.................................... 30,307 14,539 3,134 3,897 4,172
----------- ----------- ---------- ---------- ----------
Total operating expenses............................ 68,460 31,023 11,090 10,128 10,236
Equity in (losses) income
from equity method investments.................... (62) (1,167) 404 570 597
Gains on sales of assets............................ 1,284 11,952 4,608 1,786 --
----------- ----------- ---------- ---------- ----------
Income before minority interest, extraordinary item
and distributions to preferred unitholders and net
income allocated to preferred shareholders........ 17,288 20,790 2,119 2,468 327
Minority interest................................... (5,592) (9,452) (876) (1,364) 16
Extraordinary item-loss from debt refinancing
(net of amounts allocated to minority interest)... -- (110) -- -- (371)
Distributions to preferred unitholders and net
income allocated to preferred shareholders........ (5,368) (55) -- -- --
----------- ----------- ---------- ---------- ----------
Net income (loss) allocated to common
shareholders...................................... $ 6,328 $ 11,173 $ 1,243 $ 1,104 $ (28)
=========== =========== ========== ========== ==========
Distributions paid on Common Shares................. $ 8,375 $ 6,308 $ 985 $ 943 $ 902
=========== =========== ========== ========== ==========
PER SHARE DATA
Net income (loss) per Common Share
before extraordinary item--basic.................. $ 0.83 $ 1.79 $ 0.92 $ 1.00 $ (0.31)
Net income (loss) per Common Share--basic........... $ 0.83 $ 1.77 $ 0.92 $ 1.00 $ (0.03)
Net income (loss) per Common Share
before extraordinary item--diluted................ $ 0.80 $ 1.75 $ 0.88 $ 1.00 $ (0.18)
Net income (loss) per Common Share--diluted......... $ 0.80 $ 1.73 $ 0.88 $ 1.00 $ (0.03)
Distributions paid per Common Share................. $ 1.12 $ 0.97 $ 0.87 $ 0.85 $ 0.83
Weighted average number of shares
outstanding--basic EPS (1)........................ 7,622,010 6,299,281 1,347,297 1,106,379 1,083,233
Weighted average number of shares
outstanding--diluted EPS.......................... 14,810,817 11,908,761 2,404,004 1,831,443 1,756,988
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
(IN 000'S, EXCEPT FOR PER SHARE DATA)
----------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
OTHER DATA
Funds from Operations (2)........................... $ 32,780 $ 16,132 $ 1,849 $ 2,166 $ 2,009
Cash flow provided from (used in):
Operating activities.............................. 34,532 16,387 2,087 2,254 1,493
Investing activities.............................. (199,074) (261,100) (3,134) (2,571) (576)
Financing activities.............................. 165,439 230,288 17,377 (4,119) (1,342)
BALANCE SHEET DATA
Undepreciated book value of real estate............. $ 860,336 $ 542,869 $ 155,063 $ 47,383 $ 48,639
Net investment in real estate....................... 837,940 536,002 152,108 43,555 45,634
Total assets........................................ 875,076 558,974 180,955 46,224 47,741
Total liabilities................................... 543,415 356,225 89,662 38,470 41,051
Total minority interest............................. 145,931 95,705 39,364 3,125 2,436
Total shareholders' equity.......................... $ 185,730 $ 107,044 $ 51,929 $ 4,629 $ 4,254
OTHER DATA
Total leaseable square footage of properties at end
of year........................................... 18,652,284 11,928,620 2,418,590 1,444,770 1,533,770
Number of properties at the end of year............. 133 99 21 5 6
Percentage leased at end of year.................... 99% 98% 95% 92% 94%
</TABLE>
- ------------------------------
(1) Basic weighted average number of shares includes only Common Shares
outstanding during the year and excludes OP Units.
(2) Funds From Operations ("FFO"), which is a commonly used measurement of the
performance of an equity REIT, as defined by the National Association of
Real Estate Investment Trusts, Inc., is 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, and after adjustments for unconsolidated partnerships and
joint ventures. Adjustments for unconsolidated partnerships and joint
ventures were calculated to reflect funds from operations on the same basis.
Management believes the presentation of FFO is a useful disclosure as a
general measurement of its performance in the real estate industry, although
the Company's FFO may not necessarily be comparable to similarly titled
measures of other REITs. FFO does not represent cash generated from
operating activities in accordance with generally accepted accounting
principles and is not necessarily indicative of cash available to fund cash
needs and should not be considered as an alternative to net income as an
indicator of the Company's operating performance or as an alternative to
cash flow as a measure of liquidity.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following discussion and analysis should be read in conjunction with the
consolidated financial statements appearing elsewhere herein. This annual report
contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Act of 1934, as
amended. The words "believe", "expect", "anticipate", "intend", "estimate" and
other expressions which are predictions of or indicate future events and trends
which do not relate to historical matters identify forward-looking statements.
Although the Company believes that the expectations reflected in such forward
looking statements are based upon reasonable assumptions, there can be no
assurance that these expectations will be realized. As a result, the Company's
actual results could materially differ from those set forth in the
forward-looking statements. Certain factors that might cause such a difference
include but are not limited to the following: real estate investment
considerations, such as the effect of economic and other conditions in the
market area on cash flows and values; the need to renew leases or relet space
upon the expiration of current leases, and the ability of a property to generate
revenues sufficient to make principal payments on outstanding debt, outstanding
debt may be refinanced at higher interest rates or otherwise on terms less
favorable to the Company and interest rates under the Company's $150,000,000
senior secured revolving credit facility (the "Credit Facility") may increase.
22
<PAGE>
OVERVIEW
The Company has achieved significant growth since the transactions that
occurred in December 1997 which resulted in the reorganization (the
"Reorganization") of the Company as a real estate investment trust ("REIT")
focused on the industrial and office segments. In October 1999, the Company
changed its name to Keystone Property Trust and reorganized as a Maryland REIT
from a Maryland corporation. At December 31, 1999, the Company owned
18.6 million square feet consisting of 16.2 million square feet of industrial
properties, 2.3 million square feet of office properties and an investment in a
direct financing lease. During 1999, the Company acquired $322 million in
properties which aggregated approximately 6.8 million square feet, consisting of
6.5 million square feet of industrial properties (34 properties) and one office
property consisting of approximately 290,000 square feet. This represents a 56%
increase over the December 31, 1998 owned square feet of approximately
11.9 million. During 1998, the Company acquired approximately $418 million in
properties which aggregated approximately 9.9 million square feet, which was
comprised of 8.4 million square feet of industrial properties and 1.5 million
square feet of office properties. This represented a 495% increase over the
December 31, 1997 total owned square feet of approximately 2.0 million.
A summary of the industrial and office square footage owned by the Company
by market region and related occupancy data, which excludes data associated with
the Company's investment in one property which is a direct financing lease, at
December 31, 1999 and 1998 is as follows:
<TABLE>
<CAPTION>
1999
----------------------------------------------------------------------------------------------
INDUSTRIAL OFFICE TOTAL
---------------------------------- --------------------------------- ---------------------
SQUARE SQUARE SQUARE
BLDGS. FEET OCCUPANCY BLDGS. FEET OCCUPANCY BLDGS. FEET
-------- ---------- ---------- -------- --------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mid-Atlantic................... 18 5,000,836 100.0% 5 384,972 90.5% 23 5,385,808
Mid-Western.................... 15 2,629,236 100.0% -- -- -- 15 2,629,236
Northeast...................... 37 5,776,531 99.2% 29 1,904,920 98.8% 66 7,681,451
Southeast...................... 28 2,841,789 96.7% -- -- -- 28 2,841,789
-- ---------- ----- -- --------- ---- --- ----------
Total.................... 98 16,248,392 99.2% 34 2,289,892 96.9% 132 18,538,284
== ========== ===== == ========= ==== === ==========
<CAPTION>
1999
----------
TOTAL
----------
OCCUPANCY
----------
<S> <C>
Mid-Atlantic................... 97.6%
Mid-Western.................... 100.0%
Northeast...................... 99.0%
Southeast...................... 96.7%
-----
Total.................... 98.9%
=====
</TABLE>
<TABLE>
<CAPTION>
1998
----------------------------------------------------------------------------------------------
INDUSTRIAL OFFICE TOTAL
---------------------------------- --------------------------------- ---------------------
SQUARE SQUARE SQUARE
BLDGS. FEET OCCUPANCY BLDGS. FEET OCCUPANCY BLDGS. FEET
-------- ---------- ---------- -------- --------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mid-Atlantic................... 16 3,707,934 99.0% 5 384,972 97.7% 21 4,092,906
Mid-Western.................... 7 1,750,260 85.7% -- -- -- 7 1,750,260
Northeast...................... 15 1,869,606 96.6% 28 1,614,642 96.6% 43 3,484,248
Southeast...................... 26 2,396,198 100.0% -- -- -- 26 2,396,198
-- ---------- ----- -- --------- ---- --- ----------
Total.................... 64 9,723,998 97.7% 33 1,999,614 97.0% 97 11,723,612
== ========== ===== == ========= ==== === ==========
<CAPTION>
1998
----------
TOTAL
----------
OCCUPANCY
----------
<S> <C>
Mid-Atlantic................... 98.6%
Mid-Western.................... 85.7%
Northeast...................... 96.6%
Southeast...................... 100.0%
-----
Total.................... 98.9%
=====
</TABLE>
This growth has resulted in the broadening of the Company's focus on the
Mid-Atlantic and Northeastern United States population centers to include
Northern New York State, Indianapolis, Indiana, Ohio and Greenville and
Spartanburg, South Carolina. In 1999, the Company also began to focus on
development opportunities through the start of construction of a 80,000 square
foot build-to-suit office building in Allentown, PA for Aetna, Inc. and the
construction, through a 50% joint venture with Browning Investments, of a
500,000 square foot distribution facility for Brightpoint, Inc. located in
Indianapolis, Indiana. The Company anticipates that it will continue to focus on
selective development opportunities via expansion of several industrial
properties in its core portfolio and through additional development in the New
Jersey and Indianapolis market areas.
23
<PAGE>
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999 AS COMPARED TO YEAR ENDED DECEMBER 31, 1998
Net income for the year ended December 31, 1999 was $6.3 million compared
with net income of $11.2 million for 1998. The decrease in net income was
primarily attributed to the $11.9 million in gains from sales of the Company's
last two multifamily assets in 1998 as compared to gains from asset sales of
only $1.3 million in 1999. These gains from asset sales in 1998 were also offset
by increases in net income in 1999 as a result of property acquisitions. At
December 31, 1999, the Company owned 133 properties aggregating 18.6 million
square feet as compared to the 99 properties owned at December 31, 1998 which
aggregated 11.9 million square feet. Net income for the years ended
December 31, 1999 and 1998, excluding the impact of the asset sales in both
years, would have been $5.6 million in 1999 or $.72 per share as compared to
$4.7 million or $.73 per share for 1998.
Revenues increased by $43.5 million, to $84.5 million from $41.0 million, or
by 106% for the year ended December 31, 1999 as compared to 1998, respectively,
as a result of property acquisitions in both 1999 and 1998.
Property operating expenses, management fee expense and depreciation and
amortization increased in the aggregate by $18.8 million as compared to 1998 as
a result of property acquisitions. General and administrative expenses increased
by $2.9 million from $759,000 in 1998 to $3.7 million in 1999 primarily as a
result of the Company paying for certain expenses, including certain payroll
costs during 1999, which were paid by Keystone Realty Services, Inc. (the
"Management Company") in 1998. In addition, the Company incurred approximately
$250,000 of non-recurring costs in 1999 associated with the change of the
Company's name and reorganization as a Maryland REIT in October 1999.
Interest expense increased by $15.8 million primarily as a result of
additional indebtedness incurred to finance the Company's acquisitions.
Equity in losses from the Company's equity method investment in the
Management Company was a loss of $62,000 as compared to a loss of $1.2 million
for 1998. The decrease in the loss was primarily the result of the Company
paying for certain expenses, including payroll costs during 1999, which were
paid by the Management Company in 1998.
Gains on sales of assets decreased by $10.6 million in 1999 as compared to
the previous year as a result of the sale of Quadrangles Village Apartments
("Quadrangles") and Americana Lakewood Apartments ("Americana") in 1998 as the
Company consummated its plan to dispose of its remaining multifamily properties.
In 1999, only one property was sold, Urban Farms Shopping Center, which
generated a gain on sale of $1.3 million.
SEGMENTS
Revenues and property net operating income increased significantly in both
the industrial and office segments during 1999 in comparison to the previous
year as a result of the Company's acquisition activity. The owned square footage
in the industrial segment increased by approximately 68% since December 31,
1998, (from 9.7 million square feet to 16.2 million square feet). The owned
square footage in the office segment increased by approximately 15% since
December 31, 1998 (from 2.0 million square feet to 2.3 million square feet).
Revenue and property net operating income decreased in the multifamily segment
as a result of the sale of the remaining multifamily assets in 1998. Revenue and
property net operating income in the other properties segment decreased as a
result of the sale of the Company's only retail asset, Urban Farms Shopping
Center, in March 1999.
24
<PAGE>
SAME STORE PROPERTIES
Property level operating income for the year ended December 31, 1999 for the
properties owned since January 1, 1998 (the "Same Store Properties") increased
to approximately $11.8 million from $11.0 million in 1998. This increase is
primarily a result of the increase in revenue which was the result of increases
in rental rates and increases in occupancy in the Same Store Properties.
Operating expenses for these properties decreased primarily as a result of
decreases in repair and maintenance expenses. The Same Store Properties consist
of 20 properties which aggregate approximately 1.9 million square feet. Same
Store Properties represent approximately 18% of property net operating income
for the year ended December 31, 1999.
Set forth below is a schedule comparing the property level net operating
income for the Same Store Properties for the years ended December 31, 1999 and
1998.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
(DOLLARS IN 000'S) (UNAUDITED)
------------------------------
1999 1998 % CHANGE
-------- -------- --------
<S> <C> <C> <C>
Revenue
Rental revenue................................ $12,735 $12,002 6.10%
Tenant reimbursements and other............... 1,245 1,242 0.25%
------- ------- -----
Total revenue................................. 13,980 13,244 5.55%
======= ======= =====
Operating Expenses
Property operating expenses................... 1,333 1,436 (7.17)%
Real estate taxes............................. 820 800 2.50%
------- ------- -----
Total operating expenses...................... 2,153 2,236 (3.71)%
------- ------- -----
Net operating income............................ $11,827 $11,008 7.44%
======= ======= =====
Occupancy at December 31........................ 99.87% 97.09%
</TABLE>
YEAR ENDED DECEMBER 31, 1998 AS COMPARED TO YEAR ENDED DECEMBER 31, 1997
Net income for the year ended December 31, 1998 was $11.2 million compared
with a net income of $1.2 million for the same period in 1997. The increase in
net income was primarily attributed to the operating results from the 99
properties acquired by the Company since December 1997 and the gains recorded
from sales of the last two multifamily assets owned by the Company.
Revenues increased by $32.8 million for the year ended December 31, 1998 as
compared to the corresponding prior year period primarily as a result of
property acquisitions in 1998.
Property operating expenses, general and administrative expenses,
depreciation and amortization increased in the aggregate by $11.7 million as
compared with the prior year primarily as a result of property acquisitions.
Interest expense increased by $11.4 million as a result of additional
indebtedness incurred to finance the Company's acquisitions.
Equity in losses or earnings from equity method investments was a loss of
$1.2 million as compared to equity in earnings of $404,000 for the same period
in 1997. The loss in 1998 was attributed to the operations of the Management
Company. The earnings from equity method investments in 1997 primarily related
to the Company's 50% interest in Emerald Vista Associates, L.P. which was sold
in September 1997.
Gains on sales of assets increased by $7.3 million in 1998 over the previous
year as a result of the sale of Quadrangles and Americana as the Company
consummated its plan to dispose of its remaining multifamily properties.
25
<PAGE>
In October 1998, the Company incurred an extraordinary loss of $220,000 as a
result of the refinancing of $66 million of debt under the Credit Facility and
$8.4 million of other debt with certain fixed rate debt.
SEGMENTS
Revenues and property net operating income increased significantly in both
the industrial and office segments during 1998 in comparison to the previous
year as a result of the Reorganization and various acquisitions by the Company.
Revenue and property net operating income decreased in the multifamily segment
by $5.4 million (74.5%) and $2.2 million (64.4%), respectively, as a result of
the sale of the remaining multifamily assets in 1997 and 1998.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOWS
Net cash provided by operating activities was $34.5 million in 1999 as
compared to $16.4 million in 1998. This represents the Company's primary source
of liquidity to fund distributions to shareholders and unitholders in the
Operating Partnership and to a certain extent, recurring costs associated with
the re-leasing and renovation of the Company's properties. The significant
increase in cash flow provided by operating activities is a direct result of the
acquisitions in 1999 and 1998.
Net cash used in investing activities was $199.0 million in 1999 as compared
to $261.1 million in 1998. The decrease in net cash used in investing activities
in 1999 as compared to 1998 was primarily a result of the decrease in the level
of acquisitions in 1999 as compared to 1998. Included within the net cash used
in investing activities in 1999 and 1998 are net proceeds from the asset sales
of non-core assets of $9.5 million and $41.0 million, respectively, which the
Company re-invested in industrial and office properties in 1999 and 1998.
Net cash provided by financing activities in 1999 was $165.4 million as
compared to $230.3 million in 1998. The decrease in net cash provided in 1999 as
compared to 1998 is also a result of the decline in acquisition activity in 1999
as compared to 1998 as net borrowings under the Company's Credit Facility during
1999 were only $18.2 million as compared to $123.8 million in 1998.
CAPITALIZATION
STOCK OFFERINGS
During 1999 the Company raised an aggregate of approximately $129.3 million
in equity at an average price of $15.77 in several offerings which are discussed
in further detail below.
In 1999, the Company received $38.5 million in cash proceeds from Common
Share and Convertible Preferred Stock offerings which were used to fund
acquisitions of real estate properties. These proceeds were generated from the
following offerings:
- In September 1999, the Company issued 800,000 shares of Series C
Convertible Preferred Stock in a $20,000,000 private placement to several
institutional investors including Allstate Insurance Company, Teachers
Insurance and Annuity Association of America ("TIAA") and AEW Targeted
Securities Fund, L.P. A portion of the proceeds from this offering were
used to close the first phase of a transaction with Reckson Morris
Operating Partnership and Reckson Morris Industrial Trust ("RMIT").
26
<PAGE>
- In October through December 1999, the Company issued 1,276,800 Common
Shares at $14.50 to various trustees of the Company, funds managed by
Morgan Stanley Asset Management and Crescent Real Estate Equities Limited
Partnership in a $18.5 million private placement. In January 2000, an
additional 102,511 Common Shares were issued at $14.50 to various
investors including two trustees of the Company. The proceeds from this
offering were used to pay down the Company's Credit Facility and to
acquire additional industrial properties.
Additionally, in September 1999, in connection with the consummation of the
first phase of the RMIT acquisition, the Company issued 1,600,000 shares of
non-voting Series B Convertible Preferred Stock for $40,000,000 and 1,434,136 of
Series C Convertible Preferred Units for $35.8 million to investors affiliated
with the Morris Companies, respectively, as a partial consideration for the
acquisition. Each of the convertible preferred shares and units has liquidation
preference of $25 per share or unit and requires a preferred distribution of
9.75%. In addition to these preferred share and unit offerings, the Company
issued 103,878 Common Shares at $14.44 per share to RMIT for an aggregate price
of $1.5 million. The remaining consideration for this acquisition was funded
from the $20,000,000 Series C Convertible Preferred Stock offering, the proceeds
of a $98,000,000 six-year term loan at a fixed rate of 7.45% with TIAA and
assumed indebtedness of approximately $16.4 million.
In addition to the offerings discussed above, the Operating Partnership
issued $2.2 million in OP Units as partial consideration for several
acquisitions that were consummated in 1999 at prices which ranged from $15.26 to
$17.50 per OP Unit. The Company also issued 450,700 Series D Convertible
Preferred Units for $11.3 million that are convertible into Common Shares at
$16.50 in connection with the acquisition of an office property which was the
final phase of the acquisition of the Pioneer Portfolio which was consummated in
1998.
CREDIT FACILITY AND OTHER DEBT
In April 1998, the Company entered into a three year $150,000,000 Credit
Facility with a group of commercial lenders lead by Bank Boston, N.A. This
Credit Facility can be used to fund acquisitions, capital improvements,
development activities and working capital needs. On June 30, 1999, the terms of
the Credit Facility were amended and as a result the maturity was extended to
April 29, 2002, the interest rate was modified and several financial covenants
were also modified. The Credit Facility bears interest at a variable rate at the
Company's option of either a LIBOR rate plus 2.25% per annum or the prime rate.
The LIBOR interest rate is based on a sliding scale based on the Company's
leverage. The scale ranges from LIBOR + 1.625% to LIBOR + 2.25%. The Company's
outstanding borrowings under this Credit Facility are $141.9 million at
December 31, 1999 at an interest rate of 8.00%. The Company is able to elect to
increase the amount available under the Credit Facility to $250 million, subject
to the syndication of an additional $100 million.
As of December 31, 1999, the Company had approximately $380.1 million of
mortgage notes outstanding, excluding the Credit Facility, that had a weighted
average interest rate of 7.68% and at a weighted average maturity of 8.8 years.
Approximately $2.6 million of this mortgage debt is scheduled to mature in 2000.
At December 31, 1999, the Company's market capitalization was approximately
$908.3 million and the Company's consolidated debt represented approximately
57.5% of total market capitalization.
SHORT AND LONG-TERM LIQUIDITY
Cash flow from operating activities is the Company's principal source of
funds to fund debt service, common and preferred distributions, recurring
capital expenditures and certain upfront costs associated with the Company's
development activities. We expect to meet our short-term (one year or less)
liquidity requirements generally through working capital and net cash provided
by operating activities along with the Credit Facility. In addition, the Company
has several properties which are currently
27
<PAGE>
unleveraged on which the Company is able to place mortgage debt in order to
generate further short-term liquidity. Further, the Company anticipates that it
will selectively dispose of certain office and to a lesser extent industrial
assets in 2000. The Company believes all of these sources will be available in
2000 in order to fund short-term liquidity needs.
During 1999 and 1998, the Company paid distributions to common shareholders
and unitholders totaling $1.12 and $.97 per Common Share or unit, respectively,
which aggregated $16.1 million and $11.3 million, respectively. In addition, in
January 2000 the Company declared a distribution of $.295 per Common Share that
was paid on January 31, 2000 to shareholders of record on January 18, 2000.
Our long-term liquidity needs generally include the funding of existing and
future development activity, selective asset acquisitions and the retirement of
mortgage debt and amounts outstanding under the Credit Facility. We expect to
meet our long-term liquidity needs through a combination of the following:
(i) the issuance of equity securities by the Company and its Operating
Partnership, (ii) the selective disposition of our office and certain industrial
assets, (iii) the sale or contribution of certain of our wholly-owned, non-core
properties to strategic joint ventures to be formed, which could allow the
Company to generate additional capital. Finally, the Company expects that
certain of the sources described above in short-term liquidity will be an
additional source of capital for long-term liquidity. In July 1998, the Company
filed with the Securities and Exchange Commission a Form S-3 Shelf Registration
Statement under which the Company from time to time may issue Common Stock, or
preferred stock and depository shares representing preferred stock with an
aggregate value of up to $500 million. As of January 31, 2000, the Company has
issued $20.0 million under this Registration Statement.
The Company believes that our available cash and cash equivalents and cash
flows from operating activities included with cash available from borrowings and
other sources, will be adequate to meet our capital and liquidity needs in both
the short and the long-term.
OTHER COMMITMENTS
The Company has a commitment to close Phase II of the RMIT acquisition which
requires a purchase price of approximately $100.0 million to acquire six big box
distribution facilities aggregating 2.2 million square feet and six acres of
land. The Company has posted a $10,000,000 letter of credit as a deposit for
this obligation. The Company anticipates funding this acquisition with a
combination of debt financing and $5.6 million of Convertible Preferred Units.
FUNDS FROM OPERATIONS AND FUNDS AVAILABLE FOR DISTRIBUTION
Funds From Operations ("FFO"), which is a commonly used measurement of the
performance of an equity REIT, as defined by the National Association of Real
Estate Investment Trusts, Inc., is 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, and
after adjustments for unconsolidated partnerships and joint ventures.
Adjustments for unconsolidated partnerships and joint ventures are calculated to
reflect FFO on the same basis. Management believes the presentation of FFO and
Funds Available for Distribution ("FAD") are useful disclosures as general
measures of its performance in the real estate industry, although the Company's
FFO and FAD may not necessarily be comparable to similarly titled measures of
other REITs. FFO and FAD do not represent cash generated from operating
activities in accordance with generally accepted accounting principles and are
not necessarily indicative of cash available to fund cash needs and should not
be considered as an alternative to net income as an indicator of the Company's
operating performance or as an alternative to cash flow as a measure of
liquidity. FAD is defined as FFO less non-revenue producing capital
expenditures, tenant improvements, leasing commissions, straight-line rent
adjustments plus amortization of deferred financing costs and restricted stock
awards.
28
<PAGE>
FFO, FAD and cash flow information for each of the three years in the period
ended December 31, 1999 are summarized in the following table:
<TABLE>
<CAPTION>
(IN 000'S, EXCEPT PER SHARE DATA)
---------------------------------------
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
FUNDS FROM OPERATIONS: (UNAUDITED)
Income before distributions to
preferred unitholders, minority
interest, extraordinary item and net
income allocated to preferred
shareholders........................ $ 17,288 $ 20,790 $ 2,119
(Less) Plus:
Gains on sales of real estate....... (1,284) (11,952) (4,608)
Depreciation and amortization
related to real estate............ 16,359 6,911 909
Termination of employment agreements
and options and warrants buyout... -- -- 3,203
Other adjustments................... 247 213 --
Equity in (earnings) losses from
equity method investments......... 62 1,167 (404)
FFO contribution (loss) from equity
method investments................ 108 (997) 630
----------- ----------- -----------
Funds from Operations................. $ 32,780 $ 16,132 $ 1,849
=========== =========== ===========
FUNDS AVAILABLE FOR DISTRIBUTION:
(UNAUDITED)
Funds from Operations............... $ 32,780 $ 16,132 $ 1,849
Capitalized expenditures............ (1,074) (415) (1,152)
Tenant improvements................. (2,070) (349) --
Leasing commissions................. (2,097) (446) --
Amortization of deferred financing
costs............................. 1,473 643 6
Amortization of restricted stock
awards............................ 274 -- --
Straight line rent adjustments...... (1,866) (1,282) --
----------- ----------- -----------
Funds Available for Distribution.... $ 27,420 $ 14,283 $ 703
=========== =========== ===========
CASH FLOW INFORMATION:
Cash flow from operating activities... $ 34,532 $ 16,387 $ 2,087
Cash flow from investing activities... (199,074) (261,100) (3,134)
Cash flow from financing activities... 165,439 230,288 17,377
----------- ----------- -----------
Net (decrease) increase in cash and
cash equivalents.................... $ 897 $ (14,425) $ 16,330
=========== =========== ===========
Weighted average number of Common
Shares and Units and Preferred
Shares and Units--diluted (1)....... 18,363,330 11,908,761 2,404,004
=========== =========== ===========
</TABLE>
- ------------------------
(1) For 1999, this diluted share amount differs from the amount used for
earnings per share ("EPS") as it includes the Common Share equivalents
issuable upon conversion of Preferred Units and Preferred Stock which are
anti-dilutive for EPS reporting and dilutive for FFO reporting.
29
<PAGE>
INFLATION
The Company's leases for commercial office and industrial properties
generally require tenants to pay either their share of operating expenses,
including common area maintenance, real estate taxes and insurance or pay 100%
of these costs directly (for triple net leases), as a result, the Company's
exposure to increases in costs and operating expenses is reduced. The Company
does not anticipate that inflation will have a significant impact on its
operating results in the near future.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company's primary exposure to market risk is to changes in interest
rates. The Company is exposed to market risk related to its Credit Facility as
interest on the Credit Facility is subject to fluctuations in the market. The
amount outstanding under the Credit Facility represents approximately 27% of
debt outstanding as of December 31, 1999. The Company also utilizes mortgage
debt with fixed rates as a source of capital. The weighted average maturity for
fixed rate debt, excluding the Credit Facility, was 8.8 years at December 31,
1999. As these debt instruments mature, the Company typically refinances such
debt at then existing market interest rates which may be more or less than the
interest rates on the maturing debt.
If the interest rate for the Credit Facility was 100 basis points higher or
lower during 1999, the Company's interest expense would have been increased or
decreased by approximately $1.4 million. Approximately $2.6 million of the
Company's fixed rate debt matures in 2000. The Company currently intends to
refinance this maturing obligation in 2000. If interest rates for this fixed
rate debt maturing and to be refinanced in 2000 is 100 basis points higher or
lower than its current rate of 8.25%, the Company's interest expense would be
increased or decreased by approximately $26,000.
Due to the uncertainty of fluctuations in interest rates, the specific
actions that might be taken by management to mitigate the impact of such
fluctuations and their possible effects, this sensitivity analysis assumes no
changes in the Company's financial structure.
IMPACT OF RECENT ACCOUNTING STANDARDS
See Note 2 to the 1999 consolidated financial statements.
THE YEAR 2000 READINESS DISCLOSURE
The Company has experienced no problems or issues relating to the Year 2000
problem on or after January 1, 2000. The Company has fully implemented its Year
2000 compliance program and as part of that program intends to maintain its
contingency plans until the Company is satisfied that business operations will
not be adversely impacted by the possibility of a Year 2000 problem. Based upon
the Company's experience of no Year 2000 problems to-date, the Company believes
that this approach will adequately compensate for any Year 2000 problems which
may still arise.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The response to this Item 8 is included as a separate section of this Annual
Report on Form 10-K. See pages F-1 through F-27.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
30
<PAGE>
PART III.
ITEM 10. TRUSTEES AND EXECUTIVE OFFICERS OF THE REGISTRANT.
This item is incorporated by reference from the proxy statement for the 2000
Annual Meeting of Shareholders.
ITEM 11. EXECUTIVE COMPENSATION.
This item is incorporated by reference from the proxy statement for the 2000
Annual Meeting of Shareholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
This item is incorporated by reference from the proxy statement for the 2000
Annual Meeting of Shareholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
This item is incorporated by reference from the proxy statement for the 2000
Annual Meeting of Shareholders.
31
<PAGE>
PART IV.
ITEM 14. EXHIBITS, REPORTS ON FORM 8-K, AND FINANCIAL STATEMENT SCHEDULE.
The following consolidated financial statements of Keystone Property Trust
are included in Item 8.
<TABLE>
<S> <C> <C> <C> <C>
(A) 1. REPORTS OF ARTHUR ANDERSEN LLP, INDEPENDENT PUBLIC ACCOUNTANTS AND
CONSOLIDATED FINANCIAL STATEMENTS.
Consolidated Balance Sheet as of December 31, 1999 and 1998.
Consolidated Statements of Operations for the years ended
December 31, 1999, 1998 and 1997.
Consolidated Statements of Shareholders' Equity for the
years ended December 31, 1999, 1998 and 1997.
Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997.
Notes to Consolidated Financial Statements.
2. FINANCIAL STATEMENT SCHEDULES.
Schedule III--Real Estate and Accumulated Depreciation as of
December 31, 1999 for Keystone Property Trust.
3. EXHIBITS.
2 (a) Articles of Merger between American Real Estate Investment
Corporation and Keystone Property Trust. (Incorporated by
reference to Exhibit 2.1 filed with the Registrant's Current
Report on Form 8-K filed with the Commission on October 13,
1999.)
3 (a) Declaration of Trust of the Registrant.
(b) By-laws of the Registrant.
(c) Articles Supplementary classifying and designating a series
of Preferred Stock as Series A Convertible Preferred Stock
and fixing distribution and other preferences and rights of
such series. (Incorporated by reference to Exhibit 10.6
filed with the Registrant's Current Report on Form 8-K filed
with the Commission on January 8, 1999.)
(d) Articles Supplementary Reclassifying Series B Convertible
Preferred Stock and Fixing Distribution and Other
Preferences and Right of Such Series. (Incorporated by
reference to Exhibit 10.3 filed with the Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 1999.)
(e) Partnership Unit Designation of Series C Convertible
Preferred Units. (Incorporated by reference to Exhibit 10.4
filed with the Registrant's Quarterly Report on Form 10-Q
for the fiscal quarter ended September 30, 1999.)
(f) Partnership Unit Designation of Series E Convertible
Preferred Units. (Incorporated by reference to Exhibit 10.5
filed with the Registrant's Quarterly Report on Form 10-Q
for the fiscal quarter ended September 30, 1999.)
(g) Articles Supplementary Reclassifying Series C Convertible
Preferred Stock and Fixing Distribution and Other
Preferences and Right of Such Series. (Incorporated by
reference to Exhibit 10.12 filed with the Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 1999.)
(h) Partnership Unit Designation of Series F Convertible
Preferred Units. (Incorporated by reference to
Exhibit 10.13 filed with the Registrant's Quarterly Report
on Form 10-Q for the fiscal quarter ended September 30,
1999.)
(i) Partnership Unit Designation of Series A Convertible
Preferred Units.
(j) Partnership Unit Designation of Series B Convertible
Preferred Units.
</TABLE>
32
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
(k) Partnership Unit Designation of Series D Convertible
Preferred Units.
4 (a) Specimen Certificate for Common Shares.
(b) Specimen Certificate for Convertible Preferred Stock.
10 (a) Amended and Restated Agreement of Limited Partnership of
American Real Estate Investment, L. P.
(b) Dana Perfumes Mortgage Note dated September 11, 1997 by Fair
Lawn Industrial Park, Inc. and First Union National Bank in
the principal amount of $1,155,000. (Incorporated by
reference to Exhibit 10.p filed with the Registrant's Annual
Report on Form 10-KSB for the fiscal year ended
December 31, 1997.)
(c) L&W Promissory Note dated August 4, 1995 between L&W
Associates and USG Annuity & Life Company in the principal
sum of $3,525,000. (Incorporated by reference to
Exhibit 10.q filed with the Registrant's Annual Report on
Form 10-KSB for the fiscal year ended December 31, 1997.)
(d) Northfield Business Center Promissory Note dated
December 24, 1997 between McBride Properties, Inc. and
Column Financial, Inc. in the principal amount of
$3,500,000. (Incorporated by reference to Exhibit 10.r filed
with the Registrant's Annual Report on Form 10-KSB for the
fiscal year ended December 31, 1997.)
(e) One Tabas Promissory Note dated August 9, 1995 between
Hough-Loew Associates, Inc. and USG Annuity & Life Company
in the principal amount of $3,025,000. (Incorporated by
reference to Exhibit 10.s filed with the Registrant's Annual
Report on Form 10-KSB for the fiscal year ended
December 31, 1997.)
(f) Phillips Promissory Note dated January 5, 1998 between
McBride Properties, Inc. and Column Financial, Inc. in the
principal amount of $7,500,000. (Incorporated by reference
to Exhibit 10.t filed with the Registrant's Annual Report on
Form 10-KSB for the fiscal year ended December 31, 1997.)
(g) Two Tabas Promissory Note dated August 9, 1995 between
Hough-Loew Associates, Inc. and USG Annuity & Life Company
in the principal amount of $4,600,000. (Incorporated by
reference to Exhibit 10.u filed with the Registrant's Annual
Report on Form 10-KSB for the fiscal year ended
December 31, 1997.)
(h) Loan Agreement dated September 23, 1997 by and between
FLIP/BRE, Inc., OIP/BRE, L.L.C., MBP/BRE, L.L.C., and
NJA/BRE, L.L.C., and Nomura Asset Capital Corporation.
(Incorporated by reference to Exhibit 10.v filed with the
Registrant's Annual Report on Form 10-KSB for the fiscal
year ended December 31, 1997.)
(i) Master Investment Agreement dated as of August 20, 1997 by
and between American Real Estate Investment Corporation and
The Parties Listed on the Signature Pages Thereto.
(Incorporated by reference to Exhibit 10.1 filed with the
Registrant's Current Report on Form 8-K/A filed with the
Commission on August 20, 1997.)
(j) Stock Purchase Agreement dated as of August 20, 1997 by and
between American Real Estate Investment Corporation and
Hudson Bay Partners, L.P. (Incorporated by reference to
Exhibit 10.2 filed with the Registrant's Current Report on
Form 8-K/A filed with the Commission on August 20, 1997.)
(k) Management Contribution Agreement dated as of August 20,
1997 among American Real Estate Investment, L.P., American
Real Estate Investment Corporation, Jeffrey Kelter, and Penn
Square Properties, Inc. (Incorporated by reference to
Exhibit 10.3 filed with the Registrant's Current Report on
Form 8-K/ A filed with the Commission on August 20, 1997.)
</TABLE>
33
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
(l) McBride Contribution Agreement between American Real Estate
Investment Corporation, American Real Estate Investment,
L.P, and The Other Parties Listed on the Signature Pages of
the Agreement. (Incorporated by reference to Exhibit 10.4
filed with the Registrant's Current Report on Form 8-K/A
filed with the Commission on August 20, 1997.)
(m) Agreement and Plan of Merger among American Real Estate
Investment Corporation and Fair Lawn Industrial Park, Inc.,
and The Other Parties Listed on the Signature Pages Thereto.
(Incorporated by reference to Exhibit 10.5 filed with the
Registrant's Current Report on Form 8-K/A filed with the
Commission on August 20, 1997.)
(n) Agreement of Sale and Purchase and Assignment of Agreement
of Sale and Purchase-101 Commerce Drive. (Incorporated by
reference to Exhibit 10.1 filed with the Registrant's
Current Report on Form 8-K/A filed with the Commission on
February 24, 1998.)
(o) Agreement of Sale and Purchase with Letter
Agreements--Philips Lighting Building. (Incorporated by
reference to Exhibit 10.2 filed with the Registrant's
Current Report on Form 8-K/A filed with the Commission on
February 24, 1998.)
(p) Agreement of Sale and Purchase-One and Two Tabas Lane with
First, Second, Third and Fourth Amendments. (Incorporated by
reference to Exhibit 10.3 filed with the Registrant's
Current Report on Form 8-K/A filed with the Commission on
February 24, 1998.)
(q) Agreement of Sale and Purchase-Northfield Business Center
(1057 and 1091 Arnold Road) with First, Second, Third,
Fourth and Fifth Amendments. (Incorporated by reference to
Exhibit 10.4 filed with the Registrant's Current Report on
Form 8-K/A filed with the Commission on February 24, 1998.)
(r) Agreement of Sale and Purchase-1305 Goshen Parkway with
First, Second, Third and Fourth Amendments. (Incorporated by
reference to Exhibit 10.5 filed with the Registrant's
Current Report on Form 8-K/A filed with the Commission on
February 24, 1998.)
(s) Agreement of Sale Americana Lakewood I & II and addendum.
(Incorporated by reference to Exhibit 10.6 filed with the
Registrant's Current Report on Form 8-K/A filed with the
Commission on February 24, 1998.)
(t) Employment Agreement dated December 12, 1997, by and between
American Real Estate Investment Corporation and Jeffrey
Kelter. (Incorporated by reference to Exhibit 10.ag filed
with the Registrant's Annual Report on Form 10-KSB for the
fiscal year ended December 31, 1997)
(u) Employment Agreement dated December 12, 1997, by and between
American Real Estate Investment Corporation and David
McBride. (Incorporated by reference to Exhibit 10.ah filed
with the Registrant's Annual Report on Form 10-KSB for the
fiscal year ended December 31, 1997)
(v) Agreement of Sale and Purchase dated July 17, 1997, with
John D. Moran Sr. with Amendment One and Assignment.
(Incorporated by reference to Exhibit 10.ai filed with the
Registrant's Annual Report on Form 10-KSB for the fiscal
year ended December 31, 1997)
(w) Warrant Agreement between American Real Estate Investment,
L.P. and Jeffrey Kelter. (Incorporated by reference to
Exhibit 10.aj filed with the Registrant's Annual Report on
Form 10-KSB for the fiscal year ended December 31, 1997)
(x) Warrant Agreement between American Real Estate Investment,
L.P. and David McBride. (Incorporated by reference to
Exhibit 10.ak filed with the Registrant's Annual Report on
Form 10-KSB for the fiscal year ended December 31, 1997)
</TABLE>
34
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
(y) Agreements of Sale and Purchase--Double M Development
Properties and First Amendment dated March 9, 1998.
(Incorporated by reference to Exhibit 10.1 filed with the
Registrant's Current Report on Form 8-K/A filed with the
Commission on June 10, 1998.)
(z) Agreement of Sale and Purchase--GATX Properties and
Assignment dated March 16, 1998. (Incorporated by reference
to Exhibit 10.2 filed with the Registrant's Current Report
on Form 8-K/A filed with the Commission on June 10, 1998.)
(aa) Promissory Note for $8,430,000 dated March 27 1998 between
Virginia Street Associates and Column Financial, Inc.
(Incorporated by reference to Exhibit 10.3 filed with the
Registrant's Current Report on Form 8-K/A filed with the
Commission on June 10, 1998.)
(ab) Promissory Note for $5,725,000 dated March 27, 1998 between
Virginia Street Associates and Column Financial, Inc.
(Incorporated by reference to Exhibit 10.4 filed with the
Registrant's Current Report on Form 8-K/A filed with the
Commission on June 10, 1998.)
(ac) Promissory Note for $3,630,000 dated March 27, 1998 between
McBride Properties and Column Financial, Inc. (Incorporated
by reference to Exhibit 10.5 filed with the Registrant's
Current Report on Form 8-K/A filed with the Commission on
June 10, 1998.)
(ad) Contribution Agreement between American Real Estate
Investment, L.P., and Northeastern Industrial Park, Inc. and
Guilderland Ventures, Inc. (Incorporated by reference to
Exhibit 10.1 filed with the Registrant's Current Report on
Form 8-K/A filed with the Commission on July 14, 1998.)
(ae) Contribution Agreement between American Real Estate
Investment, L.P. and Columbia Executive I Assoc., Columbia
Executive II Assoc., Columbia Executive III Assoc., Columbia
Executive V Assoc., Columbia Executive VI Assoc., Columbia
Executive VII Assoc., and Columbia Executive VIII Assoc.
(Incorporated by reference to Exhibit 10.2 filed with the
Registrant's Current Report on Form 8-K/A filed with the
Commission on July 14, 1998.)
(af) Agreement of Sale and Purchase--Fed One Industrial
Portfolio. (Incorporated by reference to Exhibit 10.3 filed
with the Registrant's Current Report on Form 8-K/ A filed
with the Commission on July 14, 1998.)
(ag) Revolving Credit Facility between American Real Estate
Investment L.P., American Real Estate Investment Corporation
and BankBoston, N.A., and DLJ Capital Funding, Inc.
(Incorporated by reference to Exhibit 10.4 filed with the
Registrant's Current Report on Form 8-K/A filed with the
Commission on July 14, 1998.)
(ah) Registration Rights Agreement between American Real Estate
Investment Corporation and CRA Real Estate Securities, L.P.
(as attorney-in-fact for the purchasers named therein).
(Incorporated by reference to Exhibit 10.5 filed with the
Registrant's Current Report on Form 8-K/A filed with the
Commission on July 14, 1998.)
(ai) Registration Rights Agreement between American Real Estate
Investment Corporation and Morgan Stanley Asset
Management, Inc. (as attorney-in-fact for the purchasers
named therein). (Incorporated by reference to Exhibit 10.6
filed with the Registrant's Current Report on Form 8-K/A
filed with the Commission on July 14, 1998.)
</TABLE>
35
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
(aj) Subscription Agreement between American Real Estate
Investment Corporation and CRA Real Estate Securities, L.P.
(as attorney-in-fact for the purchasers named therein).
(Incorporated by reference to Exhibit 10.7 filed with the
Registrant's Current Report on Form 8-K/A filed with the
Commission on July 14, 1998.)
(ak) Subscription Agreement between American Real Estate
Investment Corporation and Morgan Stanley Asset
Management, Inc. (as attorney-in-fact for the purchasers
named therein). (Incorporated by reference to Exhibit 10.8
filed with the Registrant's Current Report on Form 8-K/A
filed with the Commission on July 14, 1998.)
(al) Agreement of Sale and Purchase between American Real Estate
Investment, L.P. and ASW Properties, Ltd. Along with First,
Second and Third Amendments to Agreement of Sale and
Purchase. (Incorporated by reference to Exhibit 10.1 filed
with the Registrant's Current Report on Form 8-K filed with
the Commission on August 13, 1998.)
(am) Purchase and Sale Agreement between American Real Estate
Investment, L.P. and Szeles Real Estate Development Company
and Szeles Investment Company. (Incorporated by reference to
Exhibit 10.2 filed with the Registrant's Current Report on
Form 8-K filed with the Commission on August 13, 1998.)
(an) Contribution Agreement between American Real Estate
Investment, L.P., American Real Estate Investment
Corporation and Pioneer Properties Company of Clinton
Square, Waterfront Associates, Pioneer Indigo One Company,
Pioneer Franklin Square Company, 1045 James Street Company,
Pioneer Apollo Drive Company, Pioneer Park One Company,
Pioneer Clinton Street Company, Pioneer Maltbie Company,
5010 Campuswood Company, 5015 Campuswood Company, 400 West
Division Company, Pioneer Day Care Company, and Pioneer
Management Services Company, LLC. (Incorporated by reference
to Exhibit 10.3 filed with the Registrant's Current Report
on Form 8-K filed with the Commission on August 13, 1998.)
(ao) Employment Agreement dated as of August 15, 1998, between
American Real Estate Investment Corporation and Timothy A.
Peterson. (Incorporated by reference to Exhibit 10.4 filed
with the Registrant's Current Report on Form 8-K filed with
the Commission on August 13, 1998.)
(ap) Subscription Agreement between American Real Estate
Investment Corporation and the New York State Common
Retirement Fund. (Incorporated by reference to Exhibit 10.1
filed with the Registrant's Current Report on Form 8-K filed
with the Commission on September 3, 1998.)
(aq) Registration Rights Agreement between American Real Estate
Investment Corporation and the New York State Common
Retirement Fund. (Incorporated by reference to Exhibit 10.2
filed with the Registrant's Current Report on Form 8-K filed
with the Commission on September 3, 1998.)
(ar) Agreement of Sale and Purchase between WCN Properties, L.P.
and Franklin Storage, Inc. and American Real Estate, L.P.
along with Amendment to Agreement of Sale and Purchase.
(Incorporated by reference to Exhibit 10.1 filed with the
Registrant's Current Report on Form 8-K filed with the
Commission on November 13, 1998.)
(as) Contribution Agreement between American Real Estate
Investment, L.P., acquiror and MPSN, L.L.C., Corporate Drive
Associates, LLC, Post 70 Building 7 Partners, and COB
Associates, LLC. (Incorporated by reference to Exhibit 10.1
filed with the Registrant's Current Report on Form 8-K filed
with the Commission on December 18, 1998.)
</TABLE>
36
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
(at) Promissory Note between American DE/SPE, LLC Virginia Street
Associates Limited Partnership and Column Financial, Inc.
for $65,500,000. (Incorporated by reference to Exhibit 10.1
filed with the Registrant's Quarterly Report on Form 10-Q
for the fiscal quarter ended September 30, 1998.)
(au) Amended and Restated Promissory Note between American
DE/SPE2, LLC, American DE/SPE4, L.P., and Column
Financial, Inc. for $29,400,000.) (Incorporated by reference
to Exhibit 10.2 filed with the Registrant's Quarterly Report
on Form 10-Q for the fiscal quarter ended September 30,
1998.)
(av) Promissory Note dated January 8, 1998 between American
Sedona Partners, L.P., American Real Estate Investment
Corporation and Column Financial, Inc. in the principal
amount of $17,000,000. (Incorporated by reference to
Exhibit 10.o filed with the Registrant's Annual Report on
Form 10-KSB for the fiscal year ended December 31, 1997.)
(aw) Agreement of Sale and Purchase between T. Walter Brashier,
Martin Timothy Brashier, Hopewell Properties, Inc. TTT
Partnership, Stoneledge, Inc., Kidco and American Real
Estate Investment, L.P. (Incorporated by reference to
Exhibit 10.1 filed with the Registrant's Current Report on
Form 8-K filed with the Commission on January 8, 1999.)
(ax) Twelfth Amendment to Agreement of Sale and Purchase between
T. Walter Brashier, Martin Timothy Brasher, Hopewell
Properties, Inc., TTT Partnership, Stoneledge, Inc., and
Kidco and American Real Estate Investment, L.P.
(Incorporated by reference to Exhibit 10.2 filed with the
Registrant's Current Report on Form 8-K filed with the
Commission on January 8, 1999.)
(ay) Preferred Unit Recipient Agreement between Hopewell
Properties, Inc., and American Real Estate Investment, L.P.
(Incorporated by reference to Exhibit 10.3 filed with the
Registrant's Current Report on Form 8-K filed with the
Commission on January 8, 1999.)
(az) Securities Purchase Agreement between American Real Estate
Investment Corporation and AEW Targeted Securities Fund,
L.P. (Incorporated by reference to Exhibit 10.4 filed with
the Registrant's Current Report on Form 8-K filed with the
Commission on January 8, 1999.)
(ba) Registration Rights Agreement between American Real Estate
Investment Corporation and AEW Targeted Securities Fund,
L.P. (Incorporated by reference to Exhibit 10.5 filed with
the Registrant's Current Report on Form 8-K filed with the
Commission on January 8, 1999.)
(bb) Keystone Property Trust Amended and Restated 1993 Omnibus
Incentive Plan. (Incorporated by reference to Exhibit A of
our Proxy Statement filed with the Commission on
November 24, 1999.)
(bc) First Amended and Restated Revolving Credit Agreement among
the Company, as the Operating Partnership and the Lenders
named therein dated as of June 30, 1999. (Incorporated by
reference to Exhibit 10.1 filed with the Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended
June 30, 1999.)
(bd) Registration Rights Agreement dated September 27, 1999, by
and between Reckson Morris Industrial Trust and Keystone
Property Trust. (Incorporated by reference to Exhibit 10.1
filed with the Registrant's Quarterly Report on Form 10-Q
for the fiscal quarter ended September 30, 1999.)
</TABLE>
37
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
(be) Registration Rights Agreement, dated September 27, 1999, by
and between Robert Morris, Joseph D. Morris, Ronald Schram,
Mark M. Bava, The Drew Morris Trust, The Justin Morris
Trust, The Keith Morris Trust, Joseph D. Morris Family
Limited Partnership, Robert Morris Family Limited
Partnership and Keystone Property Trust. (Incorporated by
reference to Exhibit 10.2 filed with the Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 1999.)
(bf) Subscription Agreement between Keystone Property Trust and
AEW Targeted Securities Fund, LP. (Incorporated by reference
to Exhibit 10.6 filed with the Registrant's Quarterly Report
on Form 10-Q for the fiscal quarter ended September 30,
1999.)
(bg) Subscription Agreement between Keystone Property Trust and
Allstate Insurance Company. (Incorporated by reference to
Exhibit 10.7 filed with the Registrant's Quarterly Report on
Form 10-Q for the fiscal quarter ended September 30, 1999.)
(bh) Subscription Agreement between Keystone Property Trust and
Teachers Insurance and Annuity Association of America.
(Incorporated by reference to Exhibit 10.8 filed with the
Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended September 30, 1999.)
(bi) Registration Rights Agreement between Keystone Property
Trust and AEW Targeted Securities Fund, LP. (Incorporated by
reference to Exhibit 10.9 filed with the Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 1999.)
(bj) Registration Rights Agreement between Keystone Property
Trust and Allstate Insurance Company. (Incorporated by
reference to Exhibit 10.10 filed with the Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 1999.)
(bk) Registration Rights Agreement between Keystone Property
Trust and Teachers Insurance and Annuity Association of
America. (Incorporated by reference to Exhibit 10.11 filed
with the Registrant's Quarterly Report on Form 10-Q for the
fiscal quarter ended September 30, 1999.)
(bl) Contribution and Exchange Agreement, dated as of August 6,
1999 by and between Reckson Operating Partnership L.P.,
Reckson Morris Industrial Trust, Reckson Morris Industrial
Interim GP, LLC, Robert Morris, Joseph D. Morris, Ronald
Schram, Mark M. Bava, The Drew Morris Trust, The Justin
Morris Trust, The Keith Morris Trust, The Joseph D. Morris
Family Limited Partnership, and The Robert Morris Family
Limited Partnership and Keystone Operating Partnership L.P.,
and Keystone Property Trust. (Incorporated by reference to
Exhibit 10.1 filed with the Registrant's Current Report on
Form 8-K filed with the Commission on August 20, 1999.)
(bm) Agreement of Transfer and Contribution of Partnership
Interest by and among PSPI, Inc. and Jeffrey E. Kelter, John
B. Begier, Charles C. Lee, J. Harold Shannon, and Stephen J.
Butte and Keystone Operating Partnership, L.P. (Incorporated
by reference to Exhibit 10.1 filed with the Registrant's
Current Report on Form 8-K filed with the Commission on
December 20, 1999.)
</TABLE>
38
<PAGE>
21. SUBSIDIARIES OF THE REGISTRANT: The Registrant has subsidiaries carrying on
the same line of business as the Registrant as follows:
<TABLE>
<CAPTION>
STATE OF
INCORPORATION/
NAME ORGANIZATION
- ---- --------------
<S> <C>
Keystone Operating Partnership, L.P......................... Delaware
Virginia Street Associates Limited Partnership.............. Colorado
American Quadrangles Partners, L.P.......................... Delaware
American Sedona Partners, L.P............................... Colorado
American Emerald Corp....................................... Delaware
American Timberleaf Corp.................................... Delaware
American Quandrangles Corp.................................. Delaware
American Sedona Corp........................................ Colorado
RROP, L.L.C................................................. New Jersey
McBride Properties.......................................... New Jersey
New Jersey Associates....................................... New Jersey
UFSC, L.L.C................................................. New Jersey
OIP/BRE, L.L.C.............................................. New Jersey
MBP/BRE, L.L.C.............................................. New Jersey
NJA/BRE, L.L.C.............................................. New Jersey
FLIP/BRE II, L.L.C.......................................... New Jersey
REA/SPC II, Inc............................................. New Jersey
Keystone Realty Services, Inc............................... Pennsylvania
Avalanche Investment Corporation............................ Maryland
Winchester Corporate Center GP Corp......................... Pennsylvania
Winchester Corporate Center, L.P............................ Pennsylvania
American DE/SPE L.L.C....................................... Delaware
American DE/SPE 2, L.L.C.................................... Delaware
American DE/SPE 1, Inc...................................... Delaware
American DE/SPE 2, Inc...................................... Delaware
American DE/SPE 3, Inc...................................... Delaware
American DE/SPE 4, Inc...................................... Delaware
American DE/SPE 4, L.P...................................... Delaware
21 Roadway, L.P............................................. Pennsylvania
Keystone Roadway Partners GP, LLC........................... Pennsylvania
</TABLE>
23.1 CONSENT OF ARTHUR ANDERSEN LLP
27. FINANCIAL DATA SCHEDULE
(B) Reports on Form 8-K:
- a Current Report on Form 8-K dated September 27, 1999 was filed on
October 12, 1999 (reporting under Item 2, 5 and 7) regarding the Company's
consummation of its acquisition of Reckson Morris Operating Partnership,
L.P. from Reckson Morris Industrial Trust, Reckson Operating Partnership,
L.P., Reckson Morris Industrial Interim GP, LLC, Robert Morris, Joseph D.
Morris, and certain of their related entities. Such 8-K also included
proforma information the issuance of regarding the Company's acquisition
of the BMG Property, and the PolyFoam Properties.
39
<PAGE>
- a Current Report on Form 8-K dated October 13, 1999 was filed on
October 13, 1999 (reporting under Item 5 and 7) regarding the Company's
reorganization from a Maryland corporation to a Maryland real estate
investment trust named "Keystone Property Trust".
- a Current Report on Form 8-K dated October 12, 1999 was filed on
October 18, 1999 (reporting under Item 5) regarding the completed issuance
of 68,966 common shares of the Company's, par value $.001 per share, under
the Company's existing shelf registration statement.
- a Current Report on Form 8-K dated October 15, 1999 was filed on
October 20, 1999 (reporting under Item 2 and 7) regarding the Company's
acquisition of an industrial distribution facility totaling 885,802 square
feet for approximately $29.8 million.
- a Current Report on Form 8-K dated October 28, 1999 was filed on
November 4, 1999 (reporting under Items 5 and 7) regarding the completed
issuance of an aggregate of 618,627 common shares of the Company's, par
value $.001 per share, under the Company's existing shelf registration
statement.
- A Current Report on Form 8-K dated December 14, 1999 was filed on
December 20, 1999 (reporting under Items 2 and 7) regarding the Company's
acquisition of an industrial distribution facility totaling 407,100 square
feet for approximately $16.0 million.
40
<PAGE>
SCHEDULE III:
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1999
(IN 000'S)
<TABLE>
<CAPTION>
INITIAL COSTS
LOCATION (B) --------------------
BUILDING ADDRESS (CITY/STATE) ENCUMBRANCES LAND BUILDINGS TRANSFERS
---------------- ----------------- -------------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
OFFICE PROPERTIES:
40 Potash Road............................................ Oakland, NJ 7,720 2,312 9,746 --
1655 Valley Road.......................................... Wayne, NJ 14,867 4,580 19,302 --
16-00 Route 208........................................... Fair Lawn, NJ 1,324 646 2,746 --
128 Bauer Drive........................................... Oakland, NJ (a) 420 1,774 --
22-08 Route 208........................................... Fair Lawn, NJ (a) 990 4,175 --
15-00 Pollitt Drive....................................... Fair Lawn, NJ 966 308 1,300 --
19-00 Pollitt Drive....................................... Fair Lawn, NJ 4,898 1,450 6,105 --
95 Bauer Drive............................................ Oakland, NJ 560 160 678 --
99 Bauer Drive............................................ Oakland, NJ 864 276 1,167 --
Thirteen Columbia Circle.................................. Albany, NY 1,561 441 1,883 --
Nine Columbia Circle...................................... Albany, NY (a) 218 891 --
Seventeen Columbia Circle................................. Albany, NY (a) 1,330 5,683 --
One Columbia Circle....................................... Albany, NY 4,478 1,365 5,822 --
Fifteen Columbia Circle................................... Albany, NY 6,808 1,843 8,076 --
Three Columbia Circle..................................... Albany, NY 5,021 1,533 6,522 --
8 Airline Drive........................................... Albany, NY (a) 1,298 5,300 --
6 British American Blvd................................... Latham, NY (a) 780 3,082 --
Executive Park............................................ Wyomissing, PA (a) 1,145 4,285 200
Treeview Corporate Center................................. Wyomissing, PA (a) 1,412 5,055 --
Corporate Center 15....................................... Mechanicsburg, PA (a) 1,226 3,811 (750)
Hillside Corporate Center................................. Mechanicsburg, PA (a) 1,483 6,040 150
Winchester Plaza.......................................... Allentown, PA (a) 2,834 13,282 400
125 Indigo Creek Drive.................................... Greece, NY (a) 524 3,012 --
5009 Campuswood Drive..................................... East Syracuse, NY 512 144 625 --
5000 Campuswood Drive..................................... East Syracuse, NY 2,010 373 2,611 --
5010 Campuswood Drive..................................... East Syracuse, NY 4,441 767 6,516 --
5015 Campuswood Drive..................................... East Syracuse, NY 7,132 876 9,732 --
308 Maltbie Street........................................ Syracuse, NY (a) 325 1,870 --
400 West Division Street.................................. Syracuse, NY (a) 562 3,231 --
One Clinton Square........................................ Syracuse, NY 1,665 371 2,132 --
1045 James Street......................................... Syracuse, NY 3,221 716 4,564 --
507 Plum Street........................................... Syracuse, NY 5,153 1,372 7,890 --
250 South Clinton Street.................................. Syracuse, NY 16,412 4,135 23,782 --
One Park Place............................................ Syracuse, NY 10,020 3,203 20,593 --
------- ------- ------- ----
Subtotal Office Properties................................ 99,633 41,418 203,283 0
INDUSTRIAL PROPERTIES:
5 Thornton Road........................................... Oakland, NJ 6,122 1,844 7,775 --
2 Volvo Drive............................................. Rockleigh, NJ (a) 994 4,192 --
17-01 Pollitt Drive....................................... Oakland, NJ 2,534 1,200 5,053 --
19-05 Nevins Road......................................... Oakland, NJ 3,859 1,200 5,053 --
100 Oak Hill Road......................................... Mountaintop, PA (a) 546 2,274 --
1057 Arnold Road.......................................... Reading, PA (a) 1,152 4,750 --
1091 Arnold Road.......................................... Reading, PA (a) 768 3,206 --
1305 Goshen Parkway....................................... West Chester, PA 3,173 901 4,084 --
One Tabas Lane............................................ Exton, PA 2,715 842 3,552 --
Two Tabas Lane............................................ Exton, PA 4,141 1,211 5,342 --
101 Commerce Drive........................................ Mechanicsburg, PA 16,687 5,267 21,083 --
1 Phillips Drive.......................................... Mountaintop, PA 7,364 2,213 8,855 --
Gettysburg Road........................................... Camp Hill, PA (a) 1,351 4,236 --
AIP Drive................................................. Middletown, PA 7,213 1,539 7,225 --
Steelway Boulevard........................................ Liverpool, NY 11,023 2,611 10,375 --
Northeastern Ind. Park Bldg. 8............................ Albany, NY 4,633 1,254 5,124 --
Northeastern Ind. Park Bldg. 21........................... Albany, NY 4,948 1,340 5,472 --
Northeastern Ind. Park Bldg. 22........................... Albany, NY 3,580 971 3,964 --
Marway Circle............................................. Gates, NY 3,508 826 3,318 --
16725 Square Drive........................................ Marysville, OH 2,220 564 2,459 --
1030 Edgewood Drive....................................... Urbana, OH (a) 782 2,293 --
3530 East Pike............................................ Zanesville, OH 4,559 1,002 4,685 --
5555 Massillon Road....................................... Green, OH (a) 1,573 6,309 --
One Apollo Drive.......................................... Glen Falls, NY (a) 1,933 11,129 --
2294 Molly Pitcher Highway................................ Chambersburg, PA 17,038 1,894 19,661 --
1440 Sheffler Drive....................................... Chambersburg, PA (a) 2,253 10,116 --
1465 Nitterhouse Drive.................................... Chambersburg, PA (a) 3,191 11,944 --
4400 West 96th Street..................................... Indianapolis, IN 6,344 1,384 7,845 --
6402 Corporate Drive...................................... Indianapolis, IN 6,018 1,250 7,424 --
8677 Logo Court........................................... Indianapolis, IN 8,796 2,547 15,109 --
Piedmont Highway. Ind. Park............................... Piedmont, SC (a) 1,310 7,433 --
Highway 14 Industrial Park................................ Greer, SC (a) 790 4,483 --
Buncombe Road Ind. Park................................... Greer, SC (a) 1,010 5,734 --
Batesville Road Ind. Park................................. Greer, SC (a) 1,497 8,498 --
Rocky Creek Business Park................................. Greenville, SC (a) 617 3,499 --
Augusta Road Ind. Park.................................... Greenville, SC (a) 1,129 6,405 --
White Horse Road Ind. Park................................ Greenville, SC (a) 1,272 7,218 --
120 Hidden Lake Circle.................................... Duncan, SC (a) 1,463 8,292 --
351 West 10(th) Street.................................... Indianapolis, IN 2,300 547 3,105 --
600 Hagerty Drive......................................... Fremont, OH (a) 467 2,648 --
605 Hagerty Drive......................................... Fremont, OH (a) 283 1,604 --
670 Hagerty Drive......................................... Fremont, OH (a) 405 2,294 --
800 Hagerty Drive......................................... Fremont, OH (a) 128 724 --
1411 Majestic Drive....................................... Fremont, OH (a) 671 3,803 --
1311 Majestic Drive....................................... Fremont, OH (a) 528 2,991 --
300 Enterprise Drive...................................... Bellevue, OH (a) 746 4,226 --
One Nixon Lane............................................ Edison, NJ 5,150 1,101 6,105 --
200-250 Kennedy Drive..................................... Sayerville, NJ 5,625 1,189 6,816 --
300-350 Kennedy Drive..................................... Sayerville, NJ 5,150 1,095 6,231 --
309 Kennedy Drive......................................... Sayerville, NJ 4,434 1,446 8,551 --
409 Kennedy Drive......................................... Sayerville, NJ 10,345 1,623 9,044 --
55 Carter Drive........................................... Edison, NJ -- 668 3,722 --
200-240 Carter Drive...................................... Edison, NJ -- 725 3,566 --
243 St. Nicholas Avenue................................... S. Plainfield, NJ -- 115 668 --
275-285 Pierce Street..................................... Franklin Twp., NJ -- 625 3,239 --
301-321 Herrod Blvd....................................... S. Brunswick, NJ 18,000 3,777 21,376 --
24 Abeel Road............................................. Cranbury, NJ -- 292 1,435 --
21 Cranbury Road.......................................... Cranbury, NJ 28,500 5,856 31,688 --
34 Englehard Drive........................................ Cranbury, NJ 7,275 1,467 8,381 --
200 Industrial Avenue..................................... Teterboro, NJ 17,000 3,454 20,708 --
118 Moonachie Avenue...................................... Carlstadt, NJ 11,300 2,296 15,738 --
135 Fieldcrest Avenue..................................... Edison, NJ -- 528 2,744 --
24 Madison Road........................................... Fairfield, NJ (a) 320 1,605 --
22 Madison Road........................................... Fairfield, NJ (a) 342 1,440 --
18 Madison Road........................................... Fairfield, NJ (a) 141 856 --
26 Madison Road........................................... Fairfield, NJ (a) 254 1,233 --
535 Secaucus Road......................................... Secaucus, NJ -- 585 2,837 --
Mount Ebo Corporate Park.................................. Mt. Ebo, NY -- 1,495 6,990 --
221 South 10(th) Street................................... Lemoyne, PA 19,457 4,498 25,486 --
104 Hidden Lake Circle.................................... Duncan, SC -- 697 3,947 --
21 Roadway................................................ Harrisburg, PA 12,000 2,332 13,217 --
------- ------- ------- ----
Subtotal Industrial Properties............................ 273,011 96,187 494,487 --
Operating Partnership..................................... -- -- -- --
------- ------- ------- ----
Total All Properties...................................... 372,644(c) 137,605 697,770 0
======= ======= ======= ====
<CAPTION>
COSTS GROSS AMOUNT CARRIED AT CLOSE OF
CAPITALIZED PERIOD 12/31/99
SUBSEQUENT TO ----------------------------------- ACCUMULATED
ACQUISITION OR BUILDING AND DEPRECIATION
BUILDING ADDRESS COMPLETION LAND IMPROVEMENTS TOTAL 12/31/99
---------------- -------------- -------- ------------- -------- ------------
<S> <C> <C> <C> <C> <C>
OFFICE PROPERTIES:
40 Potash Road............................................ -- 2,312 9,746 12,058 (571)
1655 Valley Road.......................................... -- 4,580 19,302 23,882 (1,132)
16-00 Route 208........................................... 499 646 3,245 3,891 (234)
128 Bauer Drive........................................... 3 420 1,777 2,197 (104)
22-08 Route 208........................................... 913 990 5,088 6,078 (343)
15-00 Pollitt Drive....................................... -- 308 1,300 1,608 (76)
19-00 Pollitt Drive....................................... -- 1,450 6,105 7,555 (358)
95 Bauer Drive............................................ -- 160 678 838 (40)
99 Bauer Drive............................................ 5 276 1,172 1,448 (68)
Thirteen Columbia Circle.................................. 5 441 1,888 2,329 (90)
Nine Columbia Circle...................................... 105 218 996 1,214 (62)
Seventeen Columbia Circle................................. 17 1,330 5,700 7,030 (272)
One Columbia Circle....................................... 57 1,365 5,879 7,244 (306)
Fifteen Columbia Circle................................... 26 1,843 8,102 9,945 (387)
Three Columbia Circle..................................... 171 1,533 6,693 8,226 (343)
8 Airline Drive........................................... 17 1,298 5,317 6,615 (254)
6 British American Blvd................................... 34 780 3,116 3,896 (150)
Executive Park............................................ 68 1,145 4,553 5,698 (207)
Treeview Corporate Center................................. 85 1,412 5,140 6,552 (228)
Corporate Center 15....................................... 381 1,226 3,442 4,668 (179)
Hillside Corporate Center................................. 64 1,483 6,254 7,737 (267)
Winchester Plaza.......................................... 94 2,834 13,776 16,610 (558)
125 Indigo Creek Drive.................................... -- 524 3,012 3,536 (118)
5009 Campuswood Drive..................................... -- 144 625 769 (24)
5000 Campuswood Drive..................................... 129 373 2,740 3,113 (121)
5010 Campuswood Drive..................................... 238 767 6,754 7,521 (302)
5015 Campuswood Drive..................................... 68 876 9,800 10,676 (391)
308 Maltbie Street........................................ 324 325 2,194 2,519 (89)
400 West Division Street.................................. -- 562 3,231 3,793 (126)
One Clinton Square........................................ 8 371 2,140 2,511 (84)
1045 James Street......................................... -- 716 4,564 5,280 (179)
507 Plum Street........................................... 24 1,372 7,914 9,286 (318)
250 South Clinton Street.................................. 9 4,135 23,791 27,926 (935)
One Park Place............................................ 37 3,203 20,630 23,833 (455)
----- ------- ------- ------- -------
Subtotal Office Properties................................ 3,381 41,418 206,664 248,082 (9,371)
INDUSTRIAL PROPERTIES:
5 Thornton Road........................................... -- 1,844 7,775 9,619 (456)
2 Volvo Drive............................................. -- 994 4,192 5,186 (246)
17-01 Pollitt Drive....................................... 339 1,200 5,392 6,592 (339)
19-05 Nevins Road......................................... -- 1,200 5,053 6,253 (296)
100 Oak Hill Road......................................... -- 546 2,274 2,820 (133)
1057 Arnold Road.......................................... 10 1,152 4,760 5,912 (275)
1091 Arnold Road.......................................... 71 768 3,277 4,045 (188)
1305 Goshen Parkway....................................... -- 901 4,084 4,985 (238)
One Tabas Lane............................................ 34 842 3,586 4,428 (207)
Two Tabas Lane............................................ 5 1,211 5,347 6,558 (311)
101 Commerce Drive........................................ -- 5,267 21,083 26,350 (1,192)
1 Phillips Drive.......................................... -- 2,213 8,855 11,068 (500)
Gettysburg Road........................................... 17 1,351 4,253 5,604 (224)
AIP Drive................................................. 129 1,539 7,354 8,893 (372)
Steelway Boulevard........................................ 108 2,611 10,483 13,094 (528)
Northeastern Ind. Park Bldg. 8............................ 131 1,254 5,255 6,509 (245)
Northeastern Ind. Park Bldg. 21........................... 34 1,340 5,506 6,846 (262)
Northeastern Ind. Park Bldg. 22........................... 12 971 3,976 4,947 (190)
Marway Circle............................................. 10 826 3,328 4,154 (145)
16725 Square Drive........................................ 1 564 2,460 3,024 (107)
1030 Edgewood Drive....................................... 529 782 2,822 3,604 (124)
3530 East Pike............................................ 1 1,002 4,686 5,688 (203)
5555 Massillon Road....................................... (29) 1,567 6,286 7,853 (251)
One Apollo Drive.......................................... -- 1,933 11,129 13,062 (436)
2294 Molly Pitcher Highway................................ 2 1,894 19,663 21,557 (657)
1440 Sheffler Drive....................................... 4 2,253 10,120 12,373 (338)
1465 Nitterhouse Drive.................................... 1 3,191 11,945 15,136 (399)
4400 West 96th Street..................................... 43 1,391 7,881 9,272 (242)
6402 Corporate Drive...................................... 39 1,256 7,457 8,713 (228)
8677 Logo Court........................................... 79 2,559 15,176 17,735 (466)
Piedmont Highway. Ind. Park............................... 40 1,311 7,472 8,783 (218)
Highway 14 Industrial Park................................ 32 791 4,514 5,305 (131)
Buncombe Road Ind. Park................................... 41 1,011 5,774 6,785 (168)
Batesville Road Ind. Park................................. 251 1,499 8,747 10,246 (249)
Rocky Creek Business Park................................. 76 617 3,575 4,192 (115)
Augusta Road Ind. Park.................................... 34 1,130 6,438 7,568 (187)
White Horse Road Ind. Park................................ 93 1,273 7,310 8,583 (213)
120 Hidden Lake Circle.................................... -- 1,463 8,292 9,755 (182)
351 West 10(th) Street.................................... -- 547 3,105 3,652 (55)
600 Hagerty Drive......................................... -- 467 2,648 3,115 (55)
605 Hagerty Drive......................................... -- 283 1,604 1,887 (34)
670 Hagerty Drive......................................... -- 405 2,294 2,699 (48)
800 Hagerty Drive......................................... -- 128 724 852 (15)
1411 Majestic Drive....................................... -- 671 3,803 4,474 (79)
1311 Majestic Drive....................................... -- 528 2,991 3,519 (22)
300 Enterprise Drive...................................... -- 746 4,226 4,972 (31)
One Nixon Lane............................................ -- 1,101 6,105 7,206 (46)
200-250 Kennedy Drive..................................... -- 1,189 6,816 8,005 (50)
300-350 Kennedy Drive..................................... -- 1,095 6,231 7,326 (46)
309 Kennedy Drive......................................... -- 1,446 8,551 9,997 (60)
409 Kennedy Drive......................................... -- 1,623 9,044 10,667 (68)
55 Carter Drive........................................... 8 668 3,730 4,398 (29)
200-240 Carter Drive...................................... -- 725 3,566 4,291 (30)
243 St. Nicholas Avenue................................... -- 115 668 783 (5)
275-285 Pierce Street..................................... -- 625 3,239 3,864 (26)
301-321 Herrod Blvd....................................... -- 3,777 21,376 25,153 (157)
24 Abeel Road............................................. -- 292 1,435 1,727 (12)
21 Cranbury Road.......................................... -- 5,856 31,688 37,544 (244)
34 Englehard Drive........................................ -- 1,467 8,381 9,848 (61)
200 Industrial Avenue..................................... -- 3,454 20,708 24,162 (144)
118 Moonachie Avenue...................................... -- 2,296 15,738 18,034 (96)
135 Fieldcrest Avenue..................................... -- 528 2,744 3,272 (22)
24 Madison Road........................................... -- 320 1,605 1,925 (13)
22 Madison Road........................................... -- 342 1,440 1,782 (14)
18 Madison Road........................................... -- 141 856 997 (6)
26 Madison Road........................................... -- 254 1,233 1,487 (11)
535 Secaucus Road......................................... -- 585 2,837 3,422 (24)
Mount Ebo Corporate Park.................................. -- 1,495 6,990 8,485 (62)
221 South 10(th) Street................................... -- 4,498 25,486 29,984 (154)
104 Hidden Lake Circle.................................... -- 697 3,947 4,644 (10)
21 Roadway................................................ 8 2,332 13,225 15,557 (18)
----- ------- ------- ------- -------
Subtotal Industrial Properties............................ 2,153 96,213 496,614 592,827 (13,008)
Operating Partnership..................................... 197 -- 197 197 (17)
----- ------- ------- ------- -------
Total All Properties...................................... 5,731 137,631 703,475 841,106 (22,396)
===== ======= ======= ======= =======
<CAPTION>
YEAR BUILT/ DEPRECIABLE
BUILDING ADDRESS RENOVATED YEAR(S)
---------------- ----------- -----------
<S> <C> <C>
OFFICE PROPERTIES:
40 Potash Road............................................ 1992 (d)
1655 Valley Road.......................................... 1989 (d)
16-00 Route 208........................................... 1983 (d)
128 Bauer Drive........................................... 1981 (d)
22-08 Route 208........................................... 1960/68 (d)
15-00 Pollitt Drive....................................... 1970/92 (d)
19-00 Pollitt Drive....................................... 1970/84/95 (d)
95 Bauer Drive............................................ 1974/91 (d)
99 Bauer Drive............................................ 1971 (d)
Thirteen Columbia Circle.................................. 1996 (d)
Nine Columbia Circle...................................... 1992 (d)
Seventeen Columbia Circle................................. 1995 (d)
One Columbia Circle....................................... 1991 (d)
Fifteen Columbia Circle................................... 1995 (d)
Three Columbia Circle..................................... 1992 (d)
8 Airline Drive........................................... 1997 (d)
6 British American Blvd................................... 1980 (d)
Executive Park............................................ 1979 (d)
Treeview Corporate Center................................. 1991 (d)
Corporate Center 15....................................... 1979 (d)
Hillside Corporate Center................................. 1991 (d)
Winchester Plaza.......................................... 1992/1998 (d)
125 Indigo Creek Drive.................................... 1992 (d)
5009 Campuswood Drive..................................... 1989 (d)
5000 Campuswood Drive..................................... 1988 (d)
5010 Campuswood Drive..................................... 1989 (d)
5015 Campuswood Drive..................................... 1991 (d)
308 Maltbie Street........................................ 1992 (d)
400 West Division Street.................................. 1992 (d)
One Clinton Square........................................ 1991 (d)
1045 James Street......................................... 1992 (d)
507 Plum Street........................................... 1991 (d)
250 South Clinton Street.................................. 1991 (d)
One Park Place............................................ 1983
Subtotal Office Properties................................
INDUSTRIAL PROPERTIES:
5 Thornton Road........................................... 1973/81 (d)
2 Volvo Drive............................................. 1966/93 (d)
17-01 Pollitt Drive....................................... 1968 (d)
19-05 Nevins Road......................................... 1955 (d)
100 Oak Hill Road......................................... 1996 (d)
1057 Arnold Road.......................................... 1995 (d)
1091 Arnold Road.......................................... 1996 (d)
1305 Goshen Parkway....................................... 1991 (d)
One Tabas Lane............................................ 1970 (d)
Two Tabas Lane............................................ 1970/91 (d)
101 Commerce Drive........................................ 1997 (d)
1 Phillips Drive.......................................... 1991-1993 (d)
Gettysburg Road........................................... 1952/1993 (d)
AIP Drive................................................. 1991 (d)
Steelway Boulevard........................................ 1977 (d)
Northeastern Ind. Park Bldg. 8............................ 1950/1997 (d)
Northeastern Ind. Park Bldg. 21........................... 1989 (d)
Northeastern Ind. Park Bldg. 22........................... 1988 (d)
Marway Circle............................................. 1976-1977 (d)
16725 Square Drive........................................ 1987 (d)
1030 Edgewood Drive....................................... 1988 (d)
3530 East Pike............................................ 1991 (d)
5555 Massillon Road....................................... 1996 (d)
One Apollo Drive.......................................... 1992 (d)
2294 Molly Pitcher Highway................................ 1986 (d)
1440 Sheffler Drive....................................... 1996 (d)
1465 Nitterhouse Drive.................................... 1995 (d)
4400 West 96th Street..................................... 1998 (d)
6402 Corporate Drive...................................... 1996 (d)
8677 Logo Court........................................... 1993 (d)
Piedmont Highway. Ind. Park............................... 1995/1997 (d)
Highway 14 Industrial Park................................ 1994/1997 (d)
Buncombe Road Ind. Park................................... 1988/1995 (d)
Batesville Road Ind. Park................................. 1970/1985 (d)
Rocky Creek Business Park................................. 1997 (d)
Augusta Road Ind. Park.................................... 1996 (d)
White Horse Road Ind. Park................................ 1989/1997 (d)
120 Hidden Lake Circle.................................... 1998 (d)
351 West 10(th) Street.................................... 1998 (d)
600 Hagerty Drive......................................... 1980/86/87 (d)
605 Hagerty Drive......................................... 1991 (d)
670 Hagerty Drive......................................... 1980/88/90 (d)
800 Hagerty Drive......................................... 1987 (d)
1411 Majestic Drive....................................... 1995 (d)
1311 Majestic Drive....................................... 1993 (d)
300 Enterprise Drive...................................... 1998 (d)
One Nixon Lane............................................ 1987 (d)
200-250 Kennedy Drive..................................... 1988 (d)
300-350 Kennedy Drive..................................... 1988 (d)
309 Kennedy Drive......................................... 1996 (d)
409 Kennedy Drive......................................... 1996 (d)
55 Carter Drive........................................... 1986 (d)
200-240 Carter Drive...................................... 1985 (d)
243 St. Nicholas Avenue................................... 1984 (d)
275-285 Pierce Street..................................... 1988 (d)
301-321 Herrod Blvd....................................... 1989 (d)
24 Abeel Road............................................. 1978 (d)
21 Cranbury Road.......................................... 1998 (d)
34 Englehard Drive........................................ 1982 (d)
200 Industrial Avenue..................................... 1998 (d)
118 Moonachie Avenue...................................... 1989 (d)
135 Fieldcrest Avenue..................................... 1980 (d)
24 Madison Road........................................... 1980 (d)
22 Madison Road........................................... 1980 (d)
18 Madison Road........................................... 1979 (d)
26 Madison Road........................................... 1980 (d)
535 Secaucus Road......................................... 1974 (d)
Mount Ebo Corporate Park.................................. 1992 (d)
221 South 10(th) Street................................... 1997 (d)
104 Hidden Lake Circle.................................... 1986/92 (d)
21 Roadway................................................ 1988 (d)
Subtotal Industrial Properties............................
Operating Partnership..................................... (d)
Total All Properties......................................
</TABLE>
S-1
<PAGE>
SCHEDULE III:
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1999
(IN 000'S)
NOTES:
(a) Collateralizes the Company's Credit Facility
(b) See description of encumbrances in Item 1--Summary of Indebtedness
(c) Reconciliation of encumbrances as shown above to total consolidated
debt, excluding unamortized debt premiums of $3,691 at December 31, 1999
is as follows:
<TABLE>
<S> <C>
Amount shown above.......................................... $372,644
Debt related to development or construction in progress..... 3,797
Credit Facility............................................. 141,980
--------
Total consolidated debt, excluding debt premiums............ $518,421
========
</TABLE>
(d) Depreciation is computed based on the following estimated lives:
<TABLE>
<S> <C>
Buildings and Improvements........... 35 years
Tenant/Leasehold Improvements........ Life of lease
Furniture, Fixtures and Equipment.... 5 to 10 years
</TABLE>
(e) At December 31, 1999, the aggregate net carrying amount for land and
buildings and improvements for federal income tax reporting was
approximately $690,000,000.
Summary of Real Estate and Accumulated Depreciation Activity:
<TABLE>
<CAPTION>
1999 1998
----------------------- -----------------------
ACCUMULATED ACCUMULATED
COST DEPRECIATION COST DEPRECIATION
-------- ------------ -------- ------------
<S> <C> <C> <C> <C>
Balance at beginning of year..................... $541,162 $ 6,867 $153,143 $ 2,955
Property acquisitions............................ 304,704 -- 418,835 --
Capital improvements............................. 3,479 -- 906 --
Properties sold.................................. (8,239) (202) (31,722) (2,838)
Depreciation expense............................. -- 15,731 -- 6,750
-------- ------- -------- -------
Balance at end of year........................... $841,106 $22,396 $541,162 $ 6,867
======== ======= ======== =======
</TABLE>
S-2
<PAGE>
KEYSTONE PROPERTY TRUST
INDEX OF CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Public Accountants.................... F-2
Consolidated Balance Sheets as of December 31, 1999 and
1998...................................................... F-3
Consolidated Statements of Operations for the years ended
December 31, 1999, 1998 and 1997.......................... F-4
Consolidated Statements of Shareholders' Equity for the
years ended December 31, 1999, 1998, and 1997............. F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997.......................... F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
F-1
<PAGE>
To the Board of Trustees and Shareholders of Keystone Property Trust:
We have audited the accompanying consolidated balance sheets of Keystone
Property Trust (a Maryland real estate investment trust) and subsidiaries as of
December 31, 1999 and 1998 and the related consolidated statements of
operations, shareholders' equity and cash flows for each of the three years in
the period ended December 31, 1999. These consolidated financial statements and
the schedule referred to below are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements and schedule based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Keystone Property Trust and subsidiaries as of December 31, 1999 and 1998, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1999 in conformity with
accounting principles generally accepted in the United States.
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index of
financial statement schedules in Item 14 is presented for purposes of complying
with the Securities and Exchange Commission's rules and is not a required part
of the basic financial statements. This schedule has been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
/s/ Arthur Andersen LLP
Philadelphia, PA
February 7, 2000
F-2
<PAGE>
KEYSTONE PROPERTY TRUST
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-------------------
1999 1998
-------- --------
<S> <C> <C>
ASSETS
INVESTMENT IN REAL ESTATE:
Land and land improvements................................ $106,279 $ 92,243
Buildings and improvements................................ 574,466 440,680
Assets held for sale...................................... 160,361 8,239
Development and construction-in-progress.................. 17,770 --
Investment in direct financing lease...................... 1,460 1,707
-------- --------
860,336 542,869
Less--Accumulated depreciation............................ (16,559) (6,665)
Accumulated depreciation--assets held for sale.......... (5,837) (202)
-------- --------
Total accumulated depreciation........................ (22,396) (6,867)
-------- --------
Total investment in real estate, net.................. 837,940 536,002
-------- --------
CASH AND CASH EQUIVALENTS................................... 4,144 3,247
RESTRICTED CASH AND CASH ESCROWS............................ 3,470 2,100
ACCOUNTS RECEIVABLE, including straight-line rent receivable
of $3,029 and $1,281 in 1999 and 1998, respectively....... 5,966 2,007
DEFERRED FINANCING COSTS, net of accumulated amortization of
$2,078 and $616 in 1999 and 1998, respectively............ 6,522 6,154
DEFERRED LEASING COSTS, net of accumulated amortization of
$776 and $149 in 1999 and 1998, respectively.............. 3,672 1,614
INVESTMENT IN KEYSTONE REALTY SERVICES, INC.., at equity.... 4,423 5,207
OTHER ASSETS................................................ 8,939 2,643
-------- --------
Total assets.......................................... $875,076 $558,974
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Mortgage notes payable and revolving credit facility,
including unamortized premium on assumed indebtedness of
$3,691 and $3,542 in 1999 and 1998, respectively........ $522,112 $346,105
Accounts payable.......................................... 2,551 968
Dividends and distributions payable....................... 1,999 3,713
Accrued interest payable.................................. 2,698 662
Accrued expenses and other liabilities.................... 11,347 3,243
Deferred rent revenue..................................... 2,708 1,534
-------- --------
Total liabilities..................................... 543,415 356,225
-------- --------
MINORITY INTEREST, 7,326,853 and 6,988,542 units outstanding
in 1999 and 1998, respectively............................ 91,310 88,205
CONVERTIBLE PREFERRED UNITS................................. 54,621 7,500
COMMITMENTS AND CONTINGENCIES............................... -- --
SHAREHOLDERS' EQUITY:
Convertible Preferred Stock, Series A; $.001 par value;
800,000 shares authorized, issued and outstanding,
liquidation preference of $20,000....................... 1 1
Convertible Preferred Stock, Series B; $.001 par value;
1,600,000 shares authorized, issued and outstanding;
liquidation preference of $40,000....................... 1 --
Convertible Preferred Stock, Series C; $.001 par value;
800,000 shares authorized, issued and outstanding;
liquidation preference of $20,000....................... 1 --
Common Shares, $.001 par value; 65,000,000 authorized;
8,906,943 and 7,391,765 shares issued and outstanding in
1999 and 1998, respectively............................. 9 7
Warrants................................................ 125 685
Additional paid-in capital.............................. 185,079 104,864
Loans to executive officers to purchase Common Shares... (1,536) (392)
Deferred compensation................................... (282) (540)
Cumulative net income................................... 20,620 14,292
Cumulative distributions................................ (18,288) (11,873)
-------- --------
Total shareholders' equity............................ 185,730 107,044
-------- --------
Total liabilities and shareholders' equity............ $875,076 $558,974
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
KEYSTONE PROPERTY TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
REVENUE:
Rents..................................................... $75,769 $36,332 $ 7,713
Reimbursement revenue and other income.................... 8,757 4,696 484
------- ------- -------
Total revenue......................................... 84,526 41,028 8,197
======= ======= =======
OPERATING EXPENSES:
Property operating expenses............................... 15,096 7,693 3,112
Management fees paid to affiliate......................... 3,048 1,121 --
General and administrative................................ 3,650 759 732
Depreciation and amortization............................. 16,359 6,911 909
Buyout of employment agreements, options and warrants..... -- -- 3,203
Interest expense.......................................... 30,307 14,539 3,134
------- ------- -------
Total operating expenses.............................. 68,460 31,023 11,090
------- ------- -------
Income (loss) before equity in income (losses) from equity
method investments, gains on sales of assets,
distributions to preferred unitholders, minority interest
of unitholders in Operating Partnership, extraordinary
item, and net income allocated to preferred shareholders.. 16,066 10,005 (2,893)
Equity in income (losses) from equity method investments.... (62) (1,167) 404
Gains on sales of assets.................................... 1,284 11,952 4,608
------- ------- -------
Income before distributions to preferred unitholders,
minority interest of unitholders in Operating Partnership,
extraordinary item, and net income allocated to preferred
shareholders.............................................. 17,288 20,790 2,119
Distributions to preferred unitholders...................... (2,040) (15) --
------- ------- -------
Income before minority interest of unitholders in Operating
Partnership, extraordinary item, and net income allocated
to preferred shareholders................................. 15,248 20,775 2,119
Minority interest of unitholders in Operating Partnership... (5,592) (9,452) (876)
Extraordinary loss on debt extinguishment net of $110
allocated to minority interest of unitholders in Operating
Partnership............................................... -- 110 --
------- ------- -------
NET INCOME BEFORE NET INCOME ALLOCATED TO PREFERRED
SHAREHOLDERS.............................................. 9,656 11,213 1,243
NET INCOME ALLOCATED TO PREFERRED SHAREHOLDERS.............. (3,328) (40) --
------- ------- -------
NET INCOME ALLOCATED TO COMMON SHAREHOLDERS................. $ 6,328 $11,173 $ 1,243
======= ======= =======
EARNINGS PER COMMON SHARE--BASIC:
Net income per Common Share before extraordinary item..... $ .83 $ 1.79 $ .92
Extraordinary item........................................ -- (.02) --
------- ------- -------
Net income per Common Share--Basic........................ $ .83 $ 1.77 $ .92
======= ======= =======
EARNINGS PER COMMON SHARE--DILUTED:
Net income per Common Share before extraordinary item..... $ .80 $ 1.75 $ .88
Extraordinary item........................................ -- (.02) --
------- ------- -------
Net income per Common Share--diluted...................... $ .80 $ 1.73 $ .88
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
KEYSTONE PROPERTY TRUST
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE THREE YEARS ENDED DECEMBER 31, 1999
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
LOANS TO EXECUTIVE
ADDITIONAL OFFICERS TO
PAID-IN PURCHASE
PREFERRED STOCK COMMON SHARES WARRANTS CAPITAL COMMON SHARES
-------------------- -------------------- --------- ---------- ------------------
SHARES AMOUNT SHARES AMOUNT
--------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCES, JANUARY 1, 1997......... -- -- 1,121,630 $ 1 $ -- $ 5,374 --
Net income........................ -- -- -- -- -- -- --
Distributions paid ($.87 per
share).......................... -- -- -- -- -- -- --
Common Shares issued for cash, net
of $870 of issuance costs....... -- -- 1,963,635 2 -- 20,728 --
Common Shares issued to officers
and directors................... -- -- 9,378 -- -- 99 --
Common Shares issued for FLIP net
assets.......................... -- -- 2,001,132 2 -- 22,010 --
Common Shares issued to terminate
employment........agreements and
options -- -- 171,266 -- -- 2,536 --
Common Shares issued for
OP Unit conversions............. -- -- 96,240 -- -- 979 --
Warrants issued................... -- -- -- 685 --
--------- --- --------- ------- ----- -------- -------
BALANCES, DECEMBER 31, 1997....... -- -- 5,363,281 $ 5 685 $ 51,726 --
Net income allocated to common
shareholders.................... -- -- -- -- -- -- --
Distributions paid ($.97 per
share).......................... -- -- -- -- -- -- --
Distributions declared............ -- -- -- -- -- -- --
Common Shares issued net of $1,042
of issuance costs............... -- -- 1,812,794 2 -- 28,459 --
Restricted Common Shares issued
employees....................... -- -- 37,242 -- -- 540 --
Common Shares issued for stock
options exercised............... -- -- 38,500 -- -- 385 --
Common Shares issued for OP Unit
conversions..................... -- -- 139,948 -- -- 1,631 --
Adjustment for minority interest
of unitholders in Operating
Partnership at dates of capital
transactions.................... -- -- -- -- -- 2,815 --
Issuance of Convertible Preferred
Stock, net of $692 in issuance
costs........................... 800,000 1 -- -- -- 19,308 --
Loan to executive officer to
purchase Common Shares.......... -- -- -- -- -- -- (392)
--------- --- --------- ------- ----- -------- -------
BALANCES, DECEMBER 31, 1998....... 800,000 $ 1 7,391,765 $ 7 $ 685 $104,864 (392)
Net income allocated to common
shareholders.................... -- -- -- -- -- -- --
Distributions paid ($1.12 per
share).......................... -- -- -- -- -- -- --
Common Shares issued, net of $200
of issuance costs............... -- -- 1,380,678 1 -- 19,812 --
Restricted Common Shares issued to
employees, net of cancellations
of 500 Common Shares............ -- -- 1,054 -- -- 22 --
Amortization of restricted share
grants and forgiveness of
executive loans................. -- -- -- -- -- -- 156
Common Shares issued for stock
options exercised............... -- -- 2,200 -- -- 22 --
Common Shares issued for OP Unit
conversions..................... -- -- 19,416 -- -- 242 --
Adjustment for minority interest
of unitholders in Operating
Partnership at dates of capital
transactions.................... -- -- -- -- -- (733) --
Issuance of Convertible Preferred
Stock, net of $625 in issuance
costs........................... 2,400,000 2 -- -- -- 59,373 --
Loan to executive officer to
purchase Common Shares.......... -- -- 100,000 1 -- 1,300 (1,300)
Common Shares issued as
compensation to trustees........ -- -- 11,830 -- -- 177 --
Conversion of Warrants to OP Units
in Operating Partnership........ -- -- -- -- (560) -- --
--------- --- --------- ------- ----- -------- -------
BALANCES, DECEMBER 31, 1999....... 3,200,000 $ 3 8,906,943 $ 9 $ 125 $185,079 $(1,536)
========= === ========= ======= ===== ======== =======
<CAPTION>
RETAINED
EARNINGS/ TOTAL
DEFERRED (ACCUMULATED SHAREHOLDERS
COMPENSATION DEFICIT) EQUITY
------------- ------------ ------------
<S> <C> <C> <C>
BALANCES, JANUARY 1, 1997......... -- $ (745) $ 4,630
Net income........................ -- 1,243 1,243
Distributions paid ($.87 per
share).......................... -- (985) (985)
Common Shares issued for cash, net
of $870 of issuance costs....... -- -- 20,730
Common Shares issued to officers
and directors................... -- -- 99
Common Shares issued for FLIP net
assets.......................... -- -- 22,012
Common Shares issued to terminate
employment........agreements and
options -- -- 2,536
Common Shares issued for
OP Unit conversions............. -- -- 979
Warrants issued................... -- -- 685
----- ------- --------
BALANCES, DECEMBER 31, 1997....... $ -- $ (487) $ 51,929
Net income allocated to common
shareholders.................... -- 11,173 11,173
Distributions paid ($.97 per
share).......................... -- (6,308) (6,308)
Distributions declared............ -- (1,959) (1,959)
Common Shares issued net of $1,042
of issuance costs............... -- -- 28,461
Restricted Common Shares issued
employees....................... (540) -- --
Common Shares issued for stock
options exercised............... -- -- 385
Common Shares issued for OP Unit
conversions..................... -- -- 1,631
Adjustment for minority interest
of unitholders in Operating
Partnership at dates of capital
transactions.................... -- -- 2,815
Issuance of Convertible Preferred
Stock, net of $692 in issuance
costs........................... -- -- 19,309
Loan to executive officer to
purchase Common Shares.......... -- -- (392)
----- ------- --------
BALANCES, DECEMBER 31, 1998....... (540) $ 2,419 $107,044
Net income allocated to common
shareholders.................... -- $ 6,328 $ 6,328
Distributions paid ($1.12 per
share).......................... -- (6,415) (6,415)
Common Shares issued, net of $200
of issuance costs............... -- -- 19,813
Restricted Common Shares issued to
employees, net of cancellations
of 500 Common Shares............ (22) -- --
Amortization of restricted share
grants and forgiveness of
executive loans................. 280 -- 436
Common Shares issued for stock
options exercised............... -- -- 22
Common Shares issued for OP Unit
conversions..................... -- -- 242
Adjustment for minority interest
of unitholders in Operating
Partnership at dates of capital
transactions.................... -- -- (733)
Issuance of Convertible Preferred
Stock, net of $625 in issuance
costs........................... -- -- 59,375
Loan to executive officer to
purchase Common Shares.......... -- -- 1
Common Shares issued as
compensation to trustees........ -- -- 177
Conversion of Warrants to OP Units
in Operating Partnership........ -- -- (560)
----- ------- --------
BALANCES, DECEMBER 31, 1999....... $(282) $ 2,332 $185,730
===== ======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
KEYSTONE PROPERTY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-------------------------------
1999 1998 1997
--------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income allocated to common shareholders............... $ 6,328 $ 11,173 $ 1,243
Adjustments to reconcile net income allocated to common
shareholders to net cash provided by operating
activities-.............................................
Depreciation and amortization........................... 17,821 7,554 909
Amortization of debt premiums........................... (701) (221) --
Amortization of deferred compensation costs and loan
forgiveness on executive stock loans................... 436 -- --
Gain on sales of assets................................. (1,284) (11,952) (4,608)
Extraordinary loss...................................... -- 110 --
Increase in straight-line rents......................... (1,867) (1,282) --
Decrease in investment in direct financing lease........ 247 213 --
Buyout of employment agreements and options............. -- -- 2,536
Equity in losses (income) from equity method
investments............................................ 62 1,167 (404)
Amortization of investment in partnership in excess of
underlying equity...................................... -- -- 356
Common Shares issued for trustees compensation.......... 177 -- 41
Income allocated to preferred shareholders and preferred
unitholders............................................ 5,368 55 --
Minority interest....................................... 5,592 9,452 876
Cash provided by (used in) -
Restricted cash....................................... (1,370) 367 (11)
Accounts receivable................................... (1,310) (593) (11)
Other assets.......................................... (1,449) (2,734) 314
Accrued interest...................................... 2,036 122 283
Accounts payable, accrued expenses and other
liabilities.......................................... 3,272 1,541 563
Deferred rent revenue................................. 1,174 1,415 --
--------- -------- --------
Net cash provided by operating activities........... 34,532 16,387 2,087
--------- -------- --------
INVESTING ACTIVITIES:
Properties acquired, net of cash acquired................. (198,549) (300,757) (17,933)
(Advances to) repayments of advances from Keystone Realty
Services, Inc........................................... 722 (1,997) (150)
Capital expenditures...................................... (3,479) (906) (1,152)
Construction in progress expenditures..................... (4,429) -- --
Payment of leasing commissions............................ (2,877) (981) --
Increase (decrease) in cash escrows from deferred
exchanges............................................... -- 2,540 (3,764)
Proceeds from sales of assets, net........................ 9,538 41,001 19,840
Partnership cash distributions received................... -- -- 25
--------- -------- --------
Net cash used in investing activities............... (199,074) (261,100) (3,134)
--------- -------- --------
FINANCING ACTIVITIES:
Issuances of Common Shares for stock options exercised.... 22 385 --
Issuances of Common and Convertible Preferred Stock, net
of issuance costs....................................... 37,689 36,748 20,780
Distributions paid on Common Shares....................... (8,375) (6,308) (985)
Distributions paid on Convertible Preferred Stock and
Convertible Preferred Units............................. (3,423) -- --
Distributions paid on OP Units............................ (7,729) (4,994) (688)
Proceeds from mortgage notes payable...................... 133,996 137,064 9,200
Repayment of mortgage notes payable....................... (3,061) (50,111) (10,236)
Payments of deferred financing costs...................... (1,830) (6,326) (694)
Net borrowings under Credit Facility...................... 18,150 123,830 --
--------- -------- --------
Net cash provided by financing activities............... 165,439 230,288 17,377
--------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ 897 (14,425) 16,330
CASH AND CASH EQUIVALENTS, beginning of year................ 3,247 17,672 1,342
--------- -------- --------
CASH AND CASH EQUIVALENTS, end of year...................... $ 4,144 $ 3,247 $ 17,672
========= ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 27,508 $ 14,091 $ 3,188
========= ======== ========
</TABLE>
See Notes 3 and 7 for disclosure of non-cash investing and financing activities
in 1999 and 1998.
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
KEYSTONE PROPERTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
Keystone Property Trust is a self-administered and self-managed real estate
investment trust ("REIT") which was organized as a Maryland corporation in 1994
under the name of American Real Estate Investment Corporation (the
"Predecessor"). On October 13, 1999, the Company re-organized as a Maryland REIT
through the merger of the Predecessor with and into Keystone Property Trust (the
"Company"). Simultaneously, the name of its operating partnership, American Real
Estate Investment, L.P. (the "Operating Partnership") was changed to Keystone
Operating Partnership, L.P., and the name of its management company was changed
to Keystone Realty Services, Inc. (the "Management Company") from American Real
Estate Management, Inc. The Company also changed its ticker symbol on the
American Stock Exchange from "REA" to "KTR" effective October 13, 1999.
The Predecessor was previously engaged in the ownership and operation of
multi-family residential properties located in certain markets within the
Southwestern United States. In connection with the transactions that were
consummated on December 12, 1997 (the "Reorganization"), the Predecessor
modified its strategy to focus on the acquisition of industrial and office
properties located in the Eastern United States. In June 1998, the Predecessor
sold its last remaining multi-family residential property, Quadrangles Village
Apartments (Note 3).
As of December 31, 1999, the Company owned 98 industrial and 34 office
properties aggregating 16.2 million square feet and 2.3 million square feet,
respectively, and an investment in a direct financing lease (the "Properties").
The Properties are located in Central Pennsylvania; Northern New Jersey; New
York State; Ohio; Indianapolis, Indiana; and Greenville and Spartanburg, South
Carolina and have an overall occupancy of 98.9% at December 31, 1999. The
Company conducts all of its service operations, including leasing and property
management through the Management Company. As part of the Reorganization, the
Operating Partnership acquired 100% of the preferred stock of the Management
Company, which entitles the Operating Partnership to receive 95% of the amounts
paid as dividends by the Management Company.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The Company is the sole general partner of the Operating Partnership with an
ownership interest of approximately 56% at December 31, 1999. The Company is
also the sole stockholder of several other subsidiary entities. The accompanying
consolidated financial statements include the account balances of the Company,
the Operating Partnership and the Company's wholly-owned and majority-owned
subsidiaries. All significant intercompany accounts and transactions have been
eliminated in consolidation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
periods. Actual results could differ from those estimates.
F-7
<PAGE>
KEYSTONE PROPERTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVESTMENT IN REAL ESTATE
Investment in real estate is recorded at cost and depreciated over the
estimated useful lives of the related assets. Expenditures for additions,
renewals and betterments which extend the useful life of the properties are
capitalized. Routine maintenance and repairs are charged to expense as incurred.
The estimated useful lives of the assets are as follows:
<TABLE>
<CAPTION>
YEARS
---------------------
<S> <C>
Buildings and improvements........................... 10-35
Land improvements.................................... 15
Tenant improvements.................................. Applicable Lease Term
</TABLE>
At December 31, 1999 and 1998, the Company had an investment in a direct
financing lease. The net investment in this lease was $1.5 million and
$1.7 million for 1999 and 1998, respectively, which consists of the gross
investment of $2.1 million and $2.6 million, net of unearned income of $640,000
and $918,000, respectively. The unearned income is amortized over the lease term
as annual rent payments are collected in order to produce a constant periodic
rate of return on the net investment in this lease.
ASSETS HELD FOR SALE
The Company accounts for properties as assets held for sale when a
commitment has been made to a formal plan of disposition. The Company reports
its assets to be disposed of at the lower of carrying value or fair value less
the cost to sell the related asset. At December 31, 1999, the Company has
classified $154.5 million of real estate, at net carrying value, as assets held
for sale. At December 31, 1999, assets held for sale consists of 15 office
properties and 11 industrial properties. As of December 31, 1998, a community
shopping center located in Northern New Jersey was shown in the accompanying
consolidated balance sheet as held for sale. This asset was sold in
February 1999. In accordance with Financial Accounting Standard No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of", ("SFAS No. 121") the Company has suspended depreciation charges
on assets held for sale as of the date disposition plans were adopted.
In accordance with SFAS No. 121, the Company assesses its assets for
impairment whenever events or changes in circumstances indicate that the
carrying amount of a respective asset that the Company expects to hold and use
may not be recoverable. In performing the review for recoverability, the Company
estimates the future cash flows expected to result from the use of the asset and
its eventual disposition. If the sum of the expected future cash flows
(undiscounted and without interest charges) is less than the carrying amount of
the asset, the Company will recognize an impairment loss. The impairment loss is
measured as the amount that the carrying value of the asset exceeds the fair
value of the asset. Estimates of fair value are based on quoted market prices in
active markets or, if quoted market prices are not available, the best
information available in the circumstances, such as the present value of
estimated expected future cash flows. Based upon management's review, no such
provisions were necessary in 1999, 1998 or 1997.
F-8
<PAGE>
KEYSTONE PROPERTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CAPITALIZATION POLICY
The Company capitalizes all direct and indirect costs, including interest
costs and payroll costs, associated with real estate assets under construction
and land under development by the Company and real estate assets under
construction and land under development, which are held in joint ventures.
During 1999, the Company capitalized $513,000 of interest costs associated with
assets under construction or development. No amount was capitalized in 1998, as
the Company had no assets under construction or active development.
EQUITY METHOD INVESTMENTS
The equity method of accounting is used to account for the Company's
non-controlling interest in 100% of the preferred stock of the Management
Company. The Company sold its non-controlling general partner interest in
Emerald Vista Associates, L.P. in September 1997, as part of its strategy to
sell its interest in multi-family assets.
The equity method of accounting is used to account for the Company's 50%
non-controlling interest in a joint venture to develop 491 acres of land in
Indianapolis, Indiana and a joint venture to construct a 500,000 square foot
industrial building located in Indianapolis, Indiana (the "Indianapolis Joint
Ventures"). At December 31, 1999, the Company has an aggregate investment of
approximately $982,000 in the Indianapolis Joint Ventures, which is included in
other assets in the accompanying financial statements.
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH
For purposes of reporting cash flows, the Company considers all highly
liquid investments purchased with an original maturity of three months or less
to be cash equivalents. Restricted cash represents amounts in escrow for payment
of property taxes, insurance or capital improvements, as required by the
Company's lenders.
DEFERRED FINANCING AND LEASING COSTS
Deferred financing costs are amortized on a straight-line basis over the
life of the related mortgage loans. Amortization is included in interest expense
in the accompanying statements of operations. Deferred leasing costs, which
include all direct and indirect costs associated with the rental of the
Company's properties, are amortized on a straight-line basis over the term of
the related leases.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair values of current assets and payables approximate their carrying amount
due to their short-term nature. The carrying amounts of the mortgage notes
payable at December 31, 1999 and 1998 approximated their respective fair values,
as determined by using year-end interest rates and market conditions.
ALLOCATIONS OF INCOME AND LOSSES
Net income and losses of the Operating Partnership are allocated to the
Company and limited partners in accordance with their respective ownership
interests. The Company's ownership interest in
F-9
<PAGE>
KEYSTONE PROPERTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
the Operating Partnership was approximately 56% and 53% and the limited
partners' ownership was approximately 44% and 47% at December 31, 1999 and 1998,
respectively. For the periods prior to the restatement of the Partnership
Agreement in connection with the Reorganization, the net income of the Operating
Partnership for each year was allocated as follows: an amount representing 80%
of the number of Common Shares outstanding at the end of each calendar year
(equivalent to approximately $904,000 for 1997) was allocated to the Company.
Any remaining net income for each such year was then allocated to the limited
partners until the cumulative net income allocated to the limited partners for
the current and all prior years was equal to approximately 42% of total
cumulative net income since inception. Net losses of the Operating Partnership
are allocated to all the partners in proportion to their percentage interests in
accordance with the terms of the amended and restated partnership agreement.
REVENUE RECOGNITION
Revenue is recognized on the accrual basis of accounting. Rental income
under leases in excess of one year in length is recognized using the
straight-line method under which contractual rent increases are recognized
evenly over the lease term. Tenant reimbursements are accrued as revenue in the
same period the related expenses are incurred by the Company.
INCOME TAXES AND OTHER
The Company elected to be taxed as a REIT under Sections 856 through 860 of
the Internal Revenue Code and applicable Treasury Regulations, commencing with
its taxable year ended December 31, 1993. The Company believes that it is
organized and will continue to operate in such a manner as to qualify for
taxation as a REIT under the Internal Revenue Code.
A REIT is generally not subject to federal income taxes on that portion of
its ordinary income or capital gain that is currently distributed to
shareholders as the REIT provisions of the Internal Revenue Code generally allow
a REIT to deduct dividends paid to its shareholders to the extent it distributes
annually at least 95% of its taxable income and satisfies certain other
requirements. Accordingly, no provision has been made for federal income taxes
in the accompanying consolidated financial statements. If the Company fails to
qualify as a REIT in any taxable year, the Company will be subject to federal
income tax at regular corporate rates on its taxable income. The Company and
certain of its subsidiaries are subject to certain state and local taxes. The
provision for these taxes has been reflected in general and administrative
expense in the accompanying financial statements. The Management Company is
subject to federal, state and local taxes on its income as it is organized as a
"C" corporation.
F-10
<PAGE>
KEYSTONE PROPERTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
A summary of the tax status of the Company's distributions for the three
years ended December 31 is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
COMMON SHARE DISTRIBUTIONS
Total distributions paid per share.......................... $ 1.12 $ .97 $ .87
Percent taxable as ordinary income.......................... 100.00% 100.00% 6.92%
Percent taxable as long term capital gains.................. 0.00% 0.00% .28%
Percent non-taxable return of capital....................... 0.00% 0.00% 92.80%
Classified as ordinary income--per share (1)................ $ .95 $ 1.14 $ .06
Classified as return of capital--per share.................. $ -- $ -- $ .81
PREFERRED SHARE AND PREFERRED UNIT DISTRIBUTIONS
Distributions declared (in 000's)........................... $5,368 $ 55 $ --
</TABLE>
- ------------------------
(1) The Company reported that approximately $.10 or approximately 36% of the
distribution declared on December 15, 1998 with a record date of
December 31, 1998 and a payable date of January 31, 1999, was taxable in
1999 in accordance with Internal Revenue Code Section 857(b)(8).
Approximately $.17 of the remaining distribution was previously reported to
shareholders as a 1998 distribution.
There are differences in the Company's bases of assets and liabilities,
specifically relating to minority interests, between those used in financial
reporting and the tax basis used for annual federal and state income tax
returns. The net federal tax basis of the Company's real estate investments at
December 31, 1999 and 1998 was approximately $690.0 million and $445.0 million,
respectively.
EARNINGS PER SHARE
In 1997, The Company discloses earnings per share ("EPS") in accordance with
Statement of Financial Accounting Standard No. 128, ("SFAS No. 128"). SFAS
No. 128 established simplified standards for computing and presenting EPS and
supercedes the standards in APB Opinion No.15, making them more comparable to
international EPS standards. It requires the dual presentation of basic and
diluted EPS on the income statement and requires a reconciliation of the
numerator and denominator of basic EPS to diluted EPS.
RECLASSIFICATIONS
Certain amounts in the 1998 and 1997 consolidated financial statements have
been reclassified in order to conform with the presentation in the 1999
consolidated financial statements.
IMPACT OF ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED
Statement of Financial Accounting Standard ("SFAS No. 133"), "Accounting for
Derivative Instruments and Hedging Activities". SFAS No. 133 is effective for
all fiscal quarters of all fiscal years beginning after June 15, 2000. SFAS
No. 133 expands the definition of derivatives and requires every derivative to
be recorded on the balance sheet as either an asset or liability measured at its
fair value. It requires that companies must formally document, designate and
assess the effectiveness of transactions that receive hedge accounting.
F-11
<PAGE>
KEYSTONE PROPERTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SFAS No. 133 requires that changes in the derivative's fair value be
recognized in the applicable financial reporting period in earnings unless
specific hedge criteria are met. At December 31, 1999, the Company does not have
any investments in derivative products, as a result, the impact of adopting SFAS
No. 133 is not determinable. The Company is planning to adopt SFAS No. 133
beginning January 1, 2001.
3. ACQUISITIONS AND DISPOSITIONS OF REAL ESTATE INVESTMENTS
1999 TRANSACTIONS
During 1999, the Company acquired 35 properties (34 industrial properties
and one office property) and 112 acres of land for an aggregate purchase price
of approximately $322.1 million. These properties contained an aggregate of
approximately 6.8 million square feet consisting of 6.5 million square feet of
industrial and 290,000 square feet of office. Consideration for these
acquisitions consisted of cash of approximately $198.5 million, future cash
payments of $5.2 million (Note 7), $27.6 million of debt assumed (including debt
premiums of $850,000), $40.0 million of Convertible Preferred Stock at a
conversion price of $16.00, $47.1 million of Convertible Preferred Units of
limited partnership interest in the Operating Partnership issued at conversion
prices ranging from $16.00 to $16.50 per unit, $2.2 million in units of limited
partnership interest ("OP Units") in the Operating Partnership issued at prices
ranging from $15.26 to $17.50 per unit and the issuance of $1.5 million of
Common Shares. The Convertible Preferred Stock and OP Units issued as part of
these transactions require a quarterly dividend or guaranteed payment at an
annual rate ranging from 9% to 9.75%.
In August 1999, the Company agreed, as part of a phased transaction, to
acquire certain industrial properties from Reckson Morris Operating Partnership,
L.P. ("RMOP") and Reckson Morris Industrial Trust ("RMIT"). The first phase of
this transaction was consummated on September 27, 1999 and involved the
acquisition of RMOP from RMIT. RMOP owned 22 industrial properties aggregating
3.9 million square feet and 105 acres of land. The second phase of this
transaction is scheduled to close in the second quarter of 2000. This phase
requires the Company to acquire entities owning six industrial properties,
aggregating approximately 2.2 million square feet and six acres of land in New
Jersey for a purchase price of approximately $100.0 million. In addition, the
Company has acquired options to purchase an additional 259 acres of land in New
Jersey on which the Company can develop an additional 2.8 million square feet of
industrial properties. The Company has a $10.0 million letter of credit
outstanding as a deposit on the second and final phase of this transaction.
The Company currently has under construction an 80,000 square foot office
building in Allentown, Pennsylvania, of which approximately 66,000 square feet
will be occupied by Aetna, Inc. It is anticipated that construction on this
building will be completed in the second quarter of 2000.
In March 1999, the Company sold Urban Farms Shopping Center for
$10.0 million, which resulted in a gain of approximately $1.3 million. The net
proceeds from this asset sale were reinvested in the acquisition of an
industrial property in 1999.
The following unaudited pro forma financial information of the Company for
the years ended December 31, 1999 and 1998 gives effect to the properties
acquired and sold and the Common Shares
F-12
<PAGE>
KEYSTONE PROPERTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. ACQUISITIONS AND DISPOSITIONS OF REAL ESTATE INVESTMENTS (CONTINUED)
and Preferred Stock and OP Unit issuances during 1999 as if the purchases, sales
and issuances had occurred on January 1, 1998.
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
(IN 000'S, EXCEPT FOR
PER SHARE DATA)
---------------------
UNAUDITED 1999 1998
- --------- --------- ---------
<S> <C> <C>
Pro forma total revenue..................................... $108,525 $99,322
Pro forma net income allocated to Common Shares............. $ 5,058 $ 4,356
Pro forma net income per Common Share--Basic................ $ .58 $ .50
Pro forma net income per Common Share--Diluted.............. $ .56 $ .48
</TABLE>
1998 TRANSACTIONS
During 1998, the Company acquired 78 properties (24 office properties and 54
industrial properties) which contained an aggregate of approximately
9.9 million square feet (1.5 million square feet of office and 8.4 million
square feet of industrial) for an aggregate purchase price of approximately
$418.0 million. Consideration for these acquisitions consisted of cash of
approximately $300.0 million, $49.0 million of debt assumed (including debt
premiums of $3.8 million), $51.0 million in OP Units in the Operating
Partnership, issued at prices ranging from $16.50 to $17.50 per unit,
$7.5 million in Convertible Preferred Units, and the issuance of $11.0 million
of Common Shares. The 300,000 Convertible Preferred Units issued are convertible
into Common Shares at $16.50 and require a quarterly guaranteed payment at the
annual rate of 9% which increased to 9.5% effective December 23, 1999. These
Convertible Preferred Units are redeemable by the Company at par at any time.
In 1998, the Company sold two multi-family properties (Americana Lakewood
Apartments and Quadrangle Village Apartments) which generated net proceeds of
$41.0 million and gains of $12.0 million. The net proceeds from these asset
sales were re-invested in industrial and office acquisitions in 1998.
The following unaudited pro forma financial information of the Company for
the years ended December 31, 1998 and 1997 gives effect to the properties
acquired and sold during 1998 and 1997 as if the purchases, sales and Common
Share and Preferred Stock offerings and OP Unit issuances had occurred on
January 1, 1997.
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
(IN 000'S, EXCEPT FOR
PER SHARE DATA)
---------------------
UNAUDITED 1998 1997
- --------- --------- ---------
<S> <C> <C>
Pro forma total revenue..................................... $71,834 $67,331
Pro forma net income allocated to common shares............. $ 6,365 $ 5,479
Pro forma net income per common share-Basic................. $ .86 $ .74
Pro forma net income per common share-Diluted............... $ .82 $ .71
</TABLE>
F-13
<PAGE>
KEYSTONE PROPERTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. ACQUISITIONS AND DISPOSITIONS OF REAL ESTATE INVESTMENTS (CONTINUED)
1997 TRANSACTIONS
On December 12, 1997, the Company consummated the acquisition of the McBride
Portfolio which was effected through the contribution by McBride Hudson Bay,
L.P. and various entities affiliated with it (collectively, "McBride") of
interests in certain entities owning 15 office and industrial properties located
in Northern New Jersey, the merger of Fairlawn Industrial Park, Inc. ("FLIP")
with and into the Company and $8.4 million in cash in return for the issuance of
2.0 million Common Shares, 3.0 million OP Units, (representing aggregate
consideration valued at approximately $55.0 million), 125,000 of seven year
warrants to acquire OP Units at an exercise price of $11 per OP Unit and the
assumption of $45.0 million of mortgage debt. The Company also acquired all of
the outstanding preferred stock of the Management Company, a full service real
estate management, construction and brokerage company in consideration for the
issuance of 363,636 OP Units valued at $4.0 million, and warrants with a seven
year term to acquire 250,000 OP Units at an exercise price of $11.00 per OP
Unit.
In December 1997, the Company, through its Operating Partnership, also
acquired six industrial properties aggregating approximately 850,000 square
feet. The aggregate purchase price for these acquisitions was $28.6 million,
consisting of $12.6 million in cash and $16.0 million in debt assumed, which
included $680,000 of debt premiums.
Simultaneous with these transactions, Hudson Bay Partners II, L.P. ("Hudson
Bay"), CRA Real Estate Securities and Robert Branson (a former director of the
Predecessor) invested an aggregate of $21.6 million in the Company in return for
the issuance of an aggregate of 2.0 million Common Shares. In addition, Hudson
Bay was issued 300,000 Common Share warrants in the Company with a seven-year
term at an exercise price of $11.00 per share.
The Company sold two multi-family properties (Timberleaf and Sedona
Apartments) in 1997 and its 50% general partnership interest in Emerald Vista,
which generated net proceeds of $19.8 million and gains totaling $4.6 million.
All acquisitions described above were accounted for by the purchase method.
The results of operations for each of the acquired properties have been included
from the respective purchase dates. All pro forma financial information
presented within this footnote is unaudited and is not necessarily indicative of
the results that actually would have occurred if acquisitions had been
consummated on the respective dates indicated, nor does the pro forma
information purport to represent the results of operations for future periods.
4. INVESTMENTS IN UNCONSOLIDATED COMPANIES
KEYSTONE REALTY SERVICES, INC.
The Company accounts for its investment in 100% of the non-voting preferred
stock of the Management Company in accordance with the equity method of
accounting. The Company is entitled to receive 95% of the amounts paid as
dividends by the Management Company. The Management Company is responsible for
various activities including the management, leasing and development of the
Company's properties and properties owned by third parties as well as providing
other real estate related services for third parties.
F-14
<PAGE>
KEYSTONE PROPERTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. INVESTMENTS IN UNCONSOLIDATED COMPANIES (CONTINUED)
INDIANAPOLIS JOINT VENTURES
In December 1998, the Company entered into an agreement to develop 491 acres
of land located in Airtech Park outside Indianapolis, Indiana. The terms of the
agreement give the Company an option and right of first refusal until
December 13, 2003 to develop distinct land parcels through joint ventures in
which the Company will have a 50% non-controlling interest. As consideration for
its investment in each joint venture the Company will issue OP Units to its
joint venture partner based upon a pre-determined formula which is based on the
number of acres in the specific development parcel. In addition, the Company
will be required to fund its 50% share of any additional capital requirements
for each venture. The Company is also required to make option payments on a
quarterly basis at a rate equal to its then current distribution rate to
unitholders in the Operating Partnership for the OP Units which have yet not
been issued in consideration for interests in specific joint ventures. On the
earlier of December 31, 2003 or the date in which the Company acquires a 50%
interest in at least 75% of the 491 acres of land, the joint venture partner has
an option to require the Company to purchase the remaining 50% interest in the
undeveloped land. In the years ended December 31, 1999 and 1998, the Company
incurred and capitalized $424,000 and $30,000 related to this option.
At December 31, 1999, OP Units equivalent to approximately $200,000 have
been issued related to this venture's development of Airtech Park. One of the
joint ventures has completed construction of a 500,000 square foot industrial
building on 34 acres in Airtech Park. In conjunction with this development
project the Company agreed to jointly and severally co-guarantee $19.5 million
of construction and permanent financing, and contribute $2.5 million of capital.
At December 31, 1999, the Company has contributed $982,000 related to this
commitment. The Company also had a commitment to acquire its venture partner's
50% ownership interest in the building at the completion of its construction for
approximately $8.9 million less the capital already invested by the Company in
the venture. This acquisition was consummated in January 2000 (Note 14).
5. INDEBTEDNESS
REVOLVING CREDIT FACILITY
On April 30, 1998, the Company obtained a three year $150 million senior
secured revolving credit facility ("Credit Facility"). On June 30, 1999, the
terms of the Credit Facility were amended and restated. As a result, the
maturity of the Credit Facility was extended to April 29, 2002 and several
financial covenants were modified. The LIBOR interest rate was modified to a
sliding scale based on the Company's leverage. The scale ranges from LIBOR
+1.625% to LIBOR +2.25%. Borrowings under the Credit Facility enable the Company
to fund acquisitions and development of real estate, as well as provide working
capital and funds for capital improvements at a variable rate which was equal to
a LIBOR rate plus 2.25% (8.00%) at December 31, 1999 or the Prime Rate, at the
Company's option. In addition, a fee ranging from .25% to .375% per annum,
depending on the level of outstanding borrowings, on the unused amount of the
Credit Facility is payable quarterly. The Company is also able to elect to
increase the amount available under the Credit Facility to $250 million, subject
to the syndication of an additional $100 million.
At December 31, 1999 and 1998, the Company had $141.9 million and
$123.8 million outstanding related to the Credit Facility. The Credit Facility
is recourse to the Company and the Operating Partnership and is secured by
cross-collateralized and cross-defaulted first mortgage loans on 63 and 53
F-15
<PAGE>
KEYSTONE PROPERTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. INDEBTEDNESS (CONTINUED)
properties at December 31, 1999 and 1998, respectively. The weighted average
balance outstanding and weighted average interest rate for the years ended
December 31, 1999 and 1998 for borrowings under the Credit Facility were
$137.4 million and $77.8 million and 7.19% and 7.39%, respectively. The Credit
Facility requires the Company to meet certain financial covenants, related to
the Company's leverage and interest coverage ratios, on a quarterly, annual and
ongoing basis. The Company is in compliance with these debt covenants as of
December 31,1999.
MORTGAGE NOTES PAYABLE
Mortgage notes of $376.4 million and $218.7 million encumbered 60 and 45 of
the properties as of December 31, 1999 and 1998, respectively. At December 31,
1999 and 1998, interest rates on the mortgage loans ranged from fixed rates of
6.88% to 9.75% and 7.03% to 9.75%, respectively. Mortgage notes had weighted
average interest rates of 7.68%, 7.75% and 7.61% during December 31, 1999, 1998
and 1997, respectively. The maturities for these notes range from
September 2000 through October 2022.
In connection with several acquisitions in 1999, 1998 and 1997, the Company
assumed certain mortgage notes with an aggregate principal value of
$75.9 million and a fair value of $80.5 million. The difference between the
principal value and the fair value was recorded as a debt premium. The debt
premium is being amortized into interest expense over the term of the related
mortgage debt. In 1999 and 1998, $701,000 and $221,000 was amortized into
interest expense related to this debt premium, respectively.
In October 1998, the Company refinanced $66.0 million of amounts borrowed
under the Credit Facility and $8.4 million of other mortgage debt with
$77.7 million of mortgage debt with a fixed rate of 7.50%. As a result of this
refinancing, the Company wrote off $220,000 of unamortized deferred financing
costs associated with this mortgage debt as an extraordinary loss on debt
extinguishment in 1998.
As a condition of certain of the mortgage loans, initial and ongoing cash
reserves are required to be funded for real estate taxes, insurance, tenant
rollover costs and capital reserves. The aggregate balances in these reserve
accounts at December 31, 1999 and 1998 were approximately $3.5 million and
$2.1 million, respectively.
In December 1999, the Company obtained a $2.0 million working capital
facility from a commercial lender. The terms of the facility required monthly
interest at LIBOR + 1.85% and maturity in January 2003. At December 31, 1999, no
amounts were borrowed from this facility.
F-16
<PAGE>
KEYSTONE PROPERTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. INDEBTEDNESS (CONTINUED)
Maturities of mortgage notes payable, excluding debt premiums as of
December 31, 1999, over the next five years are as follows:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT DUE AT
(IN 000'S) AMORTIZATION MATURITY TOTAL
- ---------- ------------ ------------- --------
<S> <C> <C> <C>
2000..................................................... $3,860 $ 2,664 $ 6,524
2001..................................................... 3,431 5,357 8,788
2002..................................................... 7,241 150,776 158,017
2003..................................................... 5,940 4,067 10,007
2004..................................................... 6,286 20,254 26,540
2005 and thereafter...................................... -- -- 308,545
--------
TOTAL.................................................... $518,421
========
</TABLE>
6. SHAREHOLDERS' EQUITY
The following table summarizes the Company's issuance of shares of
Convertible Preferred Stock and Common Shares in 1999 and 1998:
<TABLE>
<CAPTION>
NUMBER OF
SHARES
CONVERTIBLE NUMBER OF EXERCISE OR NET CASH
DATE OF PREFERRED COMMON CONVERSION PROCEEDS
TYPE OF ISSUANCE ISSUANCE STOCK SHARES SHARE PRICE PRICE (IN 000'S)
- ------------------------------------- --------------- ----------- -------------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
1999 ACTIVITY
Stock offering (1)................... Various -- 1,276,800 $ 14.50 -- $18,314
Convertible Preferred Stock
Offering (2)......................... 9/27/99 1,600,000 -- -- $ 16.00 --
Convertible Preferred Stock Offering
(3)................................ 9/27/99 800,000 -- -- $ 15.75 19,375
Stock offering (4)................... 9/27/99 -- 103,878 $ 14.44 -- --
Stock issued as compensation (5)..... Various -- 11,830 $14.50-15.56 -- --
Unit redemptions (6)................. Various -- 19,416 -- -- --
Stock options exercised.............. 4/10/99 -- 2,200 -- $ 10.00 22
Executive stock issuance and
Restricted Stock Awards (7)........ 3/24/99 -- 101,554 $13.00-14.50 -- --
--------- ------------ -------
2,400,000 1,515,678 $37,711
========= ============ =======
1998 ACTIVITY
Convertible Preferred Stock offering
(8)................................ 12/24/98 800,000 -- -- $ 16.50 $19,308
Restricted Stock Awards (7).......... 12/11/98 -- 37,242 $ 14.50 -- --
Stock offering (9)................... 8/19/98 -- 720,743 $ 15.81 -- --
Stock offering (10).................. 7/9/98 -- 1,092,051 $ 16.50 -- 17,440
Unit redemptions (6)................. Various -- 139,948 -- -- --
Stock options exercised.............. Various -- 38,500 -- $ 10.00 385
--------- ------------ -------
800,000 2,028,484 $37,133
========= ============ =======
</TABLE>
- ------------------------------
(1) These Common Shares were issued to certain trustees and executive officers
of the Company between October 12, 1999 and December 29, 1999.
(2) Offering for 1,600,000 shares of non-voting Series B Convertible Preferred
Stock, par value $.001 per share, with liquidation preference of $25.00 per
share. The shares are convertible into Common Shares at $16.00 per share.
Dividends are payable
F-17
<PAGE>
KEYSTONE PROPERTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. SHAREHOLDERS' EQUITY (CONTINUED)
quarterly at an annual rate of $2.4375 per share of Series B Preferred Stock
and are subject to an increase in the event the annual dividend per share on
the Common Shares exceeds $1.56. The Series B Preferred Stock is redeemable
by the Company at any time for cash payments equal to an amount which
produces a 17% internal rate of return to the preferred shareholder. After
the fifth anniversary of the issuance date through the ninth anniversary of
the redemption price is based on a defined premium as specified in the
subscription agreement.
(3) Offering for 800,000 shares of non-voting Series C Convertible Preferred
Stock, par value $.001 per share, with liquidation preference of $25.00 per
share. The shares are convertible into Common Shares at $15.75 per share.
Dividends are payable quarterly at an annual rate of $2.4375 per share of
Series C Preferred Stock and are subject to an increase in the event the
annual dividend per share on the Common Shares exceeds $1.54. The Series C
Preferred Stock is not redeemable by the Company prior to September 27,
2004.
(4) Shares issued as partial consideration for the RMIT acquisition.
(5) Shares issued to trustees as compensation in lieu of cash for trustee fees.
(6) Unit redemptions represent Common Shares issued upon conversion of OP Units.
(7) These restricted stock awards were issued to certain executives and
employees and vest over a two-year period from the date of grant. (Note 9)
(8) Offering for 800,000 shares of non-voting Series A Convertible Preferred
Stock, par value $.001 per share, with a liquidation preference of $25.00
per share. These shares are convertible into Common Shares at $16.50 per
share. Dividends are payable quarterly at an annual rate of $2.25 per
Series A Preferred Share and are subject to an increase in the event the
annual dividend per share on the Common Shares exceeds $1.485. The Series A
Preferred Shares are not redeemable by the Company prior to December 15,
2003.
(9) These shares were issued as a partial repayment for certain indebtedness
encumbering certain properties in the Pioneer Portfolio, which was acquired
on August 19, 1998.
(10) Investors were funds managed by Morgan Stanley Asset Management, Inc. and
CRA Real Estate Securities, L.P. This private placement includes a provision
for a purchase price adjustment on July 9, 2000 if the Company fails to
consummate a Qualifying Offering, as defined in the subscription agreement,
with net proceeds to the Company of at least $150.0 million and a per share
price of at least $16.50. This purchase price adjustment is equal to 2.5% of
the Common Shares outstanding on July 9, 2000 multiplied by the average
price of the Company's Common Shares during the 30-day period ending on the
third business day prior to July 9, 2000.
MINORITY INTEREST AND CONVERTIBLE PREFERRED UNITS
Minority interest represents interests in the Operating Partnership owned by
its limited partners. Income allocated to the minority interest is based on the
ownership of the limited partners throughout the year. Pursuant to the amended
and restated partnership agreement, the limited partners of the Operating
Partnership received a conversion right, which enables each limited partner to
convert their interests in the Operating Partnership into Common Shares or cash,
at the election of the Company at any time on a one for one basis. The number of
shares relating to the conversion right remains stable irrespective of the
market price of the Company's Common Shares. The limited partners, in the
aggregate, excluding 2.2 million of Convertible Preferred Units outstanding
could convert their partnership interests in the Operating Partnership into
7.3 million, 7.0 million and 4.1 million Common Shares as of December 31, 1999,
1998 and 1997, respectively. OP Units totaling 19,416, 139,948 and 96,240 were
converted for Common Shares in 1999, 1998 and 1997, respectively.
F-18
<PAGE>
KEYSTONE PROPERTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. SHAREHOLDERS' EQUITY (CONTINUED)
The Company has three series of non-voting Convertible Preferred Units
outstanding all of which have a liquidation value of $25 per share. The 300,000
Series B Convertible Preferred Units have a conversion price of $16.50 and
required a preferred return of 9.0% which increases to 9.5% in 2000. The
1,434,136 Series C Convertible Preferred Units have a conversion price of $16.00
and require a preferred return of 9.75%. The 450,700 Series D Convertible
Preferred Units have a conversion price of $16.50 and require a preferred return
of 9.0%. The preferential return on the Series C Convertible Preferred Units is
subject to increase in the event the annual distribution on common OP Units
exceeds $1.56. The Series B Convertible Preferred Units are redeemable by the
Company at any time. The Series C and Series D Convertible Preferred Units are
not redeemable by the Company prior to September 27, 2004 and July 21, 2004,
respectively.
7. RELATED PARTY TRANSACTIONS
The Company subleased office space in Denver, Colorado from Black Creek
Capital, LLC. The lease agreement requires a monthly lease payment of $1,346.
This lease expired on December 31, 1999. A current trustee and a former director
of the Company's predecessor are principal officers and members of Black Creek
Capital, LLC.
The Company has leases with companies in which trustees of the Company are
officers and shareholders. The annual aggregate base rental revenue under these
leases was approximately $974,000 and $1.1 million at December 31, 1999 and
1998, respectively.
The Company incurred costs during 1999 and 1998 related to capital and
tenant improvements of $591,000 and $397,000, leasing commissions of
$1.3 million and $92,000, and repair, maintenance and other costs of $21,000 and
$55,000, respectively, which were earned by the companies in which the Company's
Chairman and one of its trustees are officers and shareholders.
Certain limited partners of the Operating Partnership, which include certain
trustees and entities in which certain trustees have an ownership interest, have
guaranteed an aggregate of approximately $58.4 million and $37.8 million of the
mortgage loans as of December 31, 1999 and 1998, respectively.
Through the Operating Partnership's 100% ownership of the preferred stock of
the Management Company, the Operating Partnership is entitled to receive 95% of
the amounts paid as dividends by the Management Company. The remaining amounts
paid as dividends by the Management Company are paid to the holders of common
stock of the Management Company. Jeffrey E. Kelter, Hudson Bay Partners, L.P.
and McBride own 40%, 30% and 30%, respectively, of the common stock of the
Management Company. No dividends were paid by the Management Company in 1999,
1998 or 1997. Total management fees paid by the Operating Partnership's
properties to the Management Company are included in property operating expenses
in the accompanying statements of operations and amounted to $3.0 million and
$1.1 million during 1999 and 1998, respectively. The Management Company also
receives reimbursements of certain costs attributable to the operation of the
properties. Such reimbursements are included in property operating expenses and
general and administrative expenses in the accompanying statements of operations
and amounted to $2.8 million and $294,000 during 1999 and 1998, respectively.
The Company also incurred $565,000 and $84,000 of leasing commissions in 1999
and 1998 related to services performed by the Management Company. No management
fees, other reimbursements or leasing commissions were incurred in 1997. The
Management Company also manages one property, which is owned by a limited
partnership in which the Company's Chief Executive Officer and President has a
general partnership interest.
F-19
<PAGE>
KEYSTONE PROPERTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. RELATED PARTY TRANSACTIONS (CONTINUED)
In December 1999, the Company acquired an 89% interest (and escrowed OP
Units to purchase the remaining 11%) in a limited partnership, which owns a
407,100 square foot industrial building in Central Pennsylvania. The Company's
Chief Executive Officer and President was the general partner and certain other
executives were limited partners in this limited partnership. Subsequent to this
acquisition, the Company's Chief Executive Officer and President and certain
other executive officers are limited partners in this limited partnership. The
purchase price of this building was $16.0 million and the consideration
consisted of $14.6 million in cash and $1.4 million in OP Units at a price of
$15.26, which was the 30-day average price of the Company's Common Shares prior
to the acquisition date.
In connection with the RMIT transaction, the Company agreed to guarantee a
$12.5 million loan from Reckson Associates Realty Corp. ("Reckson") to certain
shareholders and executives of the Morris Companies (the "Morris Shareholders"),
including Joseph Morris, who was elected a trustee of the Company as a result of
the consummation of the RMIT transaction. Scott Rechler, who is President and
Co-Chief Executive Officer of Reckson, is also a trustee of the Company. The
Morris Shareholders have pledged $25.0 million of Series C Convertible Preferred
OP Units as collateral for this loan which bears interest payable monthly at
15%. Under the terms of the loan agreement, the Morris shareholders are
obligated to pay to Reckson monthly interest at the Prime Rate plus .50% (the
"Morris Interest") and the Company is obligated to pay the difference in
interest cost between the Morris Interest and 15%. During 1999, the Company
incurred $198,000 related to this obligation. The maturity of this loan is the
earlier of September 27, 2001 or the date upon which the Morris Shareholders are
able to consummate a re-financing of this obligation with a commercial lender.
The Company has also loaned an affiliate of the Morris Shareholders
approximately $800,000 under the terms of a note which matures on October 1,
2001. This note requires monthly interest payments equal to the Prime Rate plus
1%.
In connection with the RMIT transaction, the Company is obligated to pay for
the twelve month period beginning January 1, 2000, a monthly construction
management fee to an affiliate of Reckson equal to $308,000. The Company has
capitalized and accrued this obligation as a cost of the RMIT transaction at
December 31, 1999.
The Company is obligated to pay the Morris Companies additional purchase
price related to the RMIT transaction in an amount equal to 1.5% of the monthly
rent collected from the tenants in the acquired buildings. These payments are
required to be made monthly during the period of October 1999 until
October 2002. The Company has estimated the amounts due under this obligation
and has capitalized a portion of these payments aggregating $900,000 as
additional purchase price at December 31, 1999. The remaining portion will be
expensed as incurred over the three-year period as it relates to services to be
performed by the Morris Companies.
As discussed further in Note 9, Hudson Bay, Mr. Kelter and Mr. McBride
contributed their outstanding warrants to the Operating Partnership in exchange
for OP Units.
As further discussed in Notes 9 and 11, two executive officers have
outstanding loans from the Company related to Common Share issuances and
purchases.
F-20
<PAGE>
KEYSTONE PROPERTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. OPERATING LEASES
The Company's properties are leased to tenants generally under operating
leases with expiration dates extending through 2015. Future minimum rentals
under noncancellable operating leases, excluding tenant reimbursements of
operating expenses as of December 31, 1999 are as follows:
<TABLE>
<CAPTION>
(IN 000'S)
----------
<S> <C>
2000........................................................ $ 90,631
2001........................................................ $ 77,534
2002........................................................ $ 66,441
2003........................................................ $ 54,887
2004........................................................ $ 45,722
Thereafter.................................................. $214,324
</TABLE>
The revenue resulting from straight-line rental income adjustments for the
years ended December 31, 1999 and 1998 was $1.9 million and $1.3 million,
respectively. No straight line rent revenue was recognized in 1997. No tenant
represented more than 10% of the minimum rental revenues for 1999, 1998 and
1997.
9. BENEFIT PLANS AND STOCK WARRANTS
STOCK OPTIONS AND RESTRICTED STOCK AWARDS
The Company's Omnibus Incentive Plan (the "Plan"), as amended in 1998, has
authorized the grant of compensatory awards consisting of stock options, stock
awards, stock appreciation rights and other stock-based awards representing up
to 10% of the combined number of Common Shares and OP Units of the Operating
Partnership outstanding to certain officers and employees. Incentive stock
options are to be granted at not less than the fair market value of the
Company's stock on the date of the grant and the term cannot exceed ten years.
The vesting period of each grant varies and is determined at the date of grant.
During 1999, the Company granted 18,000 non-qualified options to certain
employees. During 1998, the Company granted 156,250 incentive stock options and
447,500 non-qualified options to certain employees. Each option is exchangeable
for one Common Share and has an exercise price ranging from $14.50 to $16.50,
the Company's market price at the grant date. These options have a ten-year term
and vest pro-rata in annual installments ranging from two to five years from the
grant date.
In April 1999, the Company issued 100,000 Common Shares to its President and
Chief Executive Officer, Jeffrey Kelter, in consideration for a non-interest
bearing recourse note of $1.3 million. The note is also secured by the 100,000
Common Shares issued to Mr. Kelter. The loan is to be forgiven by the Company
annually at $186,000 per year over its seven-year term as long as Mr. Kelter
remains employed by the Company. These shares carry dividend and voting rights.
This loan has been shown in the accompanying financial statements as a reduction
in shareholders' equity.
In 1999 and 1998, the Company granted 1,554 and 37,242 shares of restricted
Common Shares, respectively, to certain executives and employees under the Plan
as compensation. These shares carry dividend and voting rights and vest over a
two-year period. The shares issued under this Plan were recorded at their fair
market value on the date of grant with a corresponding charge of $22,000 and
$540,000 to shareholders' equity, which was recorded in additional paid-in
capital. The unearned
F-21
<PAGE>
KEYSTONE PROPERTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. BENEFIT PLANS AND STOCK WARRANTS (CONTINUED)
portion is amortized to compensation expense over the two-year vesting period.
At December 31, 1999, the Company amortized $280,000 of compensation expense
relating to these restricted shares.
In 1994, the Company adopted and authorized the Non-Employee Stock Option
Plan (the "Non-Employee Plan") and 300,000 shares were authorized thereunder in
the form of non-qualified stock options for issuance to certain trustees or
consultants. The exercise price for each option granted under the Non-Employee
Plan cannot be less than the fair market value of the Company's Common Shares
underlying the option at the date of grant. The term of each option is ten years
and each option is exercisable upon the date of grant, provided that the option
holder remains a trustee, employee or consultant to the Company during the
exercise period.
The following table summarizes the activity and balance outstanding for each
plan for 1999, 1998 and 1997:
<TABLE>
<CAPTION>
1999 1998 1997
------------------- ------------------- --------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
-------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
OMNIBUS INCENTIVE PLAN
Outstanding, beginning of year.............. 602,250 $15.18 -- 82,000 $ 10.00
Granted..................................... 18,000 15.24 603,750 $ 15.18 45,000 10.00
Exercised................................... -- -- -- --
Forfeited................................... (15,500) 15.08 (1,500) 16.50 (127,000) $10.00
------- ------ ------- -------- --------- ------
Outstanding, end of year.................... 604,750 $15.18 602,250 $ 15.18 -- --
======= ====== ======= ======== ========= ======
NON-EMPLOYEE PLAN
Outstanding, beginning of year.............. 18,000 $10.00 56,500 $ 10.00 104,000 $10.00
Granted..................................... -- -- -- 55,000 10.00
Exercised................................... (2,200) 10.00 (38,500) 10.00 (5,000) 10.00
Forfeited................................... -- -- -- (97,500) 10.00
------- ------ ------- -------- --------- ------
Outstanding, end of year.................... 15,800 $10.00 18,000 $ 10.00 56,500 $10.00
======= ====== ======= ======== ========= ======
</TABLE>
The following table summarizes information about stock options exercisable
at December 31, 1999:
<TABLE>
<CAPTION>
NUMBER OF WEIGHTED AVERAGE
YEAR OPTIONS EXERCISE PRICE
- ---- --------- ----------------
<S> <C> <C>
December 31, 1997.................................. 56,500 10.00
December 31, 1998.................................. 34,667 12.76
December 31, 1999.................................. 181,703 14.43
</TABLE>
Any award issued under the plans which is forfeited, expires or terminates
prior to vesting or exercise is available for future award under the plans. In
connection with the Reorganization, 388,700 options held by certain executives
were cancelled, in consideration for payments aggregating $1.4 million which the
executives elected to receive in the form of 129,449 Common Shares which were
issued as a result of the Reorganization and 22,500 options awarded to certain
directors in 1997 were cancelled at no cost to the Company. In addition, the
Company had entered into employment agreements with two former officers of the
Company and a consulting agreement with the former Chairman of the Board. These
agreements were terminated with the Reorganization. Pursuant to the
F-22
<PAGE>
KEYSTONE PROPERTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. BENEFIT PLANS AND STOCK WARRANTS (CONTINUED)
terms of these agreements, these former officers elected to receive these
payments in 41,817 Common Shares. Accordingly, the cost of terminating these
agreements of approximately $620,000, based upon the December 12, 1997 market
price of the Common Shares, was expensed upon the closing of the Reorganization.
The Company accounts for its stock-based options under Accounting Principles
Board Opinion No. 25, under which no compensation expense related to options has
been recognized, as all options have been granted with an exercise price equal
to or greater than the fair value of the Company's Common Shares on the date of
grant. The Company adopted Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS No. 123") for disclosure
purposes in 1996. In accordance with SFAS No. 123, the fair value of each option
grant has been estimated as of the date of grant using an option pricing model
with the following assumptions for 1999, 1998 and 1997, respectively: 7.00%
dividend yield; an expected life of 3.5 years; expected volatility of 29%, 29%
and 27%; and a risk free interest rate of 5.0%, 4.97% and 5.74%. The weighted
average fair value of those shares granted in 1999, 1998 and 1997 was $2.20,
$1.96 and $1.08, respectively, per option granted. The weighted average
remaining contractual life of the options outstanding is 8.7 years.
Using these assumptions, the fair value of the stock options granted in
1999, 1998 and 1997, which were not cancelled as a result of the Reorganization,
was approximately $45,000, $1,323,000 and $35,000, respectively. Had
compensation cost been determined consistent with SFAS No. 123, utilizing the
assumptions detailed above, the Company's net income would have been reduced to
the following pro forma amounts:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
(DOLLARS IN 000'S, EXCEPT PER
SHARE AMOUNTS)
------------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Net income:
As reported.................................... $6,328 $11,173 $1,243
Pro forma (unaudited).......................... $6,283 $10,961 $1,238
Basic earnings per share:
As reported.................................... $ .83 $ 1.77 $ .92
Pro forma (unaudited).......................... $ .82 $ 1.74 $ .92
Diluted earnings per share
As reported.................................... $ .80 $ 1.73 $ .88
Pro forma (unaudited).......................... $ .80 $ 1.70 $ .88
</TABLE>
WARRANTS
In conjunction with the Predecessor's initial public offering in 1993,
Dickinson & Co. received a warrant to purchase up to 107,500 Common Shares at an
exercise price of $16.50 per share at any time during the period from
November 3, 1993 to November 2, 1998. In conjunction with the acquisition of
Quadrangles Village apartments, another investor received a warrant to purchase
175,000 Common Shares at a price of $10.00 per share at any time during the
period from December 2, 1994 to December 2, 1999. Both of these warrants were
terminated in connection with the Reorganization for cash payments of $25,000
and $641,000, respectively.
F-23
<PAGE>
KEYSTONE PROPERTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. BENEFIT PLANS AND STOCK WARRANTS (CONTINUED)
In connection with the Reorganization, 300,000 Common Share warrants, with
an expiration date of December 12, 2004, were issued to Hudson Bay and 250,000
and 125,000 OP Unit warrants were issued to Jeffrey Kelter and David McBride,
respectively, at an exercise price of $11.00 per share or OP Unit. The Common
Share warrants issued to Hudson Bay and the OP Unit warrants issued to Jeffrey
Kelter and David McBride were valued at $685,000 at issuance. In December 1999,
Hudson Bay and Mr. Kelter contributed these outstanding warrants to the
Operating Partnership as consideration for the issuance of 125,103 and 106,552
OP Units, respectively. In January 2000, Mr. McBride contributed 125,000 OP Unit
warrants to the Operating Partnership in exchange for 46,379 OP Units.
10. EARNINGS PER SHARE
The following is a reconciliation of the numerators and denominators of the
basic and diluted EPS computations.
<TABLE>
<CAPTION>
BASIC DILUTED
(DOLLARS IN 000'S,
EXCEPT PER SHARE AMOUNT)
------------------------
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1999
Net income.................................................. $ 6,328 $ 6,328
Add: Minority interest allocation........................... -- 5,592
---------- -----------
$ 6,328 $ 11,920
========== ===========
Weighted average number of shares outstanding............... 7,622,010 7,622,010
Stock equivalents........................................... -- 7,188,807
---------- -----------
7,622,010 14,810,817
========== ===========
Earnings per share.......................................... $ .83 $ .80
========== ===========
YEAR ENDED DECEMBER 31, 1998
Net income.................................................. $ 11,173 $ 11,173
Add: Minority interest allocation........................... -- 9,342
Preferred dividends and distributions....................... -- 55
---------- -----------
$ 11,173 $ 20,570
========== ===========
Weighted average number of shares outstanding............... 6,299,281 6,299,281
Stock equivalents........................................... -- 5,609,480
---------- -----------
6,299,281 11,908,761
========== ===========
Earnings per share.......................................... $ 1.77 $ 1.73
========== ===========
</TABLE>
F-24
<PAGE>
KEYSTONE PROPERTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. EARNINGS PER SHARE (CONTINUED)
<TABLE>
<CAPTION>
BASIC DILUTED
---------- ----------
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1997
Net income.................................................. $ 1,243 $ 1,243
Add: Minority interest allocation........................... -- 876
---------- ----------
$ 1,243 $ 2,119
========== ==========
Weighted average number of shares outstanding............... 1,347,297 1,347,297
Stock equivalents........................................... -- 1,056,707
---------- ----------
1,347,297 2,404,004
========== ==========
Earnings per share.......................................... $ .92 $ .88
========== ==========
</TABLE>
The Company's weighted average stock equivalents consisted of the following:
<TABLE>
<CAPTION>
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Options and warrants........................................ 169,524 233,623 92,973
Convertible Preferred Stock and Convertible Preferred
Units..................................................... -- 35,284 --
OP Units.................................................... 7,019,283 5,340,573 963,734
--------- --------- ---------
7,188,807 5,609,480 1,056,707
========= ========= =========
</TABLE>
11. COMMITMENTS AND CONTINGENCIES
Three officers of the Company have employment agreements which provide for
aggregate initial base compensation of $600,000 subject to increases as approved
by the Compensation Committee, among other incentive compensation. In addition,
at December 31, 1999, an executive has a non-interest bearing recourse loan
outstanding of $359,000 from the Company, which the executive used to acquire
25,000 Common Shares. Under the terms of his employment agreement, $33,333 of
this loan is forgiven annually on each anniversary date of the start of his
employment by the Company. This loan has been shown in the accompanying
financial statements as a reduction in shareholders equity.
The Company has guaranteed bank loans held by certain executives with which
these executives acquired stock in the Company. The Company advanced funds to
these executives on an interest bearing basis to fund these purchases until the
respective executives bank loans were funded in January 1999. At December 31,
1998, the Company had $464,000 outstanding from these executives for stock
purchases. These advances were repaid by the executives in January 1999.
The Company has $10.2 million in outstanding letters of credit at
December 31, 1999 of which $10.0 million secures the Company's obligation to
close Phase II of the RMIT transaction which is scheduled to close in 2000. The
remaining letter of credit relates to the construction of an 80,000 square foot
office building in Allentown, Pennsylvania which is scheduled to be completed in
2000.
As discussed further in Note 7, the Company has guaranteed a $12.5 million
loan which the Morris Shareholders have with Reckson as part of the RMIT
transaction.
See Notes 6 and 7 for additional discussion of commitments of the Company
related to an equity issuance in 1998 and the RMIT transaction, which was
consummated in September 1999.
F-25
<PAGE>
KEYSTONE PROPERTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. COMMITMENTS AND CONTINGENCIES (CONTINUED)
LITIGATION
In the normal course of business, the Company is involved in legal actions
relating to the ownership and operation of its properties. In management's
opinion, the liabilities, if any, that may ultimately result from such legal
actions are not expected to have a materially adverse effect on the consolidated
financial position, results of operations, or cash flows of the Company.
ENVIRONMENTAL MATTERS
All of the Company's properties have been subject to Phase I environmental
assessments (and, in certain instances, Phase II environmental assessments).
Such assessments have not revealed, nor is management aware of, any
environmental liability that management believes would have a material adverse
effect on the accompanying consolidated financial statements.
12. INTERIM RESULTS (UNAUDITED)
The following presents a summary of the unaudited quarterly financial
information for the years ended December 31, 1999, 1998 and 1997:
<TABLE>
<CAPTION>
1999
--------------------------------------------------
THREE MONTH PERIOD ENDED
(DOLLARS IN 000'S, EXCEPT PER SHARE AMOUNTS)
--------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
--------- -------- ------------ ------------
<S> <C> <C> <C> <C>
Revenue..................................................... $ 18,033 $18,449 $20,454 $27,590
Income before equity in earnings (losses) from equity method
investments, gains on sales of assets, distribution to
preferred unitholders and preferred shareholders, minority
interest of unitholders in Operating Partnership and
extraordinary item........................................ 3,679 3,584 3,755 5,048
Equity in earnings (losses) from equity method
investments............................................... (486) (4) 143 285
Gains on sales of assets.................................... 1,284 -- -- --
Distributions to preferred unitholders...................... (169) (168) (406) (1,297)
Minority interest of unitholders in Operating Partnership... (1,813) (1,387) (1,420) (972)
-------- ------- ------- -------
Net income before net income allocated to preferred
shareholders.............................................. 2,495 2,025 2,072 3,064
Income allocated to preferred shareholders.................. (450) (450) (515) (1,913)
-------- ------- ------- -------
Net income available to common shareholders................. $ 2,045 $ 1,575 $ 1,557 $ 1,151
======== ======= ======= =======
Basic earnings per Common Share............................. $ .28 $ .21 $ .21 $ .14
======== ======= ======= =======
Diluted earnings per Common Share........................... $ .27 $ .20 $ .20 $ .14
======== ======= ======= =======
</TABLE>
F-26
<PAGE>
KEYSTONE PROPERTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. INTERIM RESULTS (UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
1998
--------------------------------------------------
THREE MONTH PERIOD ENDED
(DOLLARS IN 000'S, EXCEPT PER SHARE AMOUNTS)
--------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
--------- -------- ------------ ------------
<S> <C> <C> <C> <C>
Revenue..................................................... $ 5,741 $ 7,994 $11,869 $15,424
Income before equity in earnings (losses) from equity method
investments, gains on sales of assets, distribution to
preferred unitholders and preferred shareholders, minority
interest of unitholders in Operating Partnership and
extraordinary item........................................ 1,792 2,249 2,921 3,043
Equity in losses from equity method investments............. (162) (299) (562) (144)
Gains on sales of assets.................................... 6,880 5,072 -- --
Distributions to preferred unitholders...................... -- -- -- (15)
Minority interest of unitholders in Operating Partnership... (3,617) (3,403) (1,086) (1,346)
Extraordinary loss on debt extinguishment, net of $110,000
allocated to minority interest of unitholders in Operating
Partnership............................................... -- -- -- (110)
-------- ------- ------- -------
Net income before net income allocated to preferred
shareholders.............................................. 4,893 3,619 1,273 1,428
Income allocated to preferred shareholders.................. -- -- -- (40)
======== ======= ======= =======
Net income available to common shareholders................. $ 4,893 $ 3,619 $ 1,273 $ 1,388
======== ======= ======= =======
Basic earnings per Common Share............................. $ 0.90 $ 0.66 $ 0.19 $ .19
======== ======= ======= =======
Diluted earnings per Common Share........................... $ 0.87 $ 0.66 $ 0.18 $ .18
======== ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
1997
--------------------------------------------------
THREE MONTH PERIOD ENDED
(DOLLARS IN 000'S, EXCEPT PER SHARE AMOUNTS)
--------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
--------- -------- ------------ ------------
<S> <C> <C> <C> <C>
Revenue..................................................... $2,226 $1,867 $1,738 $ 2,366
Loss before equity in earnings (losses) from equity method
investments, gains on sales of assets, distributions and
minority interest of unitholders in Operating
Partnership............................................... (125) (23) (53) (2,692)
Equity in earnings (losses) from equity method
investments............................................... 130 134 173 (33)
Gains on sales of assets.................................... 403 -- 4,205 --
Minority interest of Unitholders in Operating Partnership... -- -- (1,988) 1,112
------ ------ ------ -------
Net income (loss)........................................... $ 408 $ 111 $2,337 $(1,613)
====== ====== ====== =======
Basic earnings (loss) per Common Share...................... $ 0.36 $ 0.10 $ 2.07 $ (.79)
====== ====== ====== =======
Diluted earnings (loss) per Common Share.................... $ 0.22 $ 0.06 $ 2.07 $ (.92)
====== ====== ====== =======
</TABLE>
13. SEGMENTS
The Company adopted Statement of Financial Accounting Standards No. 131,
"Disclosures About Segments of an Enterprise and Related Information," in 1998
which changes the way the Company reports information about its operating
segments.
The Company's Chief Executive Officer assesses and measures operating
results based upon property level operating income on an individual asset basis
within each of the Company's business segments. The Company considers its
reportable segments to be office, industrial, multi-family and other. Other
properties consist of a community shopping center, which was sold in 1999, and
an
F-27
<PAGE>
KEYSTONE PROPERTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. SEGMENTS (CONTINUED)
investment in a direct financing lease. The accounting policies of the
reportable segments are consistent with those described in Note 2. Summarized
financial information concerning the Company reportable segments is shown in the
following table:
<TABLE>
<CAPTION>
BUSINESS SEGMENTS 1999 1998 1997
- ----------------- -------- -------- --------
(IN 000'S)
<S> <C> <C> <C>
REVENUES:
Industrial properties....................................... $ 47,196 $ 18,545 $ 287
Office properties........................................... 36,491 18,478 320
Multifamily properties...................................... -- 1,860 7,304
Other properties............................................ 625 1,863 88
Other (1)................................................... 214 282 198
-------- -------- --------
$ 84,526 $ 41,028 $ 8,197
======== ======== ========
PROPERTY OPERATING INCOME:
Industrial properties....................................... $ 30,814 $ 12,330 $ 213
Office properties........................................... 18,564 10,299 227
Multifamily properties...................................... -- 1,234 3,464
Other properties............................................ 431 1,158 74
-------- -------- --------
$ 49,809 $ 25,021 $ 3,978
======== ======== ========
CAPITAL EXPENDITURES:
Industrial properties....................................... $ 816 $ 67 $ --
Office properties........................................... 3,746 746 --
Multifamily properties...................................... -- -- 1,152
Other properties............................................ -- 93 --
-------- -------- --------
$ 4,562 $ 906 $ 1,152
======== ======== ========
DEPRECIATION AND AMORTIZATION EXPENSE:
Industrial properties....................................... $ 9,810 $ 3,623 $ 53
Office properties........................................... 6,549 3,094 57
Multifamily properties...................................... -- -- 792
Other properties............................................ -- 194 7
-------- -------- --------
$ 16,359 $ 6,911 $ 909
======== ======== ========
INVESTMENT IN REAL ESTATE, AT COST:
Industrial properties....................................... $604,710 $311,273 $ 55,205
Office properties........................................... 254,166 221,650 58,082
Multifamily properties...................................... -- -- 31,705
Other properties............................................ 1,460 9,946 10,071
-------- -------- --------
$860,336 $542,869 $155,063
======== ======== ========
</TABLE>
The following is a reconciliation of segment property income as shown above
to the accompanying consolidated statement of operations for each respective
year:
F-28
<PAGE>
KEYSTONE PROPERTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. SEGMENTS (CONTINUED)
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
(DOLLARS IN 000'S)
<S> <C> <C> <C>
Segment property operating income as shown above............ $ 49,809 $ 25,021 $ 3,978
General and administrative expense.......................... (3,650) (759) (732)
Buyout of employment agreements, options and warrants....... -- -- (3,203)
Interest expense............................................ (30,307) (14,539) (3,134)
Other income (1)............................................ 214 282 198
-------- -------- -------
Income (loss) before equity in (losses) earnings from equity
method investments, gains on sales of assets,
distributions to preferred unitholders and preferred
shareholders, minority interest of unitholders in
Operating Partnership and extraordinary items............. $ 16,066 $ 10,005 $(2,893)
======== ======== =======
</TABLE>
- ------------------------
(1) Amount consists of interest income not allocated to a specific business
segment.
14. SUBSEQUENT EVENTS
In January 2000, the Company acquired its 50% joint venture partners'
ownership interest in a limited partnership, which constructed a 500,000 square
foot industrial building in Indianapolis, Indiana, for $8.9 million. The
consideration for this acquisition was $5.9 million in OP Units and
$3.0 million in cash.
In January 2000, the Company declared a dividend of $.295 per Common Share
payable on January 31, 2000 to all shareholders of record on January 18, 2000.
In January 2000, the Company consummated the sale of 102,511 Common Shares
to a trustee of the Company, the Company's Chairman, and to other individuals
for aggregate net proceeds of approximately $1.5 million.
F-29
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
<TABLE>
<S> <C> <C>
KEYSTONE PROPERTY TRUST
By: /s/ JEFFREY E. KELTER
-----------------------------------------
Jeffrey E. Kelter
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ JEFFREY E. KELTER
------------------------------------------- President, Chief Executive March 28, 2000
Jeffrey E. Kelter Officer and Trustee
/s/ TIMOTHY A. PETERSON
------------------------------------------- Executive Vice President, March 28, 2000
Timothy A. Peterson Chief Financial Officer
/s/ TIMOTHY E. MCKENNA Senior Vice President--
------------------------------------------- Finance (Principal March 28, 2000
Timothy E. McKenna Accounting Officer)
/s/ DAVID F. MCBRIDE
------------------------------------------- Chairman and Trustee March 28, 2000
David F. McBride
/s/ JAMES R. MULVIHILL
------------------------------------------- Trustee March 28, 2000
James R. Mulvihill
/s/ DAVID H. LESSER
------------------------------------------- Trustee March 28, 2000
David H. Lesser
/s/ FRANCESCO GALESI
------------------------------------------- Trustee March 28, 2000
Francesco Galesi
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ MICHAEL J. FALCONE
------------------------------------------- Trustee March 28, 2000
Michael J. Falcone
/s/ RUSSELL C. PLATT
------------------------------------------- Trustee March 28, 2000
Russell C. Platt
/s/ SCOTT H. RECHLER
------------------------------------------- Trustee March 28, 2000
Scott H. Rechler
/s/ JOSEPH D. MORRIS
------------------------------------------- Trustee March 28, 2000
Joseph D. Morris
</TABLE>
II-2
<PAGE>
Exhibit 3(a)
DECLARATION OF TRUST
OF
KEYSTONE PROPERTY TRUST
APRIL 30, 1999
DECLARATION OF TRUST made as of the date set forth above by the
undersigned Trustees.
WITNESSETH:
WHEREAS, the Trustees desire to create a trust for the principal purpose
of investing in real property and interests therein; and
WHEREAS, the Trustees desire that such trust qualify as a "real estate
investment trust" under the Code, and as a "real estate investment trust" under
Title 8 of the Corporations and Associations Article of the Annotated Code of
Maryland; and
WHEREAS, in furtherance of such purpose the Trustees intend to acquire
certain real property and interests therein and to hold, manage and dispose of
all such property as Trustees in the manner hereinafter stated; and
WHEREAS, it is proposed that the beneficial interest in the Trust be
divided into transferable shares of beneficial interest as hereinafter provided;
NOW, THEREFORE, it is hereby agreed and declared that the Trustees will
hold any and all property of every type and description which they are acquiring
or may hereafter acquire as Trustees, together with the proceeds thereof, in
trust, to manage and dispose of the same for the benefit of the holders from
time to time of the shares of beneficial interest being issued and to be, issued
hereunder in the manner and subject to the stipulations contained herein.
ARTICLE I
THE TRUST
1.1. NAME. The name of the Trust created by this Declaration of Trust
shall be "Keystone Property Trust" and so far as may be practicable the Trustees
shall conduct the Trust's activities, execute all documents and sue or be sued
under that name, which name (and the word "TRUST" wherever used in this
Declaration of Trust, except where the context otherwise requires) shall refer
to the Trustees collectively but not individually or personally and not to the
officers, agents, employees or Shareholders of the Trust or of such Trustees. If
the Trustees determine that the use of such name is not practicable or if the
Trustees are contractually bound
<PAGE>
to change that name, they may use another designation or they may adopt another
name under which the Trust may hold property or conduct its activities.
1.2. PLACES OF BUSINESS. The Trust shall maintain an office in Maryland at
c/o The CSC Lawyers Incorporating Service Company, Maryland, 11 East Chase
Street, Baltimore, Maryland 21202 or such other place in Maryland as the
Trustees may determine from time to time. The Resident Agent of the Trust at
such office shall be The Prentice-Hall Company System, Maryland, 11 East
Chase Street, Baltimore, Maryland 21202. The resident agent is a Maryland
corporation. The Trust may change such Resident Agent from time to time as
the Trustees shall determine. The Trust may have such other offices or places
of business within or without the State of Maryland as the Trustees may from
time to time determine.
1.3. NATURE OF TRUST. The Trust shall be a real estate investment trust
within the meaning of Title 8 of the Corporations and Associations Article of
the Annotated Code of Maryland. It is also intended that the Trust shall qualify
and carry on business as a "real estate investment trust" as described in the
Code. The Trust is not intended to be, shall not be deemed to be, and shall not
be treated as a general partnership, limited partnership, joint venture,
corporation or joint stock company (but nothing herein shall preclude the Trust
from being treated for tax purposes as an association under the Code); nor shall
the Trustees or Shareholders or any of them for any purpose be, nor be deemed to
be, nor be treated in any way whatsoever as, liable or responsible hereunder as
partners or joint venturers. The relationship of the Shareholders to the
Trustees shall be solely that of beneficiaries of the Trust in accordance with
the rights conferred upon them by this Declaration of Trust.
ARTICLE II
TRUSTEES
2.1. NUMBER, TERM OF OFFICE AND QUALIFICATIONS OF TRUSTEES.
(a) The number of Trustees shall initially be seven. The number of
Trustees may be increased or decreased pursuant to the Bylaws of the Trust
(which action may not affect the tenure of office of any Trustee), but
shall never be more than fifteen nor less than the minimum number
permitted by the laws of the State of Maryland now or hereafter in force.
(b) The Trustees (other than any Trustee elected solely by holders
of one or more classes or series of Preferred Shares) shall be divided
into three classes, as nearly equal in number as possible. The Class of
Trustees designated as Class I Trustees shall hold office initially for a
term expiring at the annual meeting of Shareholders to be held in 2001.
The Class of Trustees designated as Class II Trustees shall hold office
initially for a term expiring at the annual meeting of Shareholders to be
held in 2002. The Class of Trustees designated as Class III Trustees shall
hold office initially for a term expiring at the annual meeting of
Shareholders to be held in 2000. Trustees elected to
2
<PAGE>
succeed those Trustees whose terms have thereupon expired shall be elected
for a term of office of three years and until the election and
qualification of their successors. If the number of Trustees is changed,
any increase or decrease shall be apportioned among the classes so as to
maintain or attain, if possible, the equality of the number of Trustees in
each class, but in no case will a decrease in the number of Trustees
shorten the term of any incumbent Trustee. If such equality is not
possible, the increase or decrease shall be apportioned among the classes
in such a way that the difference in the number of Trustees in any two
classes shall not exceed one. Shareholder votes to elect Trustees shall be
conducted in the manner provided in the Bylaws. There shall be no
cumulative voting in the election of Trustees. A Trustee shall be an
individual at least 21 years of age who is not under legal disability.
Unless otherwise required by law, no Trustee shall be required to give
bond, surety or security in any jurisdiction for the performance of any
duties or obligations hereunder. The Trustees in their capacity as
Trustees shall not be required to be Shareholders or to devote their
entire time to the business and affairs of the Trust.
(c) The name and class of the Trustees who shall serve as the
initial Trustees after the Closing Date and until their successors are
duly elected and qualified is:
NAME CLASS
---------------------------------------------------------- ---------
Michael J. Falcone........................................ Class I
Francesco Galesi.......................................... Class I
Jeffrey E. Kelter......................................... Class II
Russell C. Platt.......................................... Class II
David H. Lesser........................................... Class III
David F. McBride.......................................... Class III
James R. Mulvihill........................................ Class III
2.2. COMPENSATION AND OTHER REMUNERATION. The Trustees shall be entitled
to receive such reasonable compensation for their services as Trustees as the
Trustees may determine from time to time. The Trustees and officers of the Trust
shall be entitled to receive remuneration for services rendered to the Trust in
any other capacity. Subject to Sections 5.6 and 5.7 hereof, such services may
include, without limitation, services as an officer of the Trust, legal,
accounting or other professional services, or services as a broker, transfer
agent or underwriter, whether performed by a Trustee or any Person affiliated
with a Trustee.
2.3. RESIGNATION, REMOVAL AND DEATH OF TRUSTEES. A Trustee may resign at
any time by giving written notice to the remaining Trustees at the principal
office of the Trust. Such resignation shall take effect on the date specified in
such notice, without need for prior
3
<PAGE>
accounting. Subject to the rights of holders of one or more classes or series of
Preferred Stock to elect one or more Trustees, a Trustee may be removed at any
time, but only for cause, and by the affirmative vote of the holders of Shares
representing a majority of the total votes authorized to be cast by Shares then
outstanding and entitled to vote thereon, voting as a single class. A Trustee
judged incompetent or for whom a guardian or conservator has been appointed
shall be deemed to have resigned as of the date of such adjudication or
appointment. Upon the resignation or removal of any Trustee, or his otherwise
ceasing to be a Trustee, he shall execute and deliver such documents as the
remaining Trustees shall require for the conveyance of any Trust property held
in his name, shall account to the remaining Trustees as they require for all
property which he holds as Trustee and shall thereupon be discharged as Trustee.
Upon the incapacity or death of any Trustee, his legal representative shall
perform the acts set forth in the preceding sentence and the discharge mentioned
therein shall run to such legal representative and to the incapacitated Trustee
or the estate of the deceased Trustee, as the case may be.
2.4. VACANCIES.
(a) If any or all the Trustees cease to be Trustees hereunder,
whether by reason of resignation, removal, incapacity, death or otherwise,
such event shall not terminate the Trust or affect its continuity. Until
vacancies are filled, the remaining Trustee or Trustees (even though fewer
than three) may exercise the powers of the Trustees hereunder.
(b) Subject to the rights of the holders of any class of stock
separately entitled to elect one or more Trustees, the stockholders may
elect a successor to fill a vacancy on the Board which results from the
removal of a Trustee. A Trustee elected by the stockholders to fill a
vacancy which results from the removal of a Trustee serves for the balance
of the term of the removed Trustee. Subject to the rights of the holders
of any class of stock separately entitled to elect one more Trustees, a
majority of the remaining Trustees, whether or not sufficient to
constitute a quorum, may fill a vacancy on the Board which results from
any cause except an increase in the number of Trustees, and a majority of
the entire Board may fill a vacancy which results from an increase in the
number of Trustees. A Trustee elected by the Board to fill a vacancy
serves until the next annual meeting of stockholders and until his or her
successor is elected and qualified. If at any time there shall be no
Trustees in office, successor Trustees shall be elected by the
Shareholders as provided in Section 4.9 hereof. Any Trustee elected to
fill a vacancy created by the resignation, removal or death of a former
Trustee shall hold office for the unexpired term of such former Trustee.
2.5. SUCCESSOR AND ADDITIONAL TRUSTEES. The right, title and interest of
the Trustees in and to the Trust Estate shall also vest in successor and
additional Trustees upon their qualification, and they shall thereupon have all
the rights and obligations of Trustees hereunder. Such right, title and interest
shall vest in the Trustees whether or not conveyancing documents have been
executed and delivered pursuant to Section 2.3 hereof or otherwise. Appropriate
written evidence of the election and qualification of successor and additional
Trustees shall be filed with the records of the Trust and in such other offices
or places as the Trustees may deem necessary, appropriate or desirable.
4
<PAGE>
2.6. ACTIONS BY TRUSTEES.
(a) The Trustees may act with or without a meeting. A quorum for all
meetings of the Trustees shall be a majority of the Trustees; PROVIDED,
HOWEVER, that, whenever pursuant to Section 5.7 hereof or otherwise the
vote of a majority of a particular group of Trustees is required at a
meeting, a quorum for such meeting shall be a majority of the Trustees
which shall include a majority of such group. Unless specifically provided
otherwise in this Declaration of Trust, any action of the Trustees may be
taken at a meeting at which a quorum is present by vote of a majority of
the Trustees present or without a meeting by written consents of a
majority of the Trustees, which consents shall be filed with the records
of meetings of the Trustees. Any action or actions permitted to be taken
by the Trustees in connection with the business of the Trust may be taken
pursuant to authority granted by a meeting of the Trustees conducted by a
telephone conference call, and the transaction of Trust business
represented thereby shall be of the same authority and validity as if
transacted at a meeting of the Trustees held in person or by written
consent. The minutes of any Trustees' meeting held by telephone shall be
prepared in the same manner as a meeting of the Trustees held in person.
The acquisition or disposition of any investment shall require the
approval of a majority of Trustees, except as otherwise provided in
Section 5.7 hereof. Any agreement, deed, mortgage, lease or other
instrument or writing executed by one or more of the Trustees or by any
authorized Person shall be valid and binding upon the Trustees and upon
the Trust when authorized or ratified by action of the Trustees or as
provided in the Bylaws.
(b) With respect to the actions of the Trustees, Trustees who have,
or are Affiliates of Persons who have, any direct or indirect interest in
or connection with any matter being acted upon may be counted for all
quorum purposes under this Section 2.6 hereof and, subject to the
provisions of Section 5.7 hereof, may vote on the matter as to which they
or their Affiliates have such interest or connection.
2.7. COMMITTEES. The Trustees may appoint an audit committee and such
other standing committees as the Trustees determine. Each standing committee
shall consist of one or more members. Each committee shall have such powers,
duties and obligations as the Trustees may deem necessary or appropriate. The
standing committees shall report their activities periodically to the Trustees.
2.8. INDEPENDENT TRUSTEES. Notwithstanding anything herein to the
contrary, at all times (except during a period not to exceed sixty (60) days
following the death, resignation, incapacity or removal from office of a Trustee
prior to the expiration of the Trustee's term of office), two of the Trustees
shall be "Independent Trustees." Independent Trustees shall mean Trustees who
are not (i) officers of the Trust, (ii) related to officers of the Trust or
(iii) holders, or officers or directors of such holders, of more than 5% of the
issued and outstanding Shares of capital stock of the Trust on a fully diluted
basis.
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ARTICLE III
TRUSTEES' POWERS
3.1. POWER AND AUTHORITY OF TRUSTEES. The Trustees, subject only to the
specific limitations contained in this Declaration of Trust, shall have, without
further or other authorization, and free from any power or control on the part
of the Shareholders, full, absolute and exclusive power, control and authority
over the Trust Estate and over the business and affairs of the Trust to the same
extent as if the Trustees were the sole owners thereof in their own right, and
may do all such acts and things as in their sole judgment and discretion are
necessary for or incidental to or desirable for carrying out or conducting the
business of the Trust. Any construction of this Declaration of Trust or any
determination made in good faith by the Trustees as to the purposes of the Trust
or the existence of any power or authority hereunder shall be conclusive. In
construing the provisions of this Declaration of Trust, the presumption shall be
in favor of the grant of powers and authority to the Trustees. The enumeration
of any specific power or authority herein shall not be construed as limiting the
aforesaid powers or the general powers or authority or any other specified power
or authority conferred herein upon the Trustees.
3.2. SPECIFIC POWERS AND AUTHORITY. Subject only to the express
limitations contained in this Declaration of Trust and in addition to any powers
and authority conferred by this Declaration of Trust or which the Trustees may
have by virtue of any present or future statute or rule of law, the Trustees
without any action or consent by the Shareholders shall have and may exercise at
any time and from time to time the following powers and authorities which may or
may not be exercised by them in their sole judgment and discretion and in such
manner and upon such terms and conditions as they may from time to time deem
proper:
(a) to retain, invest and reinvest the capital or other funds of the
Trust in, and to acquire, purchase, or own, real or personal property of
any kind, whether tangible or intangible, wherever located in the world,
and make commitments for such investments, all without regard to whether
any such property is authorized by law for the investment of trust funds
or produces or may produce income; to possess and exercise all the rights,
powers and privileges appertaining to the ownership of the Trust Estate;
and to increase the capital of the Trust at any time by the issuance of
any additional authorized Shares or other Securities of the Trust for such
consideration as they deem advisable;
(b) without limitation of the powers set forth in Section 3.2(a)
hereof, to invest in, purchase or otherwise acquire for such consideration
as they deem proper, in cash or other property or through the issuance of
shares or through the issuance of notes, debentures, bonds or other
obligations of the Trust, and to hold for investment, the entire or any
participating interests in any Mortgage Loans or interest in Real
Property, including ownership of, or participation in the ownership of, or
rights to acquire, equity interests in Real Property or in Persons owning,
developing, improving, operating or managing Real Property, which
interests may be acquired independently of or in connection with other
investment activities of the Trust and in the latter case, may include
rights to receive additional payments based on gross income or rental or
other
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income from the Real Property or improvements thereon; and to invest in
loans secured by the pledge or transfer of Mortgage Loans;
(c) to sell, rent, lease, hire, exchange, release, partition,
assign, mortgage, pledge, hypothecate, grant security interests in,
encumber, negotiate, convey, transfer or otherwise dispose of any and all
the Trust Estate by deeds (including deeds in lieu of foreclosure), trust
deeds, assignments, bills of sale, transfers, leases, mortgages, financing
statements, security agreements and other instruments for any of such
purposes executed and delivered for and on behalf of the Trust or the
Trustees by one or more of the Trustees or by a duly authorized officer,
employee, agent or nominee of the Trust;
(d) to issue Shares, bonds, debentures, notes or other evidences of
indebtedness, which may be secured or unsecured and may be subordinated to
any indebtedness of the Trust, to such Persons for such cash, property or
other consideration (including Securities issued or created by, or
interests in, any Person) at such time or times and on such terms as the
Trustees may deem advisable and to list any of the foregoing securities
issued by the Trust on any securities exchange and to purchase or
otherwise acquire, hold, cancel, reissue, sell and transfer any of such
Securities, and to cause the instruments evidencing such Securities to
bear an actual or facsimile imprint of the seal of the Trust (if the
Trustees shall have adopted such a seal) and to be signed by manual or
facsimile signature or signatures (and to issue such Securities, whether
or not any Person whose manual or facsimile signature shall be imprinted
thereon shall have ceased to occupy the office with respect to which such
signature was authorized), PROVIDED THAT, where only facsimile signatures
for the Trust are used, the instrument shall be countersigned manually by
a transfer agent, registrar or other authentication agent; and to issue
any of such Securities of different types in combinations or units with
such restrictions on the separate transferability thereof as the Trustees
shall determine;
(e) to enter into leases of real and personal property as lessor or
lessee and to enter into contracts, obligations and other agreements for a
term, and to invest in obligations having a term, extending beyond the
term of office of the Trustees and beyond the possible termination of the
Trust, or having a lesser term;
(f) to borrow money and give negotiable or nonnegotiable instruments
therefor; or guarantee, indemnify or act as surety with respect to payment
or performance of obligations of third parties; to enter into other
obligations on behalf of the Trust; and to assign, convey, transfer,
mortgage, subordinate, pledge, grant security interest in, encumber or
hypothecate the Trust Estate to secure any indebtedness of the Trust or
any other of the foregoing obligations of the Trust;
(g) to lend money, whether secured or unsecured;
(h) to create reserve funds for any purpose;
(i) to incur and pay out of the Trust Estate any charges or
expenses, and to disburse any funds of the Trust, which charges, expenses
or disbursements are, in the
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opinion of the Trustees, necessary or incidental to or desirable for the
carrying out of any of the purposes of the Trust or conducting the
business of the Trust, including without limitation taxes and other
governmental levies, charges and assessments, of whatever kind or nature,
imposed upon or against the Trustees in connection with the Trust or the
Trust Estate or upon or against the Trust Estate or any part thereof, and
for any of the purposes herein;
(j) to deposit funds of the Trust in banks, trust companies, savings
and loan associations and other depositaries, whether or not such deposits
will draw interest, the same to be subject to withdrawal on such terms and
in such manner and by such Person or Persons (including any one or more
Trustees or officers, employees or agents, of the Trust) as the Trustees
may determine;
(k) to possess and exercise all the rights, powers and privileges
pertaining to the ownership of all or any Mortgages or Securities issued
or created by, or interests in, any Person, forming part of the Trust
Estate, to the same extent that an individual might do so, and, without
limiting the generality of the foregoing, to vote or give any consent,
request or notice, or waive any notice, either in person or by proxy or
power of attorney, with or without power of substitution, to one or more
Persons, which proxies and powers of attorney may be for meetings or
action generally or for any particular meeting or action, and may include
the exercise of discretionary powers;
(l) to cause to be organized or assist in organizing any Person
under the laws of any jurisdiction to acquire the Trust Estate or any part
or parts thereof or to carry on any business in which the Trust shall
directly or indirectly have any interest, and to sell, rent, lease, hire,
convey, negotiate, assign, exchange or transfer the Trust Estate or any
part or parts thereof to or with any such Person or any existing Person in
exchange for the Securities thereof or otherwise, and to merge or
consolidate the Trust with or into any Person or merge or consolidate any
Person into the Trust, and to lend money to, subscribe for the Securities
of, and enter into any contracts with, any Person in which the Trust holds
or is about to acquire Securities or any other interest;
(m) to enter into joint ventures, general or limited partnerships,
limited liability companies, participation or agency arrangements and any
other lawful combinations or associations, and to act as a general or
limited partner or a member thereof;
(n) to elect, appoint, engage or employ such officers for the Trust
as the Trustees may determine, who may be removed or discharged at the
discretion of the Trustees, such officers to have such powers and duties,
and to serve such terms, as may be prescribed by the Trustees or by the
Bylaws; to engage or employ any Persons (including, subject to the
provisions of Sections 5.6 and 5.7 hereof, any Trustee or officer, agent
or employee of the Trust and any Person in which any Trustee, officer or
agent is directly or indirectly interested or with which he is directly or
indirectly connected) as agents, representatives, employees, or
independent contractors (including without limitation real estate
advisors, investment advisors, transfer agents, registrars, underwriters,
accountants, attorneys at law, real estate agents, managers, appraisers,
brokers, architects, engineers, construction
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managers, general contractors or otherwise) in one or more capacities, and
to pay compensation from the Trust for services in as many capacities as
such Person may be so engaged or employed; and to delegate any of the
powers and duties of the Trustees to any one or more Trustees, agents,
representatives, officers, employees, independent contractors or other
Persons;
(o) to determine or cause to be determined from time to time the
value of all or any part of the Trust Estate and of any services,
Securities, property or other consideration to be furnished to or acquired
by the Trust, and from time to time to revalue or cause to be revalued all
or any part of the Trust Estate in accordance with such appraisals or
other information as are, in the Trustees' sole judgment, necessary and/or
satisfactory;
(p) to collect, sue for and receive all sums of money coming due to
the Trust, and to engage in, intervene in, prosecute, join, defend,
compromise, abandon or adjust, by arbitration or otherwise, any actions,
suits, proceedings, disputes, claims, controversies, demands or other
litigation relating to the Trust, the Trust Estate or the Trust's affairs,
to enter into agreements therefor, whether or not any suit is commenced or
claim accrued or asserted and, in advance of any controversy, to enter
into agreements regarding arbitration, adjudication or settlement thereof;
(q) to renew, modify, release, compromise, extend, consolidate or
cancel, in whole or in part, any obligation to or of the Trust or
participate in any reorganization of obligors to the Trust;
(r) to self-insure or to purchase and pay for out of the Trust
Estate insurance contracts and policies, including contracts of indemnity,
insuring the Trust Estate against any and all risks and insuring the Trust
and/or all or any of the Trustees, the Shareholders, or the officers,
employees or agents of the Trust or Persons who may directly or indirectly
control the Trust against any and all claims and liabilities of every
nature asserted by any Person arising by reason of any action alleged to
have been taken or omitted by the Trust or by the Trustees, Shareholders,
officers, employees agents or controlling Persons whether or not the Trust
would have the power to indemnify such Person or Persons against any such
claim or liability;
(s) to cause legal title to any of the Trust Estate to be held by
and/or in the name of the Trustees, or, except as prohibited by law, by
and/or in the name of the Trust or one or more of the Trustees or any
other Person, on such terms, in such manner and with such powers in such
Person as the Trustees may determine, and with or without disclosure that
the Trust or Trustees are interested therein;
(t) to adopt a fiscal year for the Trust, and from time to time to
change such fiscal year;
(u) to adopt and use a seal (but the use of a seal shall not be
required for the execution of instruments or obligations of the Trust);
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(v) to the extent permitted by law, to indemnify or enter into
agreements with respect to indemnification with any Person with which the
Trust has dealings, including without limitation any broker/dealer,
investment bank, investment advisor or independent contractor, to such
extent as the Trustees shall determine;
(w) to confess judgment against the Trust;
(x) to discontinue the operations of the Trust;
(y) to repurchase or redeem Shares and other Securities issued by
the Trust;
(z) to declare and pay dividends or distributions, consisting of
cash, property or Securities, to the holders of Shares of the Trust out of
any funds legally available therefor;
(aa) to determine from time to time in accordance with sound
accounting practice or other reasonable valuation methods what constitutes
annual or other net profits, earnings, surplus or net assets in excess of
capital;
(ab) to fix and vary from time to time the amount to be reserved as
working capital, or determine that retained earnings or surplus shall
remain in the hands of the Trust;
(ac) to determine whether and to what extent and at what times and
places and under what conditions and regulations the books, accounts and
documents of the Trust, or any of them, shall be open to the inspection of
stockholders, except as otherwise provided by statute or by the Bylaws,
and, except as so provided, no stockholder shall have any right to inspect
any book, account or document of the Trust unless authorized so to do by
resolution of the Board; and
(ad) to do all other such acts and things as are incident to the
foregoing, and to exercise all powers which are necessary or useful to
carry on the business of the Trust and to carry out the provisions of this
Declaration of Trust.
3.3. BYLAWS. The Trustees may make or adopt and from time to time amend or
repeal Bylaws (the "BYLAWS") not inconsistent with law or with this Declaration
of Trust, containing provisions relating to the business of the Trust and the
conduct of its affairs and in such Bylaws may define the duties of the officers,
employees and agents of the Trust.
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ARTICLE IV
THE SHARES AND SHAREHOLDERS
4.1. DESCRIPTION OF SHARES.
(a) The interest of the Shareholders shall be divided into sixty
five million shares of beneficial interest, $.001 par value per share,
which shall be known collectively as "SHARES", all of which shall be
validly issued, fully paid and non-assessable by the Trust upon receipt of
full consideration for which they have been issued or without additional
consideration if issued by way of share dividend or share split. All of
the Shares shall be classified initially as "COMMON SHARES." Each holder
of Shares shall as a result thereof be deemed to have agreed to and be
bound by the terms of this Declaration of Trust. The Shares may be issued
for such consideration as the Trustees shall deem advisable. The Trustees
are hereby expressly authorized at any time, and from time to time, to
provide for issuance of Shares upon such terms and conditions and pursuant
to such arrangements as the Trustees may determine. Notwithstanding any
other provisions in the Declaration of Trust, no determination shall be
made by the Board nor shall any transaction be entered into by the Trust
which would cause any Shares or other equity 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.
(b) The Trustees are hereby expressly authorized to classify and
reclassify any unissued Shares at any time, and from time to time, without
Shareholder approval, by setting (or changing if such class has previously
been established) the preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends or distributions,
qualifications, or terms or conditions of redemption, of the Shares and in
connection therewith to file articles supplementary with the MSDAT. Any
such Shares reclassified as Preferred Shares shall be called "PREFERRED
STOCK".
(c) Except as otherwise determined by the Trustees with respect to
any class or series of Shares, the holders of Shares shall be entitled to
the rights and powers hereinafter set forth in this Section 4.1. The
holders of Shares shall be entitled to receive, when and as declared from
time to time by the Trustees out of any funds legally available for the
purpose, such dividends or distributions as may be declared from time to
time by the Trustees. In the event of the termination of the Trust
pursuant to Section 6.1 hereof or otherwise, or upon the distribution of
its assets, the assets of the Trust available for payment and distribution
to Shareholders shall be distributed ratably among the holders of Shares
at the time outstanding in accordance with Section 6.2 hereof. All Common
Shares shall have equal non-cumulative voting rights at the rate of one
vote per Common Share, and equal dividend, distribution, liquidation and
other rights, and (except as provided in Section 4.14 hereof) shall have
no preference, conversion, exchange, sinking
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fund or redemption rights. Absent a contrary written agreement of the
Trust authorized by the Trustees, and notwithstanding any other
determination by the Trustees with respect to any class or series of
Shares, no holder of Shares shall be entitled as a matter of right to
subscribe for or purchase any part of any new or additional issue of
Shares of any class whatsoever of the Trust, or of securities convertible
into any Shares of any class whatsoever of the Trust, whether now or
hereafter authorized and whether issued for cash or other consideration or
by way of dividend.
4.2. CERTIFICATES.
(a) Ownership of Shares shall be evidenced by certificates. Every
Shareholder shall be entitled to receive a certificate, in such form as
the Trustees shall from time to time approve, specifying the number of
Shares of the applicable class held by such Shareholder. Subject to
Sections 4.6 and 4.14 hereof, such certificates shall be treated as
negotiable and title thereto and to the Shares represented thereby shall
be transferred by delivery thereof to the same extent in all respects as a
stock certificate, and the Shares represented thereby, of a Maryland
business corporation. Unless otherwise determined by the Trustees, such
certificates shall be signed by the President and shall be countersigned
by the Secretary or a transfer agent, and registered by a registrar, if
any, and such signatures may be facsimile signatures in accordance with
Section 3.2(d) hereof. There shall be filed with each transfer agent, if
any, a copy of the form of certificate so approved by the Trustees,
certified by the President or Secretary, and such form shall continue to
be used unless and until the Trustees approve some other form.
(b) Each certificate evidencing Shares shall contain a legend
imprinted thereon to substantially the following effect or such other
legend as the Trustees may from time to time adopt:
THE TRUST WILL FURNISH TO ANY SHAREHOLDER ON REQUEST AND WITHOUT
CHARGE A FULL STATEMENT OF THE DESIGNATIONS AND ANY PREFERENCES,
CONVERSION AND OTHER RIGHTS, VOTING POWERS, RESTRICTIONS,
LIMITATIONS AS TO DIVIDENDS OR DISTRIBUTIONS, QUALIFICATIONS, AND
TERMS AND CONDITIONS OF REDEMPTION OF THE SHARES OF EACH CLASS WHICH
THE TRUST IS AUTHORIZED TO ISSUE, OF THE DIFFERENCES IN THE RELATIVE
RIGHTS AND PREFERENCES BETWEEN THE SHARES OF EACH SERIES OF A
PREFERRED OR SPECIAL CLASS IN SERIES WHICH THE TRUST IS AUTHORIZED
TO ISSUE, TO THE EXTENT THEY HAVE BEEN SET, AND OF THE AUTHORITY OF
THE BOARD OF TRUSTEES TO SET THE RELATIVE RIGHTS AND PREFERENCES OF
SUBSEQUENT SERIES OF A PREFERRED OR SPECIAL CLASS OF SHARES. SUCH
REQUEST MAY BE MADE TO THE SECRETARY OF THE TRUST OR TO ITS TRANSFER
AGENT.
(c) Notwithstanding Section 4.2(a) hereof, the Trustees of the Trust
may authorize the issuance of some or all Shares of any or all classes or
series without
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certificates. The authorization does not affect Shares already represented
by certificates until they are surrendered to the Trust. At the time of
issuance or transfer of Shares without certificates, the Trust shall send
the Shareholder a written statement of the information required by Section
4.2(b) hereof.
4.3. FRACTIONAL SHARES. In connection with any issuance of Shares, the
Trustees may issue fractional Shares or may adopt provisions for the issuance of
scrip including, without limitation, the time within which any such scrip must
be surrendered for exchange into full Shares and the rights, if any, of holders
of scrip upon the expiration of the time so fixed, the rights, if any, to
receive proportional distributions, and the rights, if any, to redeem scrip for
cash, or the Trustees may in their discretion, or if they see fit at the option
of, each holder, provide in lieu of scrip for the adjustment of the fractions in
cash. The provisions of Section 4.2 hereof relative to certificates for Shares
shall apply so far as applicable to such scrip, except that such scrip may in
the discretion of the Trustees be signed by a transfer agent alone.
4.4. LEGAL OWNERSHIP OF TRUST ESTATE. The legal ownership of the Trust
Estate and the right to conduct the business of the Trust are vested exclusively
in the Trustees (subject to Section 3.2(s) hereof), and the Shareholders shall
have no interest therein (other than beneficial interest in the Trust conferred
by their Shares issued hereunder) and they shall have no right to compel any
partition, division, dividend or distribution of the Trust or any of the Trust
Estate.
4.5. SHARES DEEMED PERSONAL PROPERTY. The Shares shall be personal
property and shall confer upon the holders thereof only the interest and rights
specifically set forth or provided for in this Declaration of Trust. The death,
insolvency or incapacity of a Shareholder shall not dissolve or terminate the
Trust or affect its continuity nor give his legal representative any rights
whatsoever, whether against or in respect of other Shareholders, the Trustees or
the Trust Estate or otherwise, except the sole right to demand and, subject to
the provisions of this Declaration of Trust (including, without limitation,
Section 4.2(c) hereof), the Bylaws and any requirements of law, to receive a new
certificate for Shares registered in the name of such legal representative, in
exchange for the certificate held by such Shareholder.
4.6. SHARE RECORD; ISSUANCE AND TRANSFERABILITY OF SHARES.
(a) Records shall be kept by or on behalf of and under the direction
of the Trustees, which shall contain the names and addresses of the
Shareholders, the number of Shares held by them respectively, and, when
represented by certificates, the numbers of the certificates representing
the Shares, and in which there shall be recorded all transfers of Shares.
The Trust, the Trustees and the officers, employees and agents of the
Trust, when Shares are represented by certificates, shall be entitled to
deem the Persons in whose names certificates are registered on the records
of the Trust to be the absolute owners of the Shares represented thereby
for all purposes of the Trust, and, when Shares are not represented by
certificates, shall be entitled to deem the Persons in whose names the
Shares are registered on the records of the Trust to be the absolute
owners of the Shares represented thereby for all purposes of the Trust;
but nothing herein shall be deemed to preclude the Trustees or officers,
employees or agents of the Trust from inquiring as to the actual ownership
of Shares. Until a transfer is duly effected on the
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records of the Trust, the Trustees shall not be affected by any notice of
such transfer, either actual or constructive.
(b) Shares shall be transferable on the records of the Trust only by
the record holder thereof, or by his agent duly authorized in writing,
upon delivery to the Trustees or a transfer agent of the certificate or
certificates therefor, properly endorsed or accompanied by duly executed
instruments of transfer (or for shares issued without certificates by duly
executed instruments of transfer) and accompanied by all necessary
documentary stamps together with such evidence of the genuineness of each
such endorsement, execution or authorization and of other matters as may
reasonably be required by the Trustees or such transfer agent. Upon such
delivery, the transfer shall be recorded in the records of the Trust and,
when the Shares are represented by certificates, a new certificate for the
Shares so transferred shall be issued to the transferee and in case of a
transfer of only a part of the Shares represented by any certificate, a
new certificate for the balance shall be issued to the transferor. Any
Person becoming entitled to any Shares in consequence of the death of a
Shareholder or otherwise by operation of law shall be recorded as the
holder of such Shares and, when the Shares are represented by
certificates, shall receive a new certificate therefor but only upon
delivery to the Trustees or a transfer agent of instruments and other
evidence required by the Trustees or the transfer agent to demonstrate
such entitlement, the existing certificate for such Shares and such
releases from applicable governmental authorities as may be required by
the Trustees or transfer agent. In case of the loss, mutilation or
destruction of any certificate for shares, the Trustees may issue or cause
to be issued a replacement certificate on such terms and subject to such
rules and regulations as the Trustees may from time to time prescribe.
Nothing in this Declaration of Trust shall impose upon the Trustees or a
transfer agent a duty, or limit their rights, to inquire into adverse
claims.
4.7. DIVIDENDS OR DISTRIBUTIONS TO SHAREHOLDERS. Subject to Section 4.1
hereof, the Trustees may from time to time declare and pay to Shareholders such
dividends or distributions in cash, property or assets of the Trust or
Securities issued by the Trust, out of current or accumulated income, capital,
capital gains, principal, interest, surplus, proceeds from the increase or
financing or refinancing of Trust obligations, or from the sale of portions of
the Trust Estate or from any other source as the Trustees in their discretion
shall determine. Shareholders shall have no right to any dividend or
distribution unless and until declared by the Trustees. The Trustees shall
furnish the Shareholders with a statement in writing advising as to the source
of the funds so distributed not later than 120 days after the close of the
fiscal year in which the distribution was made.
4.8. TRANSFER AGENT, DIVIDEND DISBURSING AGENT AND REGISTRAR. The Trustees
shall have power to employ one or more transfer agents, dividend disbursing
agents and registrars and to authorize them on behalf of the Trust to keep
records, to hold and to disburse any dividends or distributions and to have and
perform, in respect of all original issues and transfers of Shares, dividends
and distributions and reports and communications to Shareholders, the powers and
duties usually had and performed by transfer agents, dividend disbursing agents
and registrars of a Maryland business corporation.
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4.9. SHAREHOLDERS' MEETINGS.
(a) There shall be an annual meeting of the Shareholders, at such
time and place as shall be determined by or in the manner prescribed in
the Bylaws, at which the Trustees shall be elected and any other proper
business may be conducted. Subject to the rights of the holders of any
series of Preferred Stock, special meetings of Shareholders may only be
called by the President or a majority of the Trustees. If there shall be
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.
(b) No business shall be transacted by the Shareholders at a special
meeting other than business that is either (1) specified in the notice of
meeting (or any supplement thereto) given by or at the direction of the
Trustees (or any duly authorized committee thereof) or (2) otherwise
properly brought before the Shareholders by or at the direction of the
Trustees.
(c) The holders of Shares entitled to vote at the meeting
representing a majority of the total number of votes authorized to be cast
by Shares then outstanding and entitled to vote on any question present in
person or by proxy shall constitute a quorum at any such meeting for
action on such question. Any meeting may be adjourned from time to time by
a majority of the votes properly cast upon the question, without regard to
class, whether or not a quorum is present, and, except as otherwise
provided in the Bylaws, the meeting may be reconvened without further
notice. At any reconvened session of the meeting at which there shall be a
quorum, any business may be transacted at the meeting as originally
noticed.
(d) Notwithstanding any provision of law requiring the authorization
of any action by a greater proportion than a majority of the total number
of shares then outstanding and entitled to vote thereon, except as
otherwise clearly indicated in this Declaration of Trust or the Bylaws,
whenever any action is to be taken by the Shareholders, it shall be
authorized by the affirmative vote of the holders of Shares representing a
majority of the total number of votes authorized to be cast by shares then
outstanding and entitled to vote thereon. At all elections of Trustees,
voting by Shareholders shall be conducted under the non-cumulative method
and the election of Trustees shall be by the affirmative vote of the
holders of Shares representing a majority of the total number of votes
authorized to be cast by shares then outstanding and entitled to vote
thereon.
(e) Whenever Shareholders are required or permitted to take any
action by a vote at a meeting of Shareholders, such action may be taken by
executing written consents in lieu thereof.
(f) For any shareholder proposal to be presented in connection with
an annual meeting of Shareholders, including any proposal relating to the
nomination of a Trustee to be elected to the Board, the Shareholders must
have given timely written notice thereof in writing to the Secretary of
the Trust in the manner and containing the information
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required by the Bylaws. Shareholder proposals to be presented in
connection with a special meeting of Shareholders will be presented by the
Trust only to the extent required by the Bylaws.
4.10. PROXIES. Whenever the vote or consent of a Shareholder entitled to
vote is required or permitted under this Declaration of Trust, such vote or
consent may be given either directly by such Shareholder or by a proxy in the
form prescribed in, and subject to the provisions of, the Bylaws. The Trustees
may solicit such proxies from the Shareholders or any of them entitled to vote
in any matter requiring or permitting the Shareholders' vote or consent.
4.11. REPORTS TO SHAREHOLDERS. Each year the Trust shall prepare an annual
report (the "ANNUAL REPORT") of its operations, which Annual Report shall
constitute the accounting of the Trustees for such fiscal year. Subject to
Section 8-401 of the Corporations and Associations Article of the Annotated Code
of Maryland, the Annual Report shall be in such form and have such content as
the Trustees deem proper. The Annual Report shall include a balance sheet, an
income statement and a surplus statement, each prepared in accordance with
generally accepted accounting principles. Such financial statements shall be
certified by an independent certified public accountant based on a full
examination of the books and records of the Trust conducted in accordance with
generally accepted auditing procedure. The Annual Report shall be submitted to
the Shareholders at or before the annual meeting of Shareholders and, within the
earlier of 20 days after the annual meeting of Shareholders or 120 days after
the fiscal year of the Trust, shall be placed on file at the principal office of
the Trust.
4.12. FIXING RECORD DATE. The Bylaws may provide for fixing or, in the
absence of such provision, the Trustees may fix, in advance, a date as the
record date for determining the Shareholders entitled to notice of or to vote at
any meeting of Shareholders or to express consent to any proposal without a
meeting or for the purpose of determining Shareholders entitled to receive
payment of any dividend or distribution (whether before or after termination of
the Trust) or any Annual Report or other communication from the Trustees, or for
any other purpose. The record date so fixed shall be not less than 10 days nor
more than 90 days prior to the date of the meeting or event for the purposes of
which it is fixed.
4.13. NOTICE TO SHAREHOLDERS. Timely notice of all meetings of
Shareholders shall be given as provided in the Bylaws and in any event delivered
not less than 10 days before the meeting. Any notice of meeting or other notice,
communication or report to any Shareholder shall be deemed duly delivered to
such Shareholder when such notice, communication or report is deposited, with
postage thereon prepaid, in the United States mail, addressed to such
Shareholder at his address as it appears on the records of the Trust or is
delivered in person to such Shareholder.
4.14. SHAREHOLDERS' DISCLOSURE; RESTRICTIONS ON SHARE TRANSFER; LIMITATION
ON HOLDINGS.
(a)(1) Subject to Section 4.14(a)(10) hereof, during the period commencing
on the Initial Date and prior to the Restriction Termination Date:
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(A) (i) No Person, other than an Excepted Holder, shall Beneficially
Own or Constructively Own Shares in excess of the Ownership Limit; no
Excepted Holder shall Beneficially Own or Constructively Own Shares in
excess of the Excepted Holder Limit for such Excepted Holder; the McBride
Family shall not Beneficially Own or Constructively Own Shares in excess
of the McBride Family Excepted Holder Limit; and Hudson Bay shall not
Beneficially Own or Constructively Own Shares in excess of the Hudson Bay
Excepted Holder Limit.
(ii) No Person shall Beneficially or Constructively Own Shares to
the extent that such Beneficial or Constructive Ownership of Shares would
result in the Trust (a) 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 (b) 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 Shares (whether or not such Transfer is the result of a
transaction entered into through the facilities of the AMEX or any other
national securities exchange or automated inter-dealer quotation system),
that, if effective, would result in the 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 Shares.
(iv) Any Transfer of Shares that, if effective, would result in
Shares being beneficially owned by a Disqualified Person shall be void AB
INITIO as to the Transfer of that number of shares which would be
otherwise beneficially owned by the intended transferee, and the intended
transferee shall acquire no rights in such Shares.
(B) If any Transfer of Shares or change in capital structure or
other event occurs which, if effective, would result in any Person Beneficially
Owning or Constructively Owning Shares in violation of Section 4.14(a)(1)(A)(i),
(ii) or (iv) hereof,
(i) then that number of the Shares the Beneficial or Constructive
Ownership of which otherwise would cause such Person to violate Section
4.14(a)(1)(A)(i), (ii) or (iv) hereof (rounded to the nearest whole
shares) shall be automatically transferred to a Charitable Trust for the
benefit of a Charitable Beneficiary, as described in Section 4.14(b)
hereof, effective on the close of business on the Business Day prior to
the date of such Transfer, and such Person shall acquire no rights in such
shares; or
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(ii) if the transfer to the Charitable Trust describe in
clause (i) of this sentence would not be effective for any reason to
prevent the violation of Section 4.14(a)(1)(A)(i), (ii) or (iv)
hereof, then the Transfer of that number of Shares that otherwise
would cause any Person to violate Section 4.14(a)(1)(A)(i), (ii) or
(iv) hereof shall be void AB INITIO, and the intended transferee
shall acquire no rights in such Shares.
(2) If the Board of Trustees of the Trustees of the Trust 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
4.14(a)(1) hereof or that a Person intends to acquire or has attempted to
acquire Beneficial or Constructive Ownership of any Shares in violation of
Section 4.14(a)(1) hereof (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 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
Transfers or attempted Transfers or other events in violation of Section
4.14(a)(1) hereof 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 of committee thereof.
(3) Any Person who acquires or attempts or intends to acquire
Beneficial Ownership or Constructive Ownership of Shares that will or may
violate Section 4.14(a)(1)(A) hereof, or any Person who would have owned Shares
that resulted in a transfer to the Charitable Trust pursuant to the provisions
of Section 4.14(a)(1)(B) hereof shall immediately give written notice to the
Trust of such event, or in the case of such 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.
(4) From the Initial Date and prior to the Restriction Termination
Date:
(A) every owner of more than 1% (or such other percentage as
required by the Code or the Treasury Regulations promulgated thereunder)
of the outstanding 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 Shares Beneficially Owned or Constructively
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 or Constructive Ownership on the Trust's status as a REIT and
ensure compliance with the Ownership Limit.
(B) each Person who is a Beneficial or Constructive Owner of
Shares and each Person (including the shareholder of record) who is
holding Shares for a Beneficial or Constructive Owner shall provide to the
Trust a written statement or affidavit stating such information as the
Trust may request, in good faith, in order to determine the Trust's
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status as a REIT and to comply with requirements of any taxing authority
or governmental authority or to determine such compliance.
(5) Nothing contained in this Section 4.14(a) shall limit the
authority of the Board of Trustees of the Trust 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.
(6) In the case of an ambiguity in the application of any of the
provisions of this Section 4.14 or any definition contained in Section 8.1
hereof, the Board of Trustees of the Trust shall have the power to determine the
application of the provisions of this Section 4.14 with respect to any situation
based on the facts known to it. In the event this Section 4.14 requires an
action by the Board of Trustees and this 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 this Section 4.14.
(7) (A) Subject to Section 4.14(a)(1)(A)(ii) hereof, the Board of
Trustees of the Trust, in its sole discretion, may exempt a Person from the
Ownership Limit, and may establish or increase an Excepted Holder Ownership
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 Shares will violate Section 4.14(a)(1)(A)(ii) hereof;
(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 9.8%
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 shall not be treated
as a tenant of the Trust if 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 from the tenant such
that, in the opinion of the Board of Trustees of the Trust, the
Trust's ability to qualify as a REIT is not impaired); 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
4.14(a)(1) through 4.14(a)(6) hereof) will result in such Shares
being automatically transferred to a Charitable Trust in accordance
with Section 4.14(a)(1)(B) and Section 4.14(b) hereof.
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(B) Prior to granting any exception pursuant to Section
4.14(a)(7)(A) hereof, the Board of Trustees of the Trust may (but is not
obligated to) 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 4.14(a)(1)(A)(ii) hereof, an
underwriter which participates in a public offering or a private placement
of Shares (or securities convertible into or exchangeable for Shares) may
Beneficially Own or Constructively Own Shares (or securities convertible
into or exchangeable for Shares) in excess of the Ownership Limit, but
only to the extent necessary to facilitate such public offering or private
placement (and, in any event, not more than 90 days following the purchase
by the underwriter of such Shares (or such securities convertible into or
exchangeable for Shares)).
(D) The Board of Trustees may only reduce the Excepted Holder
Ownership Limit for an Excepted Holder: (i) with the written consent of
such Excepted Holder at any time, or (ii) pursuant to the terms and
conditions of the agreements and understandings entered into with such
Excepted Holder in connection with the establishment of the Excepted
Holder Ownership Limit for that Excepted Holder. No Excepted Holder
Ownership Limit shall be reduced to a percentage that is less than the
Ownership Limit.
(E) The Board of Trustees may only reduce the McBride Family
Excepted Holder Limit below 39.9%: (i) with the written consent of the
McBride Family, or (ii) pursuant to the terms and conditions of Section
8.1(w).
(F) The Board of Trustees may only reduce the Hudson Bay
Excepted Holder Limit below 40% with the written consent of Hudson Bay.
(8) The Board of Trustees may from time to time increase or decrease
the Ownership Limit; PROVIDED, HOWEVER, that:
(A) Any decrease may be made only prospectively as to
subsequent holders (other than a decrease as a result of a retroactive
change in existing law, in which case such decrease shall be effective
immediately);
(B) The Ownership Limit may not be increased if, after giving
effect to such increase, five Persons could Beneficially Own or
Constructively Own, in the aggregate, more than 49.5% in value of the
Shares then outstanding; and
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(C) Prior to the modification of either of the ownership
limitations, the Board of Trustees of the Trust may require such opinions
of counsel, affidavits, undertakings or agreements as it may deem
necessary or advisable in order to determine or ensure the Trust's status
as REIT.
(9) In addition to the legend provided in Section 4.2(b) hereof,
each certificate evidencing Shares shall contain a legend imprinted thereon (or
each statement delivered to Shareholders under Section 4.2(c) hereof shall
contain a legend therein) to substantially the following effect or such other
legend as the Trustees may from time to time adopt:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON BENEFICIAL AND CONSTRUCTIVE OWNERSHIP AND TRANSFER
FOR THE PURPOSE OF THE TRUST'S MAINTENANCE OF ITS STATUS AS A REAL
ESTATE INVESTMENT TRUST 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 4.9% (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 OWNERSHIP LIMIT
SHALL BE APPLICABLE); (II) NO PERSON MAY BENEFICIALLY OR
CONSTRUCTIVELY OWN SHARES OF THE TRUST IN EXCESS OF 9.9% (IN VALUE
OR NUMBER OF SHARES) OF THE OUTSTANDING SHARES OF ANY CLASS OR
SERIES OF PREFERRED STOCK OF THE TRUST, UNLESS SUCH PERSON IS AN
EXCEPTED HOLDER (IN WHICH CASE THE EXCEPTED HOLDER OWNERSHIP LIMIT
SHALL BE APPLICABLE); (III) NO PERSON MAY BENEFICIALLY OR
CONSTRUCTIVELY OWN 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; (IV) NO PERSON MAY TRANSFER
SHARES IF SUCH TRANSFER WOULD RESULT IN THE SHARES OF THE TRUST
BEING OWNED BY FEWER THAN 100 PERSONS; (V) NO PERSON MAY TRANSFER
SHARES IF SUCH TRANSFER WOULD RESULT IN SHARES OF THE TRUST BEING
OWNED BY A DISQUALIFIED PERSON; AND (VI) NO PLANS AND CERTAIN OTHER
PERSONS DESCRIBED IN OR SUBJECT TO THE PLAN ASSET REGULATIONS MAY
OWN MORE THAN 24.9% OF THE VALUE OF ANY CLASS OF SHARES OF THE
TRUST. ANY PERSON WHO BENEFICIALLY OR CONSTRUCTIVELY OWNS OR
ATTEMPTS TO BENEFICIALLY OR CONSTRUCTIVELY OWN SHARES WHICH CAUSES
OR WILL CAUSE A PERSON TO BENEFICIALLY OR CONSTRUCTIVELY OWN SHARES
IN EXCESS OR IN VIOLATION OF THE ABOVE LIMITATIONS MUST IMMEDIATELY
NOTIFY THE TRUST. IF ANY OF THE RESTRICTIONS ON
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TRANSFER OR OWNERSHIP ARE VIOLATED, THE SHARES REPRESENTED HEREBY
MAY BE AUTOMATICALLY TRANSFERRED TO A CHARITABLE 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 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 SHARES OF THE TRUST ON REQUEST AND WITHOUT CHARGE.
(10) Nothing contained in this Section 4.14 hereof or in any
provision hereof shall preclude the settlement of any transaction entered into
through the facilities of the AMEX or any other national securities exchange or
automated inter-dealer quotation system. Although settlement of any transaction
is permitted, any transferee in such transaction shall be subject to all the
provisions and limitations set forth in this Section 4.14 hereof.
(11) Subject to Section 4.14(a)(10) hereof,
(A) Prior to the date that either
(i) the Common Shares of the Trust qualify as a class of
"publicly-offered securities" (within the meaning of Section
2510.3-101(b)(2) of the Plan Asset Regulations) or
(ii) the Trust qualifies for another exception to the Plan
Asset Regulations (other than the exception found in Section
2510.3-101(a)(2)(ii) of the Plan Asset Regulations),
the ownership of Shares of the Trust by a "benefit plan investor" (within
the meaning of Section 2510.3-101(f)(2) of the Plan Asset Regulations) or
persons acting on behalf thereof may not exceed 24.9% of the value of any
class of Shares of the Trust calculated in accordance with the Plan Asset
Regulations. The Trustees may impose such requirements and restrictions on
purchasers and other transferees of Shares (including without limitation,
requirements under which such purchasers and other transferees must make
representations and agreements as to whether they are benefit plan
investors), and related rules and regulations, as they may deem necessary
or appropriate to monitor and enforce compliance with this Section
4.14(a)(11)(A).
(B) Without limiting the last sentence of Section
4.14(a)(11)(A), any Transfer of Shares that, if effective, would result in
Shares being beneficially owned in a violation of Section 4.14(a)(11)(A)
hereof shall be void AB INITIO as to the Transfer of that number of shares
which would be otherwise beneficially
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owned by the intended transferee, and the intended transferee shall
acquire no rights in such Shares.
(C) Without limiting the last sentence of Section
4.14(a)(11)(A), if any Transfer of Shares or change in capital structure
or other event occurs which, if effective, would result in a violation of
Section 4.14(a)(11)(A) hereof, the provisions of Section 4.14(a)(1)(B)
hereof shall apply to such shares in violation as if there had been a
violation of Section 4.14(a)(1)(A)(i), (ii) or (iv) hereof.
(b) (1) Upon any purported Transfer or other event described in Section
4.14(a)(1)(B) hereof that would result in a transfer of Shares to a Charitable
Trust, such Shares shall be deemed to have been transferred to the Charitable
Trustee as Charitable Trustee of a Charitable Trust for the exclusive benefit of
one or more Charitable Beneficiaries. Such transfer to the Charitable 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 4.14(a)(1)(B) hereof. The Charitable
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 4.14(b)(6) hereof.
(2) Shares held by the Charitable Trustee shall be issued and
outstanding Shares of the Trust. The Prohibited Owner shall have no rights in
the shares held by the Charitable Trustee. The Prohibited Owner shall not
benefit economically from ownership of any shares held in trust by the
Charitable Trustee, shall have no rights to dividends and shall not possess any
rights to vote or other rights attributable to the shares held in the Charitable
Trust.
(3) The Charitable Trustee shall have all voting rights and rights
to dividends or other distributions with respect to 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 the Shares have been transferred to the Charitable
Trustee shall be paid with respect to such Shares to the Charitable Trustee upon
demand and any dividend or other distribution authorized but unpaid shall be
paid when due to the Charitable Trustee. Any dividends or distributions so paid
over to the Charitable 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 the Shares have been transferred to the Charitable Trustee, the
Charitable Trustee shall have the authority (at the Charitable Trustee's sole
discretion) (A) to rescind as void any vote cast by a Prohibited Owner prior to
the discovery by the Trust that the Shares have been transferred to the
Charitable Trustee and (B) to recast such vote in accordance with the desires of
the Charitable Trustee acting for the benefit of the Charitable Beneficiary.
Notwithstanding the provisions of this Section 4.14, until the Trust has
received notification that 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.
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(4) Within 20 days of receiving notice from the Trust that Shares
have been transferred to the Charitable Trust, the Charitable Trustee of the
Charitable Trust shall sell the shares held in the Charitable Trust to a Person,
designated by the Charitable Trustee, whose ownership of the shares will not
violate the ownership limitations set forth in Section 4.14(a)(1)(A) hereof.
Upon such sale, the interest of the Charitable Beneficiary in the Shares sold
shall terminate, and the Charitable Trustee shall distribute the net proceeds of
the sale to the Prohibited Owner and to the Charitable Beneficiary as provided
in this Section 4.14(b)(4). The Prohibited Owner shall receive the lesser of (A)
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 (B) the price
per share received by the Charitable 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. Each Prohibited Owner and Charitable Beneficiary waive
any and all claims that they may have against the Charitable Trustee and the
Charitable Trust arising out of the disposition of any Shares transferred to the
Charitable Trust, except for claims arising out of the gross negligence or
willful misconduct of, or any failure to make payments in accordance with this
Section 4.14(b)(4) by, the Charitable Trustee or the Trust. If, prior to the
discovery by the Trust that Shares have been transferred to the Charitable
Trustee, such shares are sold by a Prohibited Owner, then (C) such shares shall
be deemed to have been sold on behalf of the Charitable Trust and (D) 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 4.14(b)(4), such excess shall be paid to the Charitable Trustee upon
demand.
(5) Shares transferred to the Charitable 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 (A) 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 (B) 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 Charitable Trustee has sold the shares
held in the Charitable Trust pursuant to Section 4.14(b)(4) hereof. Upon such
sale to the Trust, the interest of the Charitable Beneficiary in the shares sold
shall terminate and the Charitable Trustee shall distribute the net proceeds of
the sale to the Prohibited Owner.
(6) By written notice to the Charitable Trustee, the Trust shall
designate one or more nonprofit organizations to be the Charitable Beneficiary
of the interest in the Charitable Trust such that (A) the Shares held in the
Charitable Trust would not violate the restrictions set forth in Section
4.14(a)(1)(A) hereof in the hands of such Charitable Beneficiary and (B) 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.
(7) No delay or failure on the part of the Trust or the Board of
Trustees in exercising any right under this Declaration of Trust shall operate
as a waiver of any right of the
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Trust or the Board of Trustees, as the case may be, except to the extent
specifically waived in writing.
4.15. SPECIAL VOTING PROVISIONS RELATING TO CERTAIN BUSINESS COMBINATIONS
AND CONTROL SHARES. The Trust elects not to be governed by the provisions of
Subtitles 6 and 7 of Title 3 of the MGCL with respect to any transactions.
ARTICLE V
LIABILITY OF TRUSTEES, SHAREHOLDERS,
OFFICERS, EMPLOYEES AND AGENTS, AND OTHER MATTERS
5.1. LIMITATION OF LIABILITY OF SHAREHOLDERS, TRUSTEES, OFFICERS,
EMPLOYEES AND AGENTS FOR OBLIGATIONS OF THE TRUST. The Trustees and the
officers, employees and agents of the Trust, in incurring any debts, liabilities
or obligations or in taking or omitting any other actions for or in connection
with the Trust, are, and shall be deemed to be, acting as trustees, officers,
employees or agents of the Trust and not in their own individual capacities.
Except as otherwise provided in Section 6.3 hereof with respect to liability of
Trustees or officers, agents or employees of the Trust to the Trust, or to
Shareholders, no Shareholder, Trustee or officer, employee or agent of the Trust
shall be liable for any debt, claim, demand, judgment decree, liability or
obligation of any kind (in tort, contract or otherwise) of, against or with
respect to the Trust or arising out of any action taken or omitted for or on
behalf of the Trust, and the Trust shall be solely liable therefor and resort
shall be had solely to the Trust Estate for the payment or performance thereof,
and no Shareholder, Trustee or officer, employee or agent of the Trust shall be
subject to any personal liability whatsoever, in tort, contract or otherwise, to
any other Person or Persons in connection with the Trust Estate or the affairs
of the Trust (or any actions taken or omitted for or on behalf of the Trust),
and all such other Persons shall look solely to the Trust Estate for
satisfaction of claims of any nature arising in connection with the Trust Estate
or the affairs of the Trust (or any action taken or omitted for or on behalf of
the Trust).
5.2. EXPRESS EXCULPATORY CLAUSES AND INSTRUMENTS. Any written instrument
creating an obligation of the Trust shall, to the extent practicable, include a
reference to this Declaration of Trust and provide that neither the Shareholders
nor the Trustees nor any officers, employees or agents of the Trust shall be
liable thereunder and that all Persons shall look solely to the Trust Estate for
the payment of any claim thereunder or for the performance thereof; however, the
omission of such provision from any such instrument shall not render the
Shareholders, any Trustee, or any officer, employee or agent of the Trust liable
nor shall the Shareholders, any Trustee or any officer, employee or agent of the
Trust be liable to any one for such omission.
5.3. LIMITATION OF LIABILITY OF TRUSTEES, OFFICERS, EMPLOYEES AND AGENTS
TO THE TRUST AND TO SHAREHOLDERS FOR ACTS AND OMISSIONS. To the fullest extent
permitted by Maryland statutory and decisional law, as amended or interpreted,
no Trustee, officer, employee or agent of the Trust (a) shall be personally
liable to the Trust or its Shareholders and (b) shall have any greater duties
than those established by this Declaration of Trust or, in cases as to which
such duties are not so established, than those to which the directors, officers,
employees and agents of
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a Maryland business corporation are subject from time to time. No amendment of
this Declaration of Trust or repeal of any of its provisions shall limit or
eliminate the limitation on liability provided to Trustees, officers, employees
and agents of the Trust hereunder with respect to any act or omission occurring
prior to such amendment or repeal.
5.4. INDEMNIFICATION AND REIMBURSEMENT OF TRUSTEES, OFFICERS, EMPLOYEES,
AGENTS AND CERTAIN OTHER PERSONS.
(a) The Trust shall indemnify (1) its Trustees and officers, whether
serving the Trust or at its request any other entity, to the full extent
required or permitted by the General Laws of the State of Maryland now or
hereafter in force, including the advance of expenses under the procedures
and to the full extent permitted by law and (2) other employees and agents
to such extent as shall be authorized by the Trustees of the Trust or the
Bylaws and be permitted by law. The foregoing rights of indemnification
shall not be exclusive of any other rights to which those seeking
indemnification may be entitled. The Trustees may take such action as is
necessary to carry out these indemnification provisions and is expressly
empowered to adopt, approve and amend from time to time such Bylaws,
resolutions or contracts implementing such provisions or such further
indemnification arrangements as may be permitted by law. No amendment of
this Declaration of Trust or repeal of any of its provisions shall limit
or eliminate the right to indemnification provided hereunder with respect
to acts or omissions occurring prior to such amendment or repeal.
(b) Notwithstanding anything herein to the contrary, and to the
fullest extent permitted by Maryland statutory or decisional law, as
amended or interpreted, no Trustee or officer of the Trust shall be
personally liable to the Trust or its Shareholders for money damages. No
amendment of this Declaration of Trust or repeal of any of its provisions
shall limit or eliminate the limitation on liability provided to Trustees
and officers hereunder with respect to any act or omission occurring prior
to such amendment or repeal.
5.5. INDEMNIFICATION AND REIMBURSEMENT OF SHAREHOLDERS. Any Shareholder
made a party to any action, suit or proceeding or against him a claim or
liabilities are asserted by reason of the fact that he, his testate or intestate
estate was or is a Shareholder shall be indemnified and held harmless by the
Trust against judgments, fines, amounts paid on account thereof (whether in
settlement or otherwise) and reasonable expenses, including attorneys' fees,
actually and reasonably incurred by him in connection with the defense of such
action, suit, proceeding, claim or alleged liability or in connection with any
appeal therein, whether or not the same proceeds to judgment or is settled or
otherwise brought to a conclusion; PROVIDED, HOWEVER, that such Shareholder
gives prompt notice thereof, executes such documents and takes such action as
will permit the Trust to conduct the defense or settlement thereof and
cooperates therein. In the event that the assets of the Trust Estate are
insufficient to satisfy the Trust's indemnity obligations hereunder, each
Shareholder shall be entitled to such indemnification pro rata from the Trust
Estate.
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5.6. RIGHT OF TRUSTEES, OFFICERS, EMPLOYEES AND AGENTS TO OWN SHARES OR
OTHER PROPERTY AND TO ENGAGE IN OTHER BUSINESS. Any Trustee or officer, employee
or agent of the Trust may acquire, own, hold and dispose of Shares in the Trust,
for his individual account, and may exercise all rights of a Shareholder to the
same extent and in the same manner as if he were not a Trustee or officer,
employee or agent of the Trust. Any Trustee or officer, employee or agent of the
Trust may, in his personal capacity or in the capacity of trustee, officer,
director, stockholder, partner, member, advisor or employee of any Person or
otherwise, have business interests and engage in business activities similar to
or in addition to those relating to the Trust, which interests and activities
may be similar to and competitive with those of the Trust and may include the
acquisition, syndication, holding, management, development, operation or
disposition, for his own account, or for the account of such Person or others,
of interests in Mortgages, interests in Real Property, or interests in Persons
engaged in the real estate business. Each Trustee, officer, employee and agent
of the Trust shall be free of any obligation to present to the Trust any
investment opportunity which comes to him in any capacity other than solely as
Trustee, officer, employee or agent of the Trust even if such opportunity is of
a character which, if presented to the Trust, could be taken by the Trust.
Subject to the provisions of Section 6.8 hereof, any Trustee or officer,
employee or agent of the Trust may be interested as trustee, officer, director,
stockholder, partner, member, advisor or employee of, or otherwise have a direct
or indirect interest in, any Person who may be engaged to render advice or
services to the Trust, and may receive compensation from such Person as well as
compensation as Trustee, officer, employee or agent or otherwise hereunder. None
of these activities shall be deemed to conflict with his duties and powers as
Trustee or officer, employee or agent of the Trust.
5.7. TRANSACTIONS BETWEEN TRUSTEES, OFFICERS, EMPLOYEES OR AGENTS AND THE
TRUST.
(a) Except as otherwise provided by this Declaration of Trust, and
in the absence of fraud, a contract, act or other transaction between the
Trust and any other Person in which the Trust is interested, shall be
valid, and no Trustee or officer, employee or agent of the Trust shall
have any liability as a result of entering into any such contract, act or
transaction, even though (1) one or more of the Trustees or officers,
employees or agents of the Trust are directly or indirectly interested in
or connected with or are trustees, partners, directors, employees,
officers or agents of such other Person, or (2) one or more of the
Trustees or officers, employees or agents of the Trust individually or
jointly with others, is a party or are parties to, or are directly or
indirectly interested in or connected with, such contract, act or
transaction; PROVIDED THAT in each such case (A) such interest or
connection is disclosed or known to the Trustees and thereafter the
Trustees authorize or ratify such contract, act or other transaction by
affirmative vote of a majority of the Trustees who are not so interested
or (B) such interest or connection is disclosed or known to the
Shareholders, and thereafter such contract, act or transaction is approved
by Shareholders holding a majority of the Shares then outstanding and
entitled to vote thereon.
(b) Notwithstanding any other provision of this Declaration of
Trust, the Trust may engage in a transaction with (1) any Trustee,
officer, employee or
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agent of the Trust (acting in his individual capacity), (2) any director,
trustee, partner, officer, employee or agent (acting in his individual
capacity) of any investment advisor of the Trust, (3) any investment
advisor of the Trust or (4) an Affiliate of any of the foregoing, PROVIDED
THAT such transaction has, after disclosure of such affiliation, been
approved or ratified by the affirmative vote of a majority of the Trustees
not having any interest in such transaction and not Affiliates of any
party to the transaction after a determination by them that such
transaction is fair and reasonable to the Trust and the Shareholders.
(c) This Section 5.7 shall not prevent any sale of Shares issued by
the Trust for the public offering thereof in accordance with a
registration statement filed with the Securities and Exchange Commission
under the Securities Act of 1933, as amended. The Trustees are not
restricted by this Section 5.7 from forming a corporation, partnership,
trust or other business association owned by any Trustee, officer,
employee or agent or by their nominees for the purpose of holding title to
property of the Trust or managing property of the Trust, PROVIDED THAT the
Trustees make a determination that the creation of such entity for such
purpose is in the best interest of the Trust.
5.8. PERSONS DEALING WITH TRUSTEES, OFFICERS, EMPLOYEES OR AGENTS. Any act
of the Trustees or of the officers, employees or agents of the Trust purporting
to be done in their capacity as such, shall, as to any Persons dealing with such
Trustees, officers, employees or agents, be conclusively deemed to be within the
purposes of this Trust and within the powers of such Trustees or officers,
employees or agents. No Person dealing with the Trustees or any of them or with
the officers, employees or agents of the Trust shall be bound to see to the
application of any funds or property passing into their hands or control. The
receipt of the Trustees or any of them, or of authorized officers, employees or
agents of the Trust, for moneys or other consideration, shall be binding upon
the Trust.
5.9. RELIANCE. The Trustees and the officers, employees and agents of the
Trust may consult with counsel (which may be a firm in which one or more of the
Trustees or the officers, employees or agents of the Trust is or are members)
and the advice or opinion of such counsel shall be full and complete personal
protection to all the Trustees and the officers, employees and agents of the
Trust in respect of any action taken or suffered by them in good faith and in
reliance on or in accordance with such advice or opinion. In discharging their
duties, Trustees or officers, employees or agents of the Trust, when acting in
good faith, may rely upon financial statements of the Trust represented to them
to fairly present the financial position or results of operations of the Trust
by the chief financial officer of the Trust or the officer of the Trust having
charge of its books of account, or stated in a written report by an independent
certified public accountant fairly to present the financial position or results
of operations of the Trust. The Trustees and the officers, employees and agents
of the Trust may rely, and shall be personally protected in acting, upon any
instrument or other document believed by them to be genuine.
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ARTICLE VI
DURATION, AMENDMENT AND TERMINATION OF TRUST
6.1. DURATION OF TRUST. The duration of the Trust shall be perpetual;
PROVIDED, HOWEVER, the Trust may be terminated at any time at a meeting of
Shareholders by the affirmative vote of the holders of Shares representing
two-thirds of the total number of Shares then outstanding and entitled to vote
thereon.
6.2. TERMINATION OF TRUST.
(a) Upon the termination of the Trust: (1) the Trust shall carry on
no business except for the purpose of winding up its affairs; (2) the
Trustees shall proceed to wind up the affairs of the Trust and all the
powers of the Trustees under this Declaration of Trust shall continue
until the affairs of the Trust shall have been wound up, including the
power to fulfill or discharge the contracts of the Trust, collect its
assets, sell, convey, assign, exchange, transfer or otherwise dispose of
all or any part of the remaining Trust Estate 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; and (3) after paying or adequately providing for the payment of
all liabilities, and upon receipt of such releases, indemnities and
refunding agreements, as they deem necessary for their protection, the
Trustees may distribute the remaining Trust Estate (in cash or in kind or
partly each) among the Shareholders according to their respective rights.
(b) After termination of the Trust and distribution of the Trust
Estate to the Shareholders as herein provided, the Trustees shall execute
and lodge among the records of the Trust an instrument in writing setting
forth the fact of such termination and such distribution, a copy of which
instrument shall be filed with the MSDAT, and the trustees shall thereupon
be discharged from all further liabilities and duties hereunder and the
rights and interests of all Shareholders shall thereupon cease.
6.3. AMENDMENT PROCEDURE. This Declaration of Trust may be amended (except
that the provisions governing the personal liability of the Shareholders,
Trustees and of the officers, employees and agents of the Trust and the
prohibition of assessments upon Shareholders may not be amended in any respect
that could increase the personal liability of such Shareholders, Trustees or
officers, employees and agents of the Trust) at a meeting of Shareholders by
holders of Shares representing a majority of the total number of votes
authorized to be cast in respect of Shares then outstanding and entitled to vote
thereon. The approval of a majority of the Trustees shall also be required for
any such amendment. A majority of the Trustees may, after 15 days' written
notice to the Shareholders, also amend this Declaration of Trust without the
vote or consent of Shareholders if in good faith they deem it necessary to
conform this Declaration of Trust to the requirements of the Code relating to a
REIT, but the Trustees shall not be liable for failing to do so. Actions by the
Trustees pursuant to Sections 4.1, 4.14(a)(6) or 7.6(a) hereof that result in an
amendment to this Declaration of Trust shall be effected without the vote or
consent of Shareholders.
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6.4. AMENDMENTS EFFECTIVE. Any amendment pursuant to any Section of this
Declaration of Trust shall not become effective until it is duly filed with the
MSDAT.
6.5. TRANSFER TO SUCCESSOR. The Trustees, with the affirmative vote, at a
meeting approving a plan for this purpose, of the holders of Shares representing
a majority of all votes cast at a meeting at which a quorum is present, may (a)
cause the organization of a limited partnership, partnership, corporation,
association, trust or other organization to take over the Trust Estate and carry
on the affairs of the Trust, (b) merge the Trust into, or sell, convey and
transfer the Trust Estate to, any such limited partnership, partnership,
corporation, association, trust or organization in exchange for Securities
thereof, or beneficial interests therein, and the assumption by such transferee
of the liabilities of the Trust and (c) thereupon terminate this Declaration of
Trust and deliver such shares, Securities or beneficial interests to the
Shareholders in accordance with such plan.
ARTICLE VII
MISCELLANEOUS
7.1. APPLICABLE LAW. This Declaration of Trust is executed and
acknowledged by the Trustees with reference to the statutes and laws of the
State of Maryland, and the rights of all parties and the construction and effect
of every provision hereof shall be subject to and construed according to the
statutes and laws of such State. To the extent not otherwise provided in this
Declaration of Trust, the provisions of MGCL shall be deemed to apply to the
Trust.
7.2. INDEX AND HEADINGS FOR REFERENCE ONLY. The index and headings
preceding the text, articles and sections hereof have been inserted for
convenience and reference only and shall not be construed to affect the meaning,
construction or effect of this Declaration of Trust.
7.3. SUCCESSORS IN INTEREST. This Declaration of Trust and the Bylaws
shall be binding upon and inure to the benefit of the undersigned Trustees and
their successors, assigns, heirs, distributees and legal representatives, and
every Shareholder and his successors, assigns, heirs, distributees and legal
representatives.
7.4. INSPECTION OF RECORDS. Trust records shall be available for
inspection by Shareholders at the same time and in the same manner and to the
extent that comparable records of a Maryland business corporation would be
available for inspection by stockholders under the laws of the State of
Maryland. Except as specifically provided for in this Declaration of Trust or in
Title 8 of the Corporations and Associations Article of the Annotated Code of
Maryland, Shareholders shall have no greater right than stockholders of a
Maryland business corporation to require financial or other information from the
Trust, the Trustees or officers of the Trust. Any Federal or state securities
administrator or the MSDAT shall have the right, at reasonable times during
business hours and for proper purposes, to inspect the books and records of the
Trust.
7.5. COUNTERPARTS. This Declaration of Trust may be simultaneously
executed in several counterparts, each of which when so executed shall be deemed
to be an original, and such
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counterparts together shall constitute one and the same instrument, which shall
be sufficiently evidenced by any such original counterpart.
7.6. PROVISIONS OF THE TRUST IN CONFLICT WITH LAW OR REGULATIONS;
SEVERABILITY.
(a) The provisions of this Declaration of Trust are severable, and
if the Trustees shall determine, with the advice of counsel, that any one
or more of such provisions (the "CONFLICTING PROVISIONS") are in conflict
with the provisions of Code relating to a REIT, the Conflicting Provisions
shall be deemed never to have constituted a part of this Declaration of
Trust; PROVIDED, HOWEVER, that such determination by the Trustees shall
not affect or impair any of the remaining provisions of this Declaration
of Trust or render invalid or improper any action taken or omitted
(including but not limited to the election of Trustees) prior to such
determination. An amendment in recordable form signed by a majority of the
Trustees setting forth any such determination and reciting that it was
duly adopted by the Trustees, or a copy of this Declaration of Trust, with
the Conflicting Provisions removed pursuant to such a determination, in
recordable form, signed by a majority of the Trustees, shall be conclusive
evidence of such determination when filed with the MSDAT. The Trustees
shall not be liable for failure to make any determination under this
Section 7.6(a). Nothing in this Section 7.6(a) shall in any way limit or
affect the right of the Trustees to amend this Declaration of Trust as
provided in Section 6.3 hereof.
(b) If any provision of this Declaration of Trust shall be held
invalid or unenforceable, such invalidity or unenforceability shall attach
only to such provision and shall not in any manner affect or render
invalid or unenforceable any other provision of this Declaration of Trust,
and this Declaration of Trust shall be carried out as if any such invalid
or unenforceable provision were not contained herein.
7.7. CERTIFICATIONS. The following certifications shall be final and
conclusive as to any Persons dealing with the Trust:
(a) a certification of a vacancy among the Trustees by reason of
resignation, removal, increase in the number of Trustees, incapacity,
death or otherwise, when made in writing by a majority of the remaining
Trustees;
(b) a certification as to the individuals holding office as Trustees
or officers at any particular time, when made in writing by the secretary
of the Trust;
(c) a certification that a copy of this Declaration of Trust or of
the Bylaws is a true and correct copy thereof as than in force, when made
in writing by the secretary of the Trust;
(d) a certification as to any actions by Trustees, other than the
above when made in writing by the secretary of the Trust or by any
Trustee.
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ARTICLE VIII
DEFINITIONS
8.1. DEFINITIONS. The terms defined in this Article, wherever used in this
Declaration of Trust, shall, unless the context otherwise requires, have the
respective meanings hereinafter specified. Whenever the singular number is used
in this Declaration of Trust and when permitted by the context, the same shall
include the plural, and the masculine gender shall include the feminine and
neuter genders, and vice versa. Where applicable, calculations to be made
pursuant to any such definition shall be made in accordance with generally
accepted accounting principles as in effect from time to time except as
otherwise provided in such definition.
(a) AFFILIATE. The term "AFFILIATE" of a Person shall mean (1) any
Person directly or indirectly owning, controlling, or holding, with power
to vote, 10% or more of the outstanding voting securities of such other
Person, (2) any Person 10% or more of whose outstanding voting securities
are directly or indirectly owned, controlled, or held, with power to vote,
by such other Person, (3) any person directly or indirectly controlling,
controlled by, or under common control with such other Person (4) any
executive officer, director, trustee or general partner of such other
Person, and (5) any legal entity for which such Person acts as an
executive officer, director, trustee or general partner.
(b) AMEX. The term "AMEX" shall mean the American Stock Exchange,
Inc.
(c) ANNUAL REPORT. The term "ANNUAL REPORT"shall have the meaning
set forth in Section 4.11(a) hereof.
(d) BENEFICIAL OWNERSHIP. The term "BENEFICIAL OWNERSHIP" shall mean
ownership of Shares by a Person, whether the interest in the 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.
(e) 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.
(f) BYLAWS. The term "BYLAWS" shall have the meaning set forth in
Section 3.3 hereof.
(g) CHARITABLE BENEFICIARY. The term "CHARITABLE BENEFICIARY" shall
mean one or more beneficiaries of the Charitable Trust as determined
pursuant to
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Section 4.14(b)(6) hereof, 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 Sections
170(b)(1)(A), 2055 and 2522 of the Code.
(h) CHARITABLE TRUST. The term "CHARITABLE TRUST" shall mean any
trust provided for in Section 4.14(b)(1) hereof.
(i) CHARITABLE TRUSTEE. The term "CHARITABLE 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.
(j) CLOSING PRICE. The term "CLOSING PRICE" on any date shall mean
the last sale price for such 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 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 Shares is 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 Shares
is listed or admitted to trading or, if such Shares is 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 NASDAQ National
Market, or, if such automated quotation system is no longer in use, the
principal other automated quotation system that may then be in use or, if
such Shares is 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 Shares selected by the Board of Trustees of the
Trust or, in the event that no trading price is available for such Shares,
the fair market value of the Shares, as determined in good faith by the
Board of Trustees of the Trust.
(k) CODE. The term "CODE" shall mean the Internal Revenue Code of
1986, as amended from time to time.
(l) COMMON SHARES. The term "COMMON SHARES" shall mean the shares of
beneficial interest of the Trust as described in Section 4.1 hereof as
Common Shares.
(m) CONSTRUCTIVE OWNERSHIP. The term "CONSTRUCTIVE OWNERSHIP" shall
mean ownership of Shares by a Person, whether the interest in the 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.
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(n) DECLARATION OF TRUST. The term "DECLARATION OF TRUST" or "THIS
DECLARATION OF TRUST" shall mean this Declaration of Trust, as amended,
restated, supplemented or modified from time to time. The use in this
Declaration of Trust of "HEREIN" and "HEREUNDER" shall be deemed to refer
to this Declaration of Trust and shall not be limited to the particular
text, article or section in which such words appear.
(o) DISQUALIFIED PERSON. The term "DISQUALIFIED PERSON" shall mean
(1) the United States, any State or political subdivision thereof, any
foreign government, any international organization, or any agency or
instrumentality of any of the foregoing, (2) any organization (other than
a cooperative described in Section 521 of the Code) which is exempt from
tax unless such organization is subject to the tax imposed by Section 511
of the Code, and (3) any organization described in Section 1381(a)(2)(C)
of the Code.
(p) EXCEPTED HOLDER. The term "EXCEPTED HOLDER" shall mean any
shareholder of the Trust for whom an Excepted Holder Ownership Limit is
created by this Declaration of Trust or by the Board of Trustees pursuant
to Section 4.14(a)(7) hereof.
(q) EXCEPTED HOLDER OWNERSHIP LIMIT. The term "EXCEPTED HOLDER
OWNERSHIP LIMIT" shall mean, provided that the affected Excepted Holder
agrees to comply with the requirements established by the Board of
Trustees pursuant to Section 4.14(a)(7) hereof, and subject to adjustment
pursuant to Section 4.14(a)(8) hereof, the percentage limit established by
the Board of Trustees pursuant to Section 4.14(a)(7) hereof.
(r) HUDSON BAY EXCEPTED HOLDER LIMIT. The term "Hudson Bay Excepted
Holder Limit" shall mean, subject to adjustment pursuant to Section
4.14(a)(7), 40% of the Common Shares outstanding or treated as outstanding
under Section 544 of the Code; provided that no Person that is a
Beneficial Owner of Hudson Bay may Beneficially Own more than 4.9% of the
Common Shares outstanding or treated as outstanding under Section 544 of
the Code. Hudson Bay shall be subject to the Ownership Limit with respect
to any Shares acquired that are not Common Shares.
(s) HUDSON BAY. The term "Hudson Bay" shall mean Hudson Bay Partners
II, L.P.
(t) INITIAL DATE. The term "Initial Date" shall mean the date upon
which the Declaration of Trust containing Section 4.14 is filed for record
with the MSDAT.
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(u) MARKET PRICE. The term "MARKET PRICE" on any date shall mean,
with respect to any class or series of outstanding Shares, the Closing
Price for such Shares on such date.
(v) MCBRIDE FAMILY. The term "McBride Family" shall mean David
McBride, Michael McBride and Timothy McBride, each of their parents,
brothers, sisters, spouses and children, any lineal descendants of any of
the foregoing, any estates of any of the foregoing and any trusts now or
hereafter established for the benefit of any of the foregoing. As referred
to herein, a "branch" of the McBride Family shall mean all Persons
referred to in the preceding sentence whose ownership of Common Shares is
Beneficially Owned by one individual who is part of the McBride Family (as
the term "individual" is defined in Section 542(a)(2) of the Code, as
modified by Section 856(h)(3) of the Code); provided that a Person shall
be treated as part of the "branch" that results in the greatest Beneficial
Ownership by an individual who is part of the McBride Family and such
Person shall not be treated as part of any other "branch."
(w) MCBRIDE FAMILY EXCEPTED HOLDER LIMIT. The term "McBride Family
Excepted Holder Limit" shall mean, subject to adjustment pursuant to
Section 4.14(a)(7) and this Section 8.1(w), 39.9% of the Common Shares
outstanding. The McBride Family Excepted Holder Limit shall be reduced to
35% at such time as any branch of the McBride Family Beneficially Owns
less than 4.9% of the outstanding Common Shares, provided that if three or
more branches of the McBride Family each Beneficially Own 4.9% or more of
the outstanding Common Shares, the McBride Family Excepted Holder Limit
shall not be reduced pursuant to this sentence. The McBride Family
Excepted Holder Limit shall be further reduced to 30.1% at such time as
any two branches of the McBride Family each Beneficially Owns less than
4.9% of the outstanding Common Shares, provided that if two or more
branches of the McBride Family each Beneficially Own 4.9% or more of the
outstanding Common Shares, the McBride Family Excepted Holder Limit shall
not be reduced pursuant to this sentence. At such time as any branch of
the McBride Family Beneficially Owns 4.9% or less of the outstanding
Common Shares, the Person included in such branch will be subject to the
Ownership Limit and the Common Shares Beneficially Owned by such Person
shall no longer be considered in determining the McBride Family's
Beneficial Ownership for purposes of the McBride Family Excepted Holder
Limit. The McBride Family shall be subject to the Ownership Limit with
respect to any Preferred Stock acquired.
(x) MORTGAGE LOANS. The term "MORTGAGE LOANS" shall mean notes,
debentures, bonds and other evidences of indebtedness or obligations,
whether negotiable or non-negotiable, which are secured or collateralized
by Mortgages.
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(y) MORTGAGES. The term "MORTGAGES" shall mean mortgages, deeds of
trust or other security interests in Real Property.
(z) MGCL. The term "MGCL" shall mean the Maryland General
Corporation Law.
(aa) MSDAT. The term "MSDAT" shall mean the State Department of
Assessments and Taxation of Maryland.
(ab) OWNERSHIP LIMIT. The term "Ownership Limit" shall mean (i) with
respect to the Common Shares, 4.9% (in value or number of shares,
whichever is more restrictive) of the outstanding shares of COMMON Shares;
and (ii) with respect to any class or series of Preferred Stock, 9.9% (in
value or number of shares, whichever is more restrictive) of the
outstanding shares of such class or series of Preferred Stock.
(ac) PERSON. The term "PERSON" shall mean an individual,
corporation, partnership, limited liability company, 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 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.
(ad) PLAN ASSET REGULATIONS. The term "PLAN ASSET REGULATIONS" shall
mean the regulations of the United States Department of Labor found at
Title 29, Section 2510.3-101 of the United States Code issued pursuant to
the Employee Retirement Income Security Act of 1974, as amended.
(ae) PROHIBITED OWNER. The term "PROHIBITED OWNER" shall mean, with
respect to any purported Transfer, any Person who, but for the provisions
of Section 4.14(a)(1) hereof, would Beneficially Own or Constructively Own
Shares, and if appropriate in the context, shall also mean any Person who
would have been the record owner of the shares that the Prohibited Owner
would have so owned.
(af) REAL PROPERTY. The term "REAL PROPERTY" shall mean and include
land, leasehold interests (including but not limited to interests of a
lessor or lessee therein), rights and interests in land, and in any
buildings, structures, improvements, furnishings and fixtures located on
or used in connection with land or interests therein, but does not include
investments in Mortgages, Mortgage Loans or interests therein.
(ag) REIT. The term "REIT" shall mean a real estate investment trust
within the meaning of Section 856 of the Code.
36
<PAGE>
(ah) RESTRICTION TERMINATION DATE. The term "RESTRICTION TERMINATION
DATE" shall mean the first day after the Initial Date on which the Board
of Trustees of the Trust 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 restriction and limitations Beneficial Ownership,
Constructive Ownership and Transfers of Shares set forth herein is no
longer required in order for the Trust to qualify as a REIT.
(ai) SECURITIES. The term "SECURITIES" shall mean any stock, shares,
voting trust certificates, bonds, debentures, notes or other evidences of
indebtedness or in general any instruments commonly known as "securities"
or any certificates of interest, shares or participation in, temporary or
interim certificates for, receipts for, guarantees of, or warrants,
options or rights to subscribe to, purchase or acquire any of the
foregoing.
(aj) SHAREHOLDERS. The term "SHAREHOLDERS" shall mean as of any
particular time all holders of record of outstanding Shares at such time.
(ak) SHARES. The term "SHARES" or, as the context may require,
"SHARES" shall mean the shares of beneficial interest of the Trust as
described in Section 4.1 hereof or in any articles supplementary hereto,
and shall include Common Shares.
(al) 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 Shares or the right to vote or receive dividends on
Shares, including (1) the granting or exercise of any option or warrant
(or any disposition of any option or warrant), (2) any disposition of any
securities or rights convertible into or exchangeable for Shares or any
interest in Shares or any exercise of any such conversion or exchange
right, and (3) Transfers of interests in other entities that result in
changes in Beneficial or Constructive Ownership of 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.
(am) TRUST. The term "TRUST" shall mean the Trust created by this
Declaration of Trust.
(an) TRUSTEES. The term "TRUSTEES" shall mean, as of any particular
time, the original signatories hereto as long as they hold office
hereunder and additional and successor Trustees, and shall not include the
officers, employees or agents of the Trust or the Shareholders. Nothing
herein shall be deemed to preclude the Trustees from also serving as
officers, employees or agents of the Trust or owning shares.
37
<PAGE>
(ao) TRUST ESTATE. The term "TRUST ESTATE" shall mean as of any
particular time any and all property, real, personal or otherwise,
tangible or intangible, which is transferred, conveyed or paid to or
purchased by the Trust or Trustees and all rents, income, profits and
gains therefrom and which at such time is owned or held by or for the
Trust or the Trustees.
38
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Declaration of Trust
to be executed as of the day and year first written above. The undersigned
acknowledge, under penalties of perjury, that this document is such Trustee's
free act and deed, and that, to the best of his knowledge, information and
belief, the matters and facts set forth herein are true in all material
respects.
/s/ MICHAEL J. FALCONE
--------------------------------------
Michael J. Falcone
c/o Pioneer Development Company
250 South Clinton Street
Syracuse, New York 13202-1258
ACKNOWLEDGMENTS
State of New York April 28, 1999
ss.
County of Onondaga
There personally appeared the above-named Michael J. Falcone and
acknowledged the foregoing instrument to be his free act and deed.
Before me,
/s/ MARY CERIO
--------------------------------------
Notary Public
My Commission Expires: 5/26/00
/s/ FRANCESCO GALESI
--------------------------------------
Francesco Galesi
c/o Galesi Management Corporation
100 State Street
Albany, New York 12207-1800
39
<PAGE>
ACKNOWLEDGMENTS
State of New York April 28, 1999
ss.
County of Albany
There personally appeared the above-named Francesco Galesi and
acknowledged the foregoing instrument to be his free act and deed.
Before me,
/s/ NOREEN PRIEST
--------------------------------------
Notary Public
My Commission Expires: 1/31/2000
/s/ JEFFREY E. KELTER
--------------------------------------
Jeffrey E. Kelter
c/o American Real Estate Investment
Corporation
620 West Germantown Pike, Suite 200
Plymouth Meeting, Pennsylvania 19462
40
<PAGE>
ACKNOWLEDGMENTS
State of Pennsylvania April 28, 1999
ss.
Montgomery County
There personally appeared the above-named Jeffrey E. Kelter and acknowledged
the foregoing instrument to be his free act and deed.
Before me,
/s/ KRISTINE M. FISHER
--------------------------------------
Notary Public
My Commission Expires: Sept. 9, 2002
/s/ DAVID H. LESSER
--------------------------------------
David H. Lesser
c/o Hudson Bay Partners II, L.P.
237 Park Avenue, Suite 900
New York, New York 10017
41
<PAGE>
ACKNOWLEDGMENTS
State of New York April 27, 1999
ss.
New York County
There personally appeared the above-named David Lesser and acknowledged
the foregoing instrument to be his free act and deed.
Before me,
/s/ LAURA LAST
--------------------------------------
Notary Public
My Commission Expires: 11/30/00
/s/ DAVID F. MCBRIDE
--------------------------------------
David F. McBride
c/o American Real Estate Investment
Corporation
620 West Germantown Pike, Suite 200
Plymouth Meeting, Pennsylvania 19462
42
<PAGE>
ACKNOWLEDGMENTS
State of New Jersey April 27, 1999
ss.
County of Bergen
There personally appeared the above-named David F. McBride and
acknowledged the foregoing instrument to be his free act and deed.
Before me,
/s/ ANNE S. MCKEGNEY
--------------------------------------
Notary Public
My Commission Expires: Aug. 4, 2001
/s/ JAMES R. MULVIHILL
--------------------------------------
James R. Mulvihill
2 Sunset Drive
Cherry Hills Village, Co 80110
43
<PAGE>
ACKNOWLEDGMENTS
State of Pennsylvania April 28, 1999
ss.
County of Montgomery
There personally appeared the above-named James R. Mulvihill and
acknowledged the foregoing instrument to be his free act and deed.
Before me,
/s/ KRISTINE M. FISHER
--------------------------------------
Notary Public
My Commission Expires: Sept. 9, 2002
/s/ RUSSEL C. PLATT
--------------------------------------
Russell C. Platt
c/o JER International
630 Fifth Avenue, 23rd Floor
New York, New York 10111
44
<PAGE>
ACKNOWLEDGMENTS
State of New York April 28, 1999
ss.
County of New York
There personally appeared the above-named Russell C. Platt and acknowledged
the foregoing instrument to be his free act and deed.
Before me,
/s/ JOSEPH CHO
--------------------------------------
Notary Public
My Commission Expires: Feb. 22, 2001
45
<PAGE>
Exhibit 3(b)
KEYSTONE PROPERTY TRUST
BYLAWS
ARTICLE I
OFFICES
Section 1.01. Principal Executive Office. The principal office of Keystone
Property Trust (the "Trust") shall be located at such place or places as the
Trustees may designate.
Section 1.02. 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
TRUSTEES
Section 2.01. General Powers. The business and affairs of the Trust shall
be managed under the direction of its Trustees, which may exercise all such
powers of the Trust and do all such lawful act and things as are not by statute,
by the Trust's Declaration of Trust, as it may be amended from time to time (the
"Declaration of Trust") or by these Bylaws conferred on or reserved to the
Shareholders.
Section 2.02. Qualifying Shares Not Required. Trustees need not be
Shareholders of the Trust.
Section 2.03. Quorum. A majority of the Trustees shall constitute a quorum
subject to the provisions of Section 2.6 of the Declaration of Trust.
Section 2.04. Number and Term; Election. Subject to the rights of the
holders of any series of Preferred Stock, the number of Trustees shall be fixed
from time to time exclusively pursuant to a resolution adopted by a majority of
the Trustees, but shall consist of not more than fifteen nor less than the
minimum number permitted by the laws of the State of Maryland now or hereafter
in force. The initial Trustees shall be set forth in the Declaration of Trust.
The Trustees, other than any who may be elected by the holders of any series of
Preferred Stock, shall be divided, with respect to the time for which they
severally hold office, into three classes, as nearly equal in number as
possible, with the term of office of the class of Trustees designated as Class I
Trustees to hold office initially for a term expiring at the annual meeting of
Shareholders to be held in 2001, the class of Trustees designated as Class II
Trustees to hold office initially for a term
<PAGE>
expiring at the annual meeting of Shareholders to be held in 2002 and the class
of Trustees designated as Class III Trustees to hold office initially for a term
expiring at the annual meeting of Shareholders to be held in 2000. Each Trustee
shall hold office until his or her successor shall have been duly elected and
qualified. At each annual meeting of Shareholders, commencing with the annual
meeting to be held in 2000, Trustees elected to succeed those Trustees whose
terms then expire shall be elected for a term of office to expire at the third
succeeding annual meeting of Shareholders after their election, with each
Trustee to hold office until his or her successor shall have been duly elected
and qualified.
Section 2.05. Place of Meeting. Meetings of the Trustees shall be held at
the principal office of the Trust or at such place within the United States as
the President shall direct or as is fixed from time to time by resolution of the
Trustees.
Section 2.06. Annual Meeting. Immediately following each annual meeting of
Shareholders, and at the same place as each annual meeting, a regular meeting of
the Trustees shall be held for the purpose of electing officers and transacting
other business. Notice of such meetings need not be given.
Section 2.07. Regular Meetings. Regular meetings of the Trustees shall be
held at the place determined pursuant to Section 2.05 on the dates, if any,
established at each annual meeting of the Trustees and notice of such regular
meetings of the Trustees is hereby dispensed with.
Section 2.08. Special Meetings. Special meetings of the Trustees may be
called at any time by the President or a majority of the Trustees. Notice of any
special meeting shall be given to each Trustee at his or her business or
residence in writing or by telegram or by telephone communication. If mailed,
such notice shall be deemed adequately delivered when deposited in the United
States mails so addressed, with postage thereon prepaid, at least five days
before such meeting. If by telegram, such notice shall be deemed adequately
delivered when the telegram is delivered to the telegraph company at least
twenty-four hours before such meeting. If by telephone, the notice shall be
given at least twelve hours prior to the time set for the meeting. Neither the
business to be transacted at, nor the purpose of, any special meeting of the
Trustees need be specified in the notice of such meeting, except for amendments
to these Bylaws as provided under Article XI hereof. A meeting may be held at
any time without notice if all the Trustees are present or if those not present
waive notice of the meeting in writing, either before or after such meeting.
Section 2.09. Committees. The Trustees may, by resolution or resolutions
passed by a majority of the Trustees, designate one or more committees composed
of one or more Trustees and delegate to these committees any of the powers of
the Trustees, except the power to authorize dividends on Shares, elect Trustees,
issue Shares other than as provided in the next sentence, recommend to the
Shareholders any action which requires Shareholder approval, amend the Bylaws,
or approve any merger or Share exchange which does not require Shareholder
approval. If the Trustees have given general authorization for the issuance of
Shares providing for or establishing a method or procedure for determining the
maximum number of Shares to be issued, a committee of the
<PAGE>
Trustees, in accordance with that general authorization or any Share option or
other plan or program adopted by the Trustees, may authorize or fix the terms of
Shares subject to classification or reclassification and the terms on which any
Shares may be issued, including all terms and conditions required or permitted
to be established or authorized by the Trustees. Among the committees the
Trustees may appoint are the following:
(a) An Executive Committee, which shall have such authority as shall
be delegated by the Trustees and shall advise the Trustees from time to
time with respect to such matters as the Trustees shall direct.
(b) An Audit Committee, which shall consist solely of Independent
Trustees (as defined below), unless otherwise changed by resolution
adopted by a majority of the Trustees. The Audit Committee shall make
recommendations concerning the engagement of independent public
accountants, review with the independent public accountants the plans and
results of the audit engagement, approve professional services provided by
the independent public accountants, review the independence of the
independent public accountants, consider the range of audit and non-audit
fees and review the adequacy of the Trust's internal accounting controls.
(c) A Compensation Committee, which shall determine compensation for
the Trust's executive officers and shall administer a Share incentive plan
adopted by the Trust.
For purposes of this Section 2.09, "Independent Trustees" shall mean Trustees
who are not (i) officers of the Trust, (ii) related to officers of the Trust or
(iii) holders of more than 5% of the issued and outstanding Shares of the Trust.
The Trustees may designate one or more Trustees as alternate members of
any committee, who may replace any absent or disqualified member at any meeting
of such committee. Each committee may fix rules of procedure for its business. A
majority of the members of a committee shall constitute a quorum for the
transaction of business and the act of a majority of those present at a meeting
at which a quorum is present shall be the act of the committee. The members of a
committee present at any meeting, whether or not they constitute a quorum, may
appoint a Trustee to act in the place of an absent member. Any action required
or permitted to be taken at a meeting of a committee may be taken without a
meeting, if a unanimous written consent which sets forth the action is signed by
each member of the committee and filed with the minutes of the committee.
Section 2.10. Action Without Meeting. Unless specifically otherwise
provided in the Declaration of Trust, any action required or permitted to be
taken by the Trustees may be taken without a meeting if a unanimous written
consent which sets forth the action is signed by each Trustee or committee and
such written consent is filed with the minutes of the proceedings of the
Trustees or committee.
Section 2.11. Telephone Meetings. The Trustees or a committee may meet by
means of a telephone conference circuit or similar communications equipment by
means of which all persons
<PAGE>
participating in the meeting shall be able to hear one another and participate
therein. Such meeting shall be deemed to have been held at a place designated by
the Trustees at the meeting. Participation in a telephone conference meeting
shall constitute presence in person at such meeting.
Section 2.12. Committee Rules. Unless the Trustees or a committee
otherwise provide, each committee designated by the Trustees may adopt, amend
and repeal rules for the conduct of such committees business. In the absence of
a provision by the Trustees or a provision in the rules of such committee to the
contrary, a majority of the entire authorized number of members of such
committee shall constitute a quorum for the transaction of business, the vote of
a majority of the members present at a meeting at the time of such vote if a
quorum is then present shall be the act of such committee, and in other respects
each committee shall conduct its business in the same manner as the Trustees
conduct their business pursuant to Article II of the Declaration of Trust and
this Article II of these Bylaws.
Section 2.13. Resignation. Any Trustee may resign at any time by giving
written notice to the Trustees. Such resignation shall take effect upon the
execution and delivery to Trust of such notice or upon any future date specified
in the notice, and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 2.14. Vacancies. Subject to the rights of the holders of any class
of Shares separately entitled to elect one or more Trustees, the Shareholders
may elect a successor to fill a vacancy among the Trustees which results from
the removal of a Trustee. A Trustee elected by the Shareholders to fill a
vacancy which results from the removal of a Trustee serves for the balance of
the term of the removed Trustee. Subject to the rights of the holders of any
class of Shares separately entitled to elect one or more Trustees, a majority of
the remaining Trustees, whether or not sufficient to constitute a quorum, may
fill a vacancy among the Trustees which results from any cause except an
increase in the number of Trustees, and a majority of the Trustees may fill a
vacancy which results from an increase in the number of Trustees. A Trustee
elected by the Trustees to fill a vacancy serves until the next annual meeting
of Shareholders and until his or her successor is elected and qualifies.
Section 2.15. Removal. Subject to the rights of the holders of any series
of Preferred Shares, any Trustee, or all the Trustees, may be removed from
office at any time with cause by the affirmative vote of the holders of not less
than a majority of the then outstanding voting Shares.
Section 2.16. Compensation. Trustees shall not receive any stated salary
for their services as Trustees but, by resolution of the Trustees, the Trustees
may receive fixed sums per year and/or per meeting and for any service or
activity they perform or engage in as Trustees. Such fixed sums may be paid
either in cash or in Shares of the Trust. 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 Trustee from serving the Trust in any other capacity and receiving
<PAGE>
compensation therefor.
Section 2.17. 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 2.18. 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 or her duties.
Section 2.19. Reliance. Each Trustee, officer, employee and agent of the
Trust shall, in the performance of his or her 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.
ARTICLE III
OFFICERS
Section 3.01. Enumeration. The officers of the Trust shall be a Chairman
of the Trustees, a President, a Secretary, a Treasurer. The Trustees may also
designate a Chief Executive Officer, and may appoint one or more
Vice-Presidents, Assistant Secretaries and Assistant Treasurers. Any two or more
offices except President and Vice-President may be held by the same person. The
Chairman of the Trustees shall be a Trustee, and the other officers may be
Trustees. The Trustees may elect or appoint such other officers, agents and
employees as it shall deem necessary who shall have such authority and shall
perform such duties as from time to time shall be prescribed by the Trustees.
Section 3.02. Powers and Duties of the Chairman. The Chairman of the
Trustees shall be an executive position which shall perform such duties and have
such powers as are from time to time assigned by the Trustees.
Section 3.03. Powers and Duties of the President. The President shall have
general powers of supervision and management of the business and affairs of the
Trust subject to the control of the Executive Committee and the Trustees, and
shall see that all orders and resolutions of the Trustees are carried into
effect. He or she may execute, in the name of the Trust, all authorized deeds,
mortgages, bonds, contracts or other instruments, except in cases in which the
signing and execution thereof shall have been expressly delegated to some other
officer or agent of the Trust. In general, he or she shall perform such other
duties customarily performed by a President of a corporation and shall perform
such other duties and have such other powers as are from time to time assigned
to him or her by the Trustees or the Executive Committee of the Trustees.
<PAGE>
Section 3.04. Powers and Duties of Vice President. Each Vice President, if
any, designated by the Trustees shall be an administrative officer of the Trust
and have such duties as are designated by the Trustees.
Section 3.05. Duties of the Secretary. The Secretary or at the request of
the Trustees, the Assistant Secretary, shall attend all meetings of the Trustees
or the Shareholders, keep the minutes thereof in appropriate books, give or
cause to be given notice of all meetings of the Trustees and of the
Shareholders, keep in safe custody the records and seal of the Trust, affix such
seal to any instrument when authorized by the Trustees and perform such other
duties incidental to the office or as may be prescribed by the Trustees.
Section 3.06. Duties of the Treasurer. The Treasurer shall have the
custody of the Trust's funds and securities and shall be responsible for the
keeping of full and accurate accounts of receipts and disbursements in books
belonging to the Trust, the deposit of all moneys and other valuable effects in
the name and to the credit of the Trust and the disbursement of the funds of the
Trust subject to the order of the Trustees. The Treasurer shall render to the
President and Trustees whenever they may so require an account of all his or her
transactions as Treasurer and of the financial condition of the Trust. The
Treasurer shall, if required by the Trustees, give the Trust a bond in such sum
or sums and with such surety or sureties as shall be satisfactory to the
Trustees, conditioned upon the faithful performance of his duties. The Assistant
Treasurer shall perform such duties and have such power as the Trustees may from
time to time prescribe. At the request of the Treasurer or in his or her absence
or disability, the Assistant Treasurer shall in their order of designated rank
or seniority perform all the duties and exercise the powers of Treasurer.
ARTICLE IV
SHAREHOLDERS
Section 4.01. Effect of Quorum. Subject to the provisions of the
Declaration of Trust, the Shareholders present at a duly called or held meeting
at which a quorum is present may continue to do business until adjournment
notwithstanding the withdrawal of enough Shareholders so that the remaining
Shareholders constitute less than a quorum.
Section 4.02. Place of Meeting. Meetings of the Shareholders shall be held
at the principal office of the Trust or at such place within the United States
as shall be stated in the notice of the meeting or in a duly executed waiver of
notice thereof.
Section 4.03. Annual Meeting. The annual meeting of the Shareholders shall
be held on such date and at such time as may be determined by the Trustees. The
first annual meeting of the Shareholders shall be held in the second calendar
quarter of 1999. At each annual meeting, the Shareholders shall elect Trustees
in the manner provided by the Declaration of Trust and these Bylaws, as in
effect from time to time, and shall transact such other business as may properly
come before the meeting.
<PAGE>
Section 4.04. Special Meetings. Subject to the rights of the holders of
any series of preferred Shares of the Trust (the "Preferred Shares"), the
President of the Trust or the Trustees, pursuant to a resolution adopted by a
majority of the total number of Trustees, may call special meetings of the
Shareholders. Special meetings of Shareholders shall also be called by the
Secretary of the Trust upon the written request of the Shareholders holding not
less than 25% of all the Shares entitled to vote at such meeting. Such request
shall state the purpose of such meeting and the matters proposed to be acted on
at such meeting. Within ten (10) days of the receipt of such a request, the
Secretary shall inform said Shareholders of the reasonably estimated cost of
preparing and mailing notice of the meeting (including all proxy materials that
may be required in connection therewith) and, upon payment to the Trust of such
costs, the Secretary shall within thirty (30) days of such payment, or such
longer period as may be necessitated by compliance with any applicable statutory
or regulatory requirements, give notice to each Shareholder entitled to notice
of the meeting. Unless requested by the holders of a majority of the issued and
outstanding Shares entitled to be voted at such meeting, the special meeting
need not be called to consider any matter which is substantially the same as a
matter voted on at any meeting of the Shareholders held during the preceding
twelve (12) months.
Section 4.05. Notice of Annual or Special Meetings.
(a) Written notice of every meeting of Shareholders, stating the
purpose or purposes for which the meeting is called, the date, hour and
place of the meeting, and, unless it is an annual meeting, indicating that
it is being issued by or at the direction of the person or persons calling
the meeting, shall be given, not less than ten (10) nor more than ninety
(90) days before the date of the meeting, to each Shareholder of record
entitled to vote at such meeting. Such notice shall be directed to a
Shareholder at his address as it shall appear on the records of the Trust
or its transfer agent.
(b) Any business of the Trust may be transacted at an annual meeting
of the Shareholders without being specifically designated in the notice,
except such business as is required by statute to be stated in such
notice. Business transacted at all special meetings shall be confined to
that which is related to the purpose or purposes stated in the notice of
the meeting. At every meeting of the Shareholders, the Chairman of the
Trustees, if there is one, shall conduct the meeting or, in the case of
vacancy in office or absence of the Chairman of the Trustees, one of the
following officers present shall conduct the meeting in the order stated:
the Vice Chairman of the Trustees, if there be one, the President, the
Vice-Presidents in their order of rank and seniority.
Section 4.06. Quorum; Adjournment. Whether or not there is a quorum
present, the Shareholders entitled to vote at a meeting, present in person or
represented by proxy, shall have 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 of the time and place to which the
meeting shall be adjourned. At such adjourned meeting at which there shall be a
quorum, any business may be transacted which might have been transacted on the
original date of the meeting.
<PAGE>
Unless any statute or the Declaration of Trust provides otherwise, a majority of
all the votes cast at a meeting at which a quorum is present is sufficient to
approve any matter which properly comes before the meeting, except that a
plurality of all the votes cast at a meeting at which a quorum is present shall
be sufficient to elect a Director.
Section 4.07. Proxies. Unless the Declaration of Trust provides for a
greater or lesser number of votes per Share or limits or denies voting rights,
each outstanding Share, regardless of class, is entitled to one vote on each
matter submitted to a vote at a meeting of Shareholders. In all elections for
Trustees, 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
Shareholder may vote the Share the Shareholder owns of record either in person
or by proxy. A Shareholder may sign a writing authorizing another person to act
as proxy. Signing may be accomplished by the Shareholder or the Shareholder's
authorized agent signing the writing or causing the Shareholder's signature to
be affixed to the writing by any reasonable means, including facsimile
signature. A Shareholder may authorize another person to act as proxy by
transmitting, or authorizing the transmission of, a telegram, cablegram,
datagram, or other means of electronic transmission to the person authorized to
act as proxy or to a proxy solicitation firm, proxy support service
organization, or other person authorized by the person who will act as proxy to
receive the transmission. Unless a proxy provides otherwise, it is not valid
more than eleven months after its date. A proxy is revocable by a Shareholder at
any time without condition or qualification unless the proxy states that it is
irrevocable and the proxy is coupled with an interest. A proxy may be made
irrevocable for so long as it is coupled with an interest. The interest with
which a proxy may be coupled includes an interest in the Share to be voted under
the proxy or another general interest in the Trust or its assets or liabilities.
Section 4.08. Nominations and Proposals by Shareholders.
(a) Annual Meetings of Shareholders.
(1) Nominations of persons for election as a Trustee and the
proposal of business to be considered by the Shareholders may be
made at an annual meeting of Shareholders (a) pursuant to the
Trust's notice of meeting delivered pursuant to Article IV, Section
4.08 of these Bylaws, (b) by or at the direction of the President or
(c) by any Shareholder of the Trust who is entitled to vote at the
meeting, who complies with the notice procedures set forth in
clauses (2) and (3) of this paragraph (a) of this Bylaw and who was
a Shareholder of record at the time such notice is delivered to the
Secretary of the Trust.
(2) For nominations or other business to be properly brought
before the annual meeting by a Shareholder pursuant to clause (c) of
Paragraph (a) (1) of this Bylaw the Shareholder must have given
timely notice thereof in writing to the Secretary of the Trust. To
be timely, a Shareholder's notice shall be delivered to the
Secretary at the principal executive offices of the Trust not less
than sixty days nor more than ninety days prior to the first
anniversary of the preceding year's
<PAGE>
annual meeting; provided, however, that in the event that the date
of the annual meeting is advanced by more than thirty days or
delayed by more than sixty days from such anniversary date, notice
by the Shareholder to be timely must be so delivered not earlier
than the ninetieth day prior to such annual meeting and not later
than the close of business on the later of the sixtieth day prior to
such annual meeting or the tenth day following the day on which
public announcement of the date of meeting is first made. Such
Shareholder's notice shall set forth (a) as to each person whom the
Shareholder proposes to nominate for election or reelection as a
Trustee all information relating to such person that is required to
be disclosed in solicitations of proxies for election of Trustees,
or is otherwise required, in each case pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended (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;
(b) as to any other business that the Shareholder proposes to bring
before the meeting, a brief 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 the beneficial owner, if any, on whose
behalf the proposal is made; and (c) as to the Shareholder giving
the notice and the beneficial owner, if any, on whose behalf the
nominations or proposal is made (i) the name and address of such
Shareholder, as they appear on the Trust's books, and of such
beneficial owner and (ii) the class and number of Shares of the
Trust which are owned beneficially and of record by such Shareholder
and such beneficial owner.
(3) Notwithstanding anything in the second sentence of
paragraph (a) (2) of this Bylaw to the contrary, in the event that
the number of Trustees to be elected as Trustees is increased and
there is no public announcement naming all of the nominees for
Trustee or specifying the size of the increased number of Trustees
made by the Trust at least seventy days prior to the first
anniversary of the preceding year's annual meeting, a Shareholder's
notice required by this Bylaw 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 pursuant to Article IV,
Section 4.08 of these Bylaws. Nominations of persons for election as Trustees
may be made at a special meeting of Shareholders at which Trustees are to be
elected pursuant to the Trust's notice of meeting by or at the direction of the
Trustees. Nominations by Shareholders of persons for
<PAGE>
election as Trustees may be made at such a special meeting of Shareholders if
the Shareholder's notice as required by paragraph (a) (2) of this Bylaw shall be
delivered to the Secretary at the principal executive offices of the Trust not
earlier than the ninetieth day prior to such special meeting and not later than
the close of business on the later of the seventieth 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.
(c) General.
(1) Only persons who are nominated in accordance with the
procedures set forth in this Bylaw shall be eligible to serve as
Trustees. Except as otherwise provided by Maryland law, the
Declaration of Trust or these Bylaws, the Chairman 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 in
accordance with the procedures set forth in this Bylaw and, if any
proposed nomination or business is not in compliance with this
Bylaw, to declare that such defective proposal or nomination shall
be disregarded.
(2) For purposes of this Bylaw, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News
Service, Associated Press or comparable national news service or 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 Bylaw, a
Shareholder shall also comply with all applicable requirements of
the Exchange Act and the rules and regulations thereunder with
respect to the matters set forth in this Bylaw. Nothing in this
Bylaw shall be deemed to affect any rights of Shareholders to
request inclusion of proposals in the Trust's proxy statement
pursuant to Rule 14a-5 under the Exchange Act.
Section 4.09. Voting Rights. If no date is fixed for the determination of
the Shareholders entitled to vote at any meeting of Shareholders, only Persons
in whose names Shares entitled to vote stand on the Share records of the Trust
at the opening of business on the day of any meeting of Shareholders shall be
entitled to vote at such meeting.
Section 4.10. Conduct of Business and Voting. At all meetings of
Shareholders, unless the voting is conducted by inspectors, the proxies and
ballots shall be received, and all questions touching the qualification of
voters and the validity of proxies, the acceptance or rejection of votes and
procedures for the conduct of business not otherwise specified by these Bylaws,
the Declaration of Trust or law, shall be decided or determined by the Chairman
of the meeting. If demanded by Shareholders, present in person or by proxy,
entitled to cast 10% in number of votes entitled to be cast, or if ordered by
the Chairman, the vote upon any election or question shall be taken by
<PAGE>
ballot and, upon like demand or order, the voting shall be conducted by two
inspectors, in which event the proxies and ballots shall be received, and all
questions touching the qualification of voters and the validity of proxies and
the acceptance or rejection of votes shall be decided, by such inspectors.
Unless so demanded or ordered, no vote need be by ballot and voting need not be
conducted by inspectors. The Shareholders at any meeting may choose an inspector
or inspectors to act at such meeting, and in default of such election the
Chairman of the meeting may appoint an inspector or inspectors. No candidate for
election as a Trustee at a meeting shall serve as an inspector thereat.
Section 4.11. Informal Action by Shareholders. Any action required or
permitted to be taken at a meeting of Shareholders may be taken without a
meeting if there is filed with the records of Shareholder's meetings a unanimous
written consent which sets forth the action and is signed by each Shareholder
entitled to vote on the matter and a written waiver of any right to dissent
signed by each Shareholder entitled to notice of the meeting but not entitled to
vote at it.
ARTICLE V
CONTRACTS AND FINANCE
Section 5.01. Contracts and Agreements. To the extent permitted by
applicable law, and except as otherwise prescribed by the Declaration of Trust
or these Bylaws, the Trustees may authorize any officer, employee or agent of
the Trust to enter into any contract or execute and deliver any instrument in
the name of and on behalf of the Trust. Such authority may be general or
confined to specific instances. A person who holds more than one office in the
Trust may not act in more than one capacity to execute, acknowledge, or verify
an instrument required by law to be executed, acknowledged, or verified by more
than one officer.
Section 5.02. Checks and Drafts. All checks, drafts and orders for the
payment of money, notes and other evidences of indebtedness, issued in the name
of the Trust, shall, unless otherwise provided by resolution of the Trustees, be
signed by the Chairman of the Trustees, the President, a Vice-President or an
Assistant Vice-President and countersigned by the Treasurer, an Assistant
Treasurer, the Secretary or an Assistant Secretary.
Section 5.03. 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 VI
SHARES
Section 6.01. Certificates for Shares Each Shareholder is entitled to
certificates which represent and certify the transferable unit of beneficial
interest he or she holds in the Trust. Each Share certificate shall include on
its face the name of the Trust, the name of the Shareholder or other
<PAGE>
person to whom it is issued, and the class of Share and number of Shares it
represents. It shall also include on its face or back (a) a statement of any
restrictions on transferability and (b) a statement which provides in substance
that the Trust will furnish to any Shareholder on request and without charge a
full statement of the designations and any preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption of the Shares of each
class which the Trust is authorized to issue, of the differences in the relative
rights and preferences between the Shares of each series of a preferred or
special class in series which the Trust is authorized to issue, to the extent
they have been set, and of the authority of the Trustees to set the relative
rights and preferences of subsequent series of a preferred or special class of
Shares and any restrictions on transferability. Such request may be made to the
Secretary or to its transfer agent. It shall be in such form, not inconsistent
with law or with the Declaration of Trust, as shall be approved by the Trustees
or any officer or officers designated for such purpose by resolution of the
Trustees. Each Share certificate shall be signed by the Chairman of the
Trustees, the President, or a Vice-President, and countersigned by the
Secretary, an Assistant Secretary, the Treasurer, or an Assistant Treasurer.
Each certificate may be sealed with the actual trust seal or a facsimile of it
or in any other form and the signatures may be either manual or facsimile
signatures. A certificate is valid and may be issued whether or not an officer
who signed it is still an officer when it is issued. A certificate may not be
issued until the Shares represented by it is fully paid.
Section 6.02. Record Dates or Closing of Transfer Books. The Trustees may
set a record date or direct that the Share transfer books be closed for a stated
period for the purpose of making any proper determination with respect to
Shareholders, including which Shareholders are entitled to notice of a meeting,
vote at a meeting, receive a dividend, or be allotted other rights. The record
date may not be prior to the close of business on the day the record date is
fixed nor more than 90 days before the date on which the action requiring the
determination will be taken; the transfer books may not be closed for a period
longer than 20 days; and, in the case of a meeting of Shareholders, the record
date or the closing of the transfer books shall be at least ten days before the
date of the meeting.
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 6.03. Lost Certificates. The Trustees (or any officer designated
by them) may direct a new certificate to be issued in place of any certificate
theretofore 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 such issue of a
new certificate, the Trustees may, in their discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed certificate, or his legal representative, to give the Trustee a bond
in such sum and with such surety or sureties as it may direct as indemnity agent
<PAGE>
any claim that may be made against the Trust with respect to the certificate
alleged to have been lost, stolen or destroyed.
Section 6.04. Transfers of Shares. Upon surrender to the Trust or the
transfer agent of the Trust of a certificate for Shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, subject to compliance with all applicable laws and the requirements of
the Trust's transfer agent, it shall be the duty of the Trust or its agents to
issue a new certificate to the person entitled thereto, to cancel the old
certificate and to record the transaction upon its transfer books.
Section 6.05. Registered Shareholders 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 person whether or not it
shall have express or other notice thereof, except as expressly provided by the
laws of the State of Maryland.
Section 6.06. Share Ledger. The Trust shall maintain at its principal
executive office or at the office of its counsel, accountants or transfer agent,
an original or a duplicate Share ledger containing the name and address of each
Shareholder and the number of Shares of each class held by such Shareholder.
ARTICLE VII
MISCELLANEOUS
Section 7.01. Record Dates and Closing of Transfer Books. Pursuant to the
Declaration of Trust, the Trustees may fix record dates for specified purposes.
If a record date is so fixed, only Shareholders of record on the date so fixed
shall be entitled to the rights to which the record date pertains.
Section 7.02. Books and Records. The Trust shall keep correct and complete
books and records of its accounts and transactions and minutes of the
proceedings of its Shareholders and Trustees and of any executive or other
committee when exercising any of the powers of the Trustees. The books and
records of the Trust may be in written form or in any other form which can be
converted within a reasonable time into written form for visual inspection.
Minutes shall be recorded in written form but may be maintained in the form of a
reproduction. The original or a certified copy of these Bylaws shall be kept at
the principal office of the Trust.
Section 7.03. Trust Seal. The Trustees may provide a suitable seal,
bearing the name of the Trust, which shall be in the charge of the Secretary.
The Trustees may authorize one or more duplicate seals and provide for the
custody thereof. If the Trust is required to place its trust seal to a document,
it is sufficient to meet the requirement of any law, rule, or regulation
relating to a trust seal to place the word "(seal)" adjacent to the signature of
the person authorized to sign the document on behalf of the Trust.
<PAGE>
Section 7.04. Voting Stock in Other Corporations. Stock of other
corporations or associations, registered in the name of the Trust, may be voted
by the President, a Vice President, or a proxy appointed by either of them. The
Trustees, however, may by resolution appoint some other person to vote such
Shares, in which case such person shall be entitled to vote such Shares upon the
production of a certified copy of such resolution, or otherwise direct the
voting of such Shares.
Section 7.05. Annual Statement of Affairs. The President or chief
accounting officer shall prepare annually a full and correct statement of the
affairs of the Trust, to include a balance sheet and a financial statement of
operations for the preceding fiscal year. The statement of affairs shall be
submitted at the annual meeting of the Shareholders and, within 20 days after
the meeting, placed on file at the Trust's principal office.
Section 7.06. Inspection of Bylaws. The Trustees shall keep at the
principal office for the transaction of business of the Trust the original or a
copy of the Bylaws as amended or otherwise altered to date, certified by the
Secretary, which shall be open to inspection by the Shareholders at all
reasonable times during office hours.
ARTICLE VIII
DISTRIBUTIONS
Section 8.01. Distributions. If declared by the Trustees at any meeting
thereof, the Trust may pay dividends or distributions on its Shares in cash,
property, or in Shares, unless such dividend or distribution is contrary to law
or to a restriction contained in the Declaration of Trust.
ARTICLE IX
INDEMNIFICATION OF OFFICERS AND TRUSTEES;
INSURANCE
Section 9.01. Indemnification.
(a) Procedure. Any indemnification, or payment of expenses in
advance of the final disposition of any proceeding, shall be made
promptly, and in any event within 60 days, upon the written request of the
Trustee or officer entitled to seek indemnification (the "Indemnified
Party"). The right to indemnification and advances hereunder shall be
enforceable by the Indemnified Party in any court of competent
jurisdiction, if (i) the Trust denies such request, in whole or in part,
or (ii) no disposition thereof is made within 60 days. The Indemnified
Party's costs and expenses incurred in connection with successfully
establishing his or her right to indemnification, in whole or in part, in
any such action shall also be reimbursed by the Trust. It shall be a
defense to any action for advance for expenses that (a) a determination
has been made that the facts then known to those making the determination
would preclude indemnification or (b) the Trust has not
<PAGE>
received both (i) an undertaking as required by law to repay such advances
in the event it shall ultimately be determined that the standard of
conduct has not been met and (ii) a written affirmation by the Indemnified
Party of such Indemnified Party's good faith belief that the standard of
conduct necessary for indemnification by the Trust has been met.
(b) Exclusivity, Etc. The indemnification and advance of expenses
provided by the Declaration of Trust and these Bylaws shall not be deemed
exclusive of any other rights to which a person seeking indemnification or
advance of expenses may be entitled under any law (common or statutory),
or any agreement, vote of Shareholders or disinterested Trustees or other
provision that is consistent with law, both as to action in his or her
official capacity and as to action in another capacity while holding
office or while employed by or acting as agent for the Trust, shall
continue in respect of all events occurring while a person was a Trustee
or officer after such person has ceased to be a Trustee or officer, and
shall inure to the benefit of the estate, heirs, executors and
administrators of such person. The Trustee shall not be liable for any
payment under this Bylaw in connection with a claim made by a Trustee or
officer to the extent such Trustee or officer has otherwise actually
received payment under insurance policy, agreement, vote or otherwise, of
the amounts otherwise indemnifiable hereunder. All rights to
indemnification and advance of expenses under the Declaration of Trust and
hereunder shall be deemed to be a contract between the Trust and each
Trustee or officer of the Trust who serves or served in such capacity at
any time while this Bylaw is in effect. Nothing herein shall prevent the
amendment of this Bylaw, provided that no such amendment shall diminish
the rights of any person hereunder with respect to events occurring or
claims made before its adoption or as to claims made after its adoption in
respect of events occurring before its adoption. Any repeal or
modification of this Bylaw shall not in any way diminish any rights to
indemnification or advance of expenses of such Trustee or officer or the
obligations of the Trust arising hereunder with respect to events
occurring, or claims made, while this Bylaw or any provision hereof is in
force.
(c) Following any "change in control" of the Trust of the type
required to be reported under Item 1 of Form 8-K promulgated under the
Exchange Act, any determination as to entitlement to indemnification shall
be made by independent legal counsel selected by the claimant, which such
independent legal counsel shall be retained by the Trustees on behalf of
the Trust and whose fees and disbursements shall be paid by the Trust.
Section 9.02. Insurance. The Trust may maintain insurance, at its expense,
to protect itself and any Trustee, officer, employee or agent of the Trust or
another corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the Trust would have the
power to indemnify such person against such expense, liability or loss under the
Declaration of Trust.
ARTICLE X
WAIVER OF NOTICE
<PAGE>
Section 10.01. 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 of the ground that the meeting is not lawfully called or
convened.
ARTICLE XI
AMENDMENTS
Section 11.01. Amendments. These Bylaws may be amended or repealed, or new
Bylaws may be adopted, by the Shareholders at any meeting of the Shareholders or
pursuant to Section 4.11 of these Bylaws, or by the Trustees at any meeting of
the Trustees or pursuant to Section 2.10 of these Bylaws; provided that the
Trustees may not amend or repeal this Article XI or Section 4.11 or any part of
these Bylaws that has been adopted by the Shareholders subject to the express
condition that it may not be amended or repealed except by holders of a majority
of the issued and outstanding Shares.
ARTICLE XII
DEFINITIONS
Section 12.01. Definitions. All terms defined in the Declaration of Trust
shall have the same meaning when used in these Bylaws.
ARTICLE XIII
FISCAL YEAR
Section 13.01. Fiscal Year. The fiscal year of the Trust shall be the
calendar year.
ARTICLE XIV
THE ADVISOR
Section 14.01. Employment of Advisor. The Trustees are not and shall not
be required personally to conduct the business of the Trust, and the Trustees
shall have the power to appoint, employ or contract with any person (including
one or more of themselves or any corporation, partnership, or trust in which one
or more of them may be Trustees, officers, Shareholders, partners or trustees,
as the Trustees may deem necessary or proper for the transaction of the business
of the Trust.
<PAGE>
The Trustees may employ or contract with a person to act as advisor to the Trust
(the "Advisor") and may grant or delegate such authority to the Advisor as the
Trustees may in its sole discretion deem necessary or desirable without regard
to whether such authority is normally granted or delegated by boards of trustees
or boards of directors of business corporations. The Advisor shall be required
to use its best efforts to supervise the operation of the Trust in a manner
consistent with the investment policies and objectives of the Trust. The
Trustees shall have the power to determine the terms and compensation of the
Advisor or any other person whom it may cause the Trust to employ or with whom
it may cause the Trust to contract for advisory services. The Trustees may
exercise broad discretion in allowing the Advisor to administer and regulate the
operations of the Trust, to act as agent for the Trust, to execute documents on
behalf of the Trustees and to make executive decisions which conform to general
policies and general principles previously established by the Trustees.
Section 14.02. Other Activities of Advisor. The Advisor shall not be
required to administer the Trust as its sole and exclusive function and may have
other business interests and may engage in other activities similar or in
addition to those relating to the Trust, including the rendering of advice or
services of any kind to other investors or any other persons (including other
real estate investment trusts) and the management of other investments. The
Trustees may request the Advisor to engage in certain other activities which
complement the Trust's investments, and the Advisor may receive compensation or
commissions therefor from the Trust or other persons. Neither the Advisor nor
any Affiliate of the Advisor shall be obligated to present any particular
investment opportunities to the Trust, even if such opportunities are of a
character such that, if presented to the Trust, they could be taken by the
Trust, and, subject to the foregoing, each of them shall be protected in taking
for, its own account or recommending to others any such particular investment
opportunity. Notwithstanding the foregoing, the Advisor shall be required to use
its best efforts to present the Trust with a continuing and suitable program
consistent with the investment policies and objectives of the Trust and with
investments which are representative of, comparable with and on similar terms as
investments being made by Affiliates of the Advisor, or by the Advisor for its
own account or for the account of any person for whom the Advisor is providing
advisory services. In addition, the Advisor shall be required, upon the request
of any Trustee, to promptly furnish the Trustees with such information on a
confidential basis as to any investments within the investment policies of the
Trust made by Affiliates of the Advisor or by the Advisor for its own account or
for the account of any person for whom the Advisor is providing advisory
services.
Section 14.03. Advisor Compensation. The Trustees shall at least annually
review generally the performance of the Advisor in order to determine whether
the compensation which the Trust has contracted to pay to the Advisor is
reasonable in relation to the nature and quality of services performed and
whether the provisions of the advisory contract with the Advisor are being
carried out.
<PAGE>
EXHIBIT 3-(i)
PARTNERSHIP UNIT DESIGNATION OF SERIES A CONVERTIBLE PREFERRED UNITS
The following is a statement of the designations, qualifications,
special or relative rights and privileges of the Series A Convertible Preferred
Units of Keystone Operating Partnership, L.P. (the "Partnership"). Capitalized
terms used but not otherwise defined in this Partnership Unit Designation shall
have the same meanings ascribed to them in the Partnership's Amended and
Restated Agreement of Limited partnership, dated as of December 12, 1997, and
any amendments thereto (collectively, the "PARTNERSHIP AGREEMENT").
1. DESIGNATION AND NUMBER. The designation for the class of Preferred
Units authorized by this Partnership Unit Designation shall be Series A
Convertible Preferred Units (the "SERIES A PREFERRED UNITS"). The number of
Series A Preferred Series Units shall be 800,000, which number may be decreased
(but not below the number thereof then outstanding) from time to time by the
General Partner.
2. RANK. For the purposes of this Partnership Unit Designation, any class
or classes of Partnership Units in the Partnership shall be deemed to rank:
1. prior to the Series A Preferred Units, either as to
distributions or upon liquidation, dissolution or winding up, or both, if
the holders of Partnership Units of such class or classes shall be
entitled by the terms thereof 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 the Series A
Preferred Units;
2. on a parity with the Series A Preferred Units, either as to
distributions or upon liquidation, dissolution or winding up, or both,
whether or not the distribution payment dates, or redemption or
liquidation prices per Partnership Unit thereof, be different from those
of the Series A Preferred Units, if the holders of Partnership Units of
such class or classes shall be entitled by the terms thereof to the
receipt of distributions or of amounts distributed upon liquidation,
dissolution or winding up, as the case may be, in proportion to their
respective distribution rates or liquidation prices, without preference
or priority of one over the other as between the holders of such
Partnership Units and the holders of Series A Partnership Preferred Units
(the term "PARITY PREFERRED UNIT" being used to refer to any Partnership
Unit on a parity with the Series A Preferred Units, either as to
distributions or upon liquidation, dissolution or winding up, or both, as
the context may require); and
3. junior to Series A Preferred Units, either as to distributions
or upon liquidation, dissolution or winding up, or both, if such class
shall be OP Units or any other common Partnership Unit (the "JUNIOR
UNITS") or if the holders of the Series A 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 preference
or priority to the holders of Partnership Units of such class or classes.
3. DISTRIBUTIONS. The holders of Series A Preferred Units shall be
entitled to receive distributions payable in cash in an amount per Series A
Preferred Unit equal to the per share dividend payable on the shares of Series A
Convertible Preferred Stock, par value $.001 per share (the "SERIES A PREFERRED
SHARES") of the General Partner. Each such distribution shall be payable to the
holders of record of the Series A Preferred Units, as they appear on the records
of the Partnership at the close of business on the record date for the dividend
payable with respect to the Series A Preferred Shares, on any date on which cash
dividends are paid
<PAGE>
on the Series A Preferred Shares (each, a "DISTRIBUTION PAYMENT DATE"). Holders
of Series A Preferred Units shall not be entitled to any distributions on the
Series A Preferred Units, whether payable in cash, property or stock, except as
provided herein.
No distributions may be declared or paid or set apart for payment on
any Parity Preferred Units with regard to the payment of distributions unless
there shall also be or have been declared and paid or set apart for payment on
the Series A Preferred Units like distributions for all distribution payment
periods of the Series A Preferred Units ending on or before the distribution
payment date of such Parity Preferred Units, ratably in the proportion to the
respective amounts of distributions accumulated and unpaid or payable on the
Series A Preferred Units and such Parity Preferred Units. Except as set forth in
the preceding sentence, unless full cumulative distributions on the Series A
Preferred Units have been paid, no distributions may be paid or declared and set
aside for payment or other distribution made upon any Junior Units or Parity
Preferred Units as to distributions, nor any Junior Units or any Parity
Preferred Units as to distributions may be redeemed, purchased or otherwise
acquired for any consideration (or any payment be made to or available for a
sinking fund for the redemption of any Units or other Partnership Interests);
PROVIDED, HOWEVER, that any moneys therefor deposited in any sinking fund with
respect to any Preferred Unit of the Partnership in compliance with the
provision of such sinking fund may thereafter be applied to the purchase or
redemption of such Preferred Unit in accordance with the terms of such sinking
fund, regardless of whether at the time of such application full cumulative
distributions upon Series A Preferred Units outstanding to the last Distribution
Payment Date shall have been paid or declared and set apart for payment) by the
Partnership; PROVIDED that any such Junior Units or Parity Preferred Units may
be converted into or exchanged for Partnership Units of the Partnership ranking
junior to the Series A Preferred Units as to distributions.
4. ALLOCATIONS. Allocations of the Partnership's items of income, gain,
loss and deduction shall be allocated among the holders of Series A Preferred
Units in accordance with Article VI of the Partnership Agreement.
5. LIQUIDATION PREFERENCE. The Series A Preferred Units shall rank, as to
any Liquidation (as herein defined), of the Partnership, prior to the OP Units
and any other class of Partnership Units of the Partnership ranking junior to
Series A Preferred Units as to rights upon Liquidation, so that in the event of
any Liquidation, whether voluntary or involuntary, the holders of the Series A
Preferred Units shall be entitled to receive out of the assets of the
Partnership available for distribution to holders of Partnership Units, whether
from capital, surplus or earnings, before any distribution is made to holders of
OP Units or any other Junior Units, an amount equal to the greater of (a)(i)
$25.00 per Series A Preferred Unit plus an amount equal to all distributions
(whether or not earned or declared) accrued and unpaid there on to the date of
final distribution to such holders (the "LIQUIDATION PREFERENCE") plus (ii) the
Liquidation Premium (as herein defined) or (b) an amount per Series A Preferred
Unit equal to the amount which would have been payable had each Series A
Preferred Unit be converted into OP Units immediately prior to such Liquidation.
The holders of the Series A Preferred Units will not be entitled to receive the
Liquidation Preference until the liquidation preference of any other class of
Partnership Units ranking senior to the Series A Preferred Units as to rights
upon Liquidation shall have been paid (or a sum set aside therefor sufficient to
provide for payment) in full. After payment of the full amount of the
Liquidation Preference, the holders of Series A Preferred Units will not be
entitled to any further participation in any distribution of assets by the
Partnership. If, upon any Liquidation, the assets of the Partnership, or
proceeds thereof, distributable among the holders of Series A Preferred Units
and any other units of any class or series of Parity Preferred Units shall be
insufficient to pay in full the preferential amount aforesaid, then such assets,
or the proceeds thereof, shall be distributable among such holders of Series A
Preferred Units and Parity Preferred Units ratably in accordance with the
respective amounts which would be payable on such Partnership Units if all
amounts payable thereon were paid in full. For the purposes
<PAGE>
hereof, a "LIQUIDATION" shall mean (a) a dissolution or winding up of the
General Partner or the Partnership, whether voluntary or involuntary; (b) a
consolidation or merger of the General Partner or the Partnership with and into
one or more entities which are not affiliates of the General Partner or the
Partnership which results in a Change in Control (as herein defined) or (c) a
sale or transfer of all or substantially all of the General Partner's or the
Partnership's assets other than to an affiliate of either the General Partner or
the Partnership. For the purposes hereof, the "LIQUIDATION PREMIUM" shall mean
(a) on or prior to December 15, 2003, in connection with (i) a Liquidation which
constitutes a merger or consolidation of the General Partner or the Partnership
with one or more entities that are not affiliates of the General Partner or the
Partnership and, as a result of such merger or consolidation, a Qualified Entity
is the surviving entity, an amount equal to five percent of the Liquidation
Preference or (ii) any other Liquidation, an amount equal to ten percent of the
Liquidation Preference, or (b) after December 15, 2003, in connection with any
Liquidation, an amount equal to the redemption premium which would be payable on
the Series A Preferred Shares if such shares were called for redemption by the
General Partner. For the purposes hereof, a "CHANGE IN CONTROL" shall mean any
merger or consolidation of the General Partner or the Partnership in which one
or more entities which are not affiliates of the General Partner or the
Partnership, as the case may be, acquire more than 50% of the General Partner's
or the Partnership's outstanding voting equity securities or as a result of
which security holders of the General Partner or the Partnership immediately
before such merger or consolidation hold, immediately after such merger or
consolidation, less than 50% of the surviving entity's outstanding securities.
6. CONVERSION. Series A Preferred Units shall be convertible by the
holders thereof as follows:
(a) Upon any conversion of Series A Preferred Shares into
Common Shares, the General Partner shall cause a number of Series A
Preferred Units equal to the number of such converted Series A
Preferred Shares to be converted by the holders thereof into OP Units.
The conversion ratio in effect from time to time for the conversion of
Series A Preferred Units into OP Units pursuant to this Section 6 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; and
(b) No fractional OP Units shall be issued upon conversion of
Series A Preferred Units. Instead of any fractional OP Units that would
otherwise be deliverable upon the conversion of Series A Preferred
Units, the Partnership shall pay to the 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 shares of Common Shares.
7. REDEMPTION. In the event the General Partner exercises its redemption
right with respect to the Series A Preferred Shares and pays the redemption
price in cash, the Partnership shall concurrently redeem a corresponding amount
of Series A Preferred Units at the same redemption price paid by the General
Partner for the Series A Preferred Shares.
8. VOTING RIGHTS. The holders of Series A Preferred Units shall have no
voting rights whatsoever, except for the (i) any voting rights to which they may
be entitled under the laws of the State of Delaware, and (ii) as follows:
(a) So long as any Series A Preferred Units remain
outstanding, the consent of the holders of at least two-thirds of the
Series A Preferred Units outstanding at the time and all other classes
or series of Preferred Units of the Partnership upon which like voting
rights have been conferred and are exercisable (voting together as a
class), given in person or by proxy, either in
<PAGE>
writing or at any meeting called for the purpose, shall be
necessary to permit, effect or validate any one or more of the
following:
(b) the issuance or increase of any class or series of
Partnership Units ranking prior (as that term is defined in paragraph
2(a) hereof) to the Series A Preferred Units; or
(c) the amendment, alteration or repeal, whether by merger,
consolidation or otherwise, of any of the provisions of the Partnership
Agreement (including this Partnership Unit Designation or any provision
hereof), that would materially and adversely affect any power,
preference, or special right of the Series A Preferred Units or of the
holders thereof;
PROVIDED, HOWEVER, that any increase in the number of Series A
Preferred Units or any increase or decrease in the number of any class or series
of Preferred Units of the Partnership or the creation and issuance of other
classes or series of OP Units or Preferred Units of the Partnership, in each
case ranking on a parity with or junior to the Series A Preferred Units with
respect to the payment of dividends and the distribution of assets upon
liquidation, dissolution or winding up, shall not be deemed to materially and
adversely affect such powers, preferences or special rights.
9. RESTRICTIONS ON OWNERSHIP. The Series A Preferred Units shall be owned
and held solely by the General Partner.
<PAGE>
IN WITNESS WHEREOF, this Partnership Unit Designation has been duly
executed by the General Partner on behalf of the Partnership as of the day and
year set forth below.
DATED: December 24, 1998 GENERAL PARTNER
KEYSTONE PROPERTY TRUST
By: /s/ Timothy A. Peterson
Name: Timothy A. Peterson
Title: Chief Financial Officer
<PAGE>
EXHIBIT 3-(j)
PARTNERSHIP UNIT DESIGNATION OF SERIES B CONVERTIBLE PREFERRED UNITS
The following is a statement of the designations,
qualifications, special or relative rights and privileges of the Series B
Convertible Preferred Units of Keystone Operating Partnership, L.P. (the
"PARTNERSHIP"). Capitalized terms used but not otherwise defined in this
Partnership Unit Designation shall have the same meanings ascribed to them in
the Partnership's Amended and Restated Agreement of Limited Partnership, dated
as of December 12, 1997, and any amendments thereto (collectively, the
"PARTNERSHIP AGREEMENT").
1. DESIGNATION AND NUMBER. The designation for the class of Preferred Units
authorized by this Partnership Unit Designation shall be Series B Convertible
Preferred Units (the "SERIES B PREFERRED UNITS"). The number of Series B
Preferred Units shall be 300,000, which number may be decreased (but not below
the number thereof then outstanding) from time to time by the General Partner.
2. RANK. For the purposes of this Partnership Unit Designation, any class or
classes of Partnership Units in the Partnership shall be deemed to rank:
(A) prior to the Series B Preferred Units, either as to distributions
or upon liquidation, dissolution or winding up, or both, if the holders of
Partnership Units of such class or classes shall be entitled by the terms
thereof 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 the Series B Preferred Units;
(B) on a parity with the Series B Preferred Units, either as to
distributions or upon liquidation, dissolution or winding up, or both, whether
or not the distribution payment dates, or redemption or liquidation prices per
Partnership Unit thereof, be different from those of the Series B Preferred
Units, if the holders of Partnership Units of such class or classes shall be
entitled by the terms thereof to the receipt of distributions or of amounts
distributed upon liquidation, dissolution or winding up, as the case may be, in
proportion to their respective distribution rates or liquidation prices, without
preference or priority of one over the other as between the holders of such
Partnership Units and the holders of Series B Preferred Units (the term "PARITY
PREFERRED UNITS" being used to refer to any Partnership Unit on a parity with
the Series B Preferred Units, either as to distributions or upon liquidation,
dissolution or winding up, or both, as the context may require, and shall
include the Series A Convertible Preferred Units of the Operating Partnership);
and
(C) junior to Series B Preferred Units, either as to distributions or
upon liquidation, dissolution or winding up, or both, if such class shall be OP
Units or any other common Partnership Units (the "JUNIOR UNITS") or if the
holders of the Series B 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 preference or priority to the holders of
Partnership Units of such class or classes.
3. DISTRIBUTIONS. Commencing on the date on which the Series B Preferred Units
are first issued (the "ISSUE DATE"), holders of Series B Preferred Units will be
entitled to receive, out of Net Operating Cash Flow, cash distributions at the
rate of 9.00% per annum, which shall equal $2.25 per outstanding Series B
Preferred Unit, until the day which is 12 months after the Issue Date (the
<PAGE>
"FIRST ANNIVERSARY"). From and after the First Anniversary, holders of Series B
Preferred Units will be entitled to receive, out of Net Operating Cash Flow,
cash distributions at the rate of 9.50% per annum, which shall equal $2.375 per
outstanding Series B Preferred Unit. Distributions on the Series B Preferred
Units will be cumulative from the Issue Date, whether or not in any distribution
period or periods there shall be funds of the Partnership available for the
payment of such distributions, and will be payable on the last calendar day of
March, June, September and December, in each year (each, a "DISTRIBUTION PAYMENT
DATE"). Distributions will be payable, in arrears, to holders of record of
Series B Preferred Units as they appear on the books of the Partnership on each
record date, which shall be not more than 45 days preceding the applicable
Guaranteed Payment Date, as shall be fixed by the General Partner. The amount of
distributions payable for the initial distribution period or any period shorter
or longer than a full distribution period shall be calculated on the basis of
twelve 30-day months and a 360-day year. No distributions may be declared or
paid or set apart for payment on any Parity Preferred Units with regard to the
payment of distributions unless there shall also be or have been declared and
paid or set apart for payment on the Series B Preferred Units like distributions
for all distribution payment periods of the Series B Preferred Units ending on
or before the distribution payment date of such Parity Preferred Units, ratably
in the proportion to the respective amounts of distributions accumulated and
unpaid or payable on the Series B Preferred Units and such Parity Preferred
Units. Except as set forth in the preceding sentence, unless full cumulative
distributions on the Series B Preferred Units have been paid, no distributions
may be paid or declared and set aside for payment or other distribution made
upon any Junior Units or Parity Preferred Units as to distributions, nor any
Junior Units or any Parity Preferred Units as to distributions may be redeemed,
purchased or otherwise acquired for any consideration (or any payment be made to
or available for a sinking fund for the redemption of any Junior Units or other
interests in the Partnership); PROVIDED, HOWEVER, that any moneys therefor
deposited in any sinking fund with respect to any Preferred Unit of the
Partnership in compliance with the provision of such sinking fund may thereafter
be applied to the purchase or redemption of such Preferred Unit of the
Partnership in accordance with the terms of such sinking fund, regardless of
whether at the time of such application full cumulative distributions upon
Series B Preferred Units outstanding to the last Distribution Payment Date shall
have been paid or declared and set apart for payment) by the Partnership;
PROVIDED that any such Junior Units or Parity Preferred Units may be converted
into or exchanged for Partnership Units ranking junior to the Series B Preferred
Units as to distributions.
4. ALLOCATIONS. Allocations of the Partnership's items of income, gain, loss and
deduction shall be allocated among the holders of Series B Preferred Units in
accordance with Article V of the Partnership Agreement.
5. LIQUIDATION PREFERENCE. The Series B Preferred Units shall rank, as to any
Liquidation (as herein defined) of the Partnership, prior to any other class of
Partnership Units ranking junior to Series B Preferred Units as to rights upon
Liquidation, so that in the event of any Liquidation, whether voluntary or
involuntary, the holders of the Series B Preferred Units shall be entitled to
receive out of the assets of the Partnership available for distribution to
holders of Partnership Units, whether from capital, surplus or earnings, before
any distribution is made to holders of any other such Junior Units, an amount
equal to $25.00 per Series B Preferred Unit plus distributions (whether or not
earned or declared) accrued and unpaid thereon to the date of final distribution
to such holders (the "LIQUIDATION PREFERENCE"). The holders of the Series B
Preferred Units will not be entitled to receive the Liquidation Preference until
the liquidation preference of any other class of Partnership Units ranking
senior to the Series B Preferred Units as to rights upon Liquidation shall have
been paid (or a sum set aside therefor sufficient to provide for payment) in
full. After payment of the full amount of the Liquidation Preference, the
holders of Series B Preferred Units will not be entitled to any further
participation in any distribution of assets by the Partnership. If, upon any
Liquidation, the assets of the Partnership, or proceeds thereof, distributable
among the holders of Series B
<PAGE>
Preferred Units and any other units of any class or series of Parity Preferred
Units shall be insufficient to pay in full the preferential amount aforesaid,
then such assets, or the proceeds thereof, shall be distributable among such
holders of Series B Preferred Units and such Parity Preferred Stock ratably in
accordance with the respective amounts which would be payable on such
Partnership Units if all amounts payable thereon were paid in full. For the
purposes hereof, a "LIQUIDATION" shall mean (a) a dissolution or winding up of
the Partnership or the General Partner, whether voluntary or involuntary or (b)
a sale or transfer of all or substantially all of the Partnership's or the
General Partner's assets other than to an affiliate of the Partnership or the
General Partner.
6. CONVERSION. Series B Preferred Units are convertible into shares of common
stock of the General Partner, par value $.001 per share (the "COMMON SHARES").
At any time after the Issue Date, each holder of Series B Preferred Units shall
have the option, upon not less than thirty days prior written notice to the
Partnership, of converting as of a date (a "CONVERSION DATE") set forth in such
notice each Series B Preferred Unit held by such holder. In the event that all
outstanding Series B Preferred Units are converted into Common Shares at the
current conversion price, the holders of such Series B Preferred Units will be
entitled to receive, in accordance with the terms and provisions of this Section
6, 454,545 Common Shares. No fractional shares or scrip representing fractions
of Common Shares shall be issued upon conversion of the Series B Preferred
Units. If a conversion would result in the issuance by the Partnership of a
fractional Common Share, then the Series B Preferred Unit holder shall receive
cash in lieu of the fractional Common Share.
The Conversion Price shall be adjusted from time to time as
follows:
(a) If the General Partner shall after the Issue Date (A) pay a
dividend or make a distribution on its shares of capital stock in Common
Shares, (B) subdivide its outstanding Common Shares into a greater number
of shares, (C) combine its outstanding Common Shares into a smaller
number of shares or (D) issue any shares of capital stock by
reclassification of its Common Shares, the Conversion Price in effect at
the opening of business on the day following the date fixed for the
determination of stockholders entitled to receive such dividend or
distribution or at the opening of business on the day following the day
on which such subdivision, combination or reclassification becomes
effective, as the case may be, shall be adjusted so that the holder of
any Series B Preferred Unit thereafter surrendered for conversion shall
be entitled to receive the number of Common Shares that such holder would
have owned or have been entitled to receive after the happening of any of
the events described above, had such Series B Preferred Unit been
converted immediately prior to the record date in the case of a dividend
or distribution or the effective date in the case of a subdivision,
combination or reclassification. An adjustment made pursuant to this
subparagraph (i) shall become effective immediately upon the opening of
business on the day next following the record date (subject to paragraph
(h) below) in the case of a dividend or distribution and shall become
effective immediately upon the opening of business on the day next
following the effective date in the case of a subdivision, combination or
reclassification.
(b) No adjustment in the Conversion Price shall be required unless
such adjustment would require a cumulative increase or decrease of at
least 1% in such price; provided, however, that any adjustments that by
reason of this subparagraph (ii) are not
<PAGE>
required to be made shall be carried forward and taken into account in
any subsequent adjustment until made. Notwithstanding any other
provisions of this Section 6, the General Partner shall not be required
to make any adjustment of the Conversion Price for the issuance of any
Common Shares pursuant to any plan providing for the reinvestment of
dividends or interest payable on securities of the General Partner and
the investment of additional optional amounts in Common Shares under such
plan. All calculations under this Section 6 shall be made to the nearest
cent (with $.005 being rounded upward) or to the nearest one-tenth of a
share (with .05 of a share being rounded upward), as the case may be.
Anything in this Section 6 to the contrary notwithstanding, the General
Partner shall be entitled, to the extent permitted by law, to make such
reductions in the Conversion Price, in addition to those required by this
Section 6, as it in its discretion shall determine to be advisable in
order that any stock dividends, subdivision of shares, reclassification
or combination of shares, distribution of rights, options or warrants to
purchase stock or securities, or a distribution of other assets (other
than cash dividends) hereafter made by the General Partner to its
stockholders shall not be taxable or, if that is not possible, to
determine any income taxes that are otherwise payable because of such
event.
Whenever the Conversion Price is adjusted as herein provided,
the General Partner shall prepare and deliver to the holders of the Series B
Preferred Units in a reasonable time period a notice of such adjustment of the
Conversion Price setting forth the adjusted Conversion Price and the effective
date of such adjustment and an officer's certificate setting forth the
Conversion Price after such adjustment and setting forth a brief statement of
the facts requiring such adjustment. The General Partner shall mail such notice
and such certificate to the holders of each Series B Preferred Unit at such
holder's last address as shown on the records of the General Partner.
In any case in which this Section 6 provides that an
adjustment shall become effective on the day next following the record date for
an event, the General Partner may defer until the occurrence of such event (A)
issuing to the holder of any Series A Preferred Unit converted after such record
date and before the occurrence of such event the additional Common Shares
issuable upon such conversion by reason of the adjustment required by such event
over and above the Common Shares issuable upon such conversion before giving
effect to such adjustment and (B) paying to such holder any amount of cash in
lieu of any fraction pursuant to this Section 6.
7. REDEMPTION. The Partnership, at its option, may, upon 15 days' written notice
to each holder of Series B Preferred Units (the "REDEMPTION NOTICE"), notify
such holders of its intent to redeem for cash on the date specified in the
Redemption Notice (the "REDEMPTION DATE") all or part of the outstanding Series
B Preferred Units at the Liquidation Preference. Within ten days of its receipt
of a Redemption Notice, each holder of Series B Preferred Units shall notify the
General Partner whether it intends to exercise its right to convert its Series B
Preferred Units into Common Shares, pursuant to Section 6 hereof or to be
redeemed at the Liquidation Preference. In the event that any such holder of
Series B Preferred Stock fails to respond to the Redemption Notice within such
ten-day period, the Partnership shall have the right to redeem the Series B
Preferred Units on the terms provided for in the Redemption Notice. Series B
Preferred Units shall not be subject to conversion pursuant to this Section 7 if
the holder thereof has exercised its option to convert such Series B Preferred
Units into Common Shares as provided for in Section 6 above.
<PAGE>
8. VOTING RIGHTS. The holders of Series B Preferred Units shall have no voting
rights whatsoever, except for the (i) any voting rights to which they may be
entitled under the laws of the State of Delaware, and (ii) as follows:
So long as any Series B Preferred Units remain outstanding,
the consent of the holders of at least two-thirds of the
Series B Preferred Units outstanding at the time and all other
classes or series of Preferred Units of the Partnership upon
which like voting rights have been conferred and are
exercisable (voting together as a class), given in person or
by proxy, either in writing or at any meeting called for the
purpose, shall be necessary to permit, effect or validate any
one or more of the following:
(a) the issuance or increase of any class or series of Partnership
Units ranking prior (as that term is defined in paragraph 2(a) hereof) to
the Series B Preferred Units; or
(b) the amendment, alteration or repeal, whether by merger,
consolidation or otherwise, of any of the provisions of the Partnership
Agreement (including this Partnership Unit Designation or any provision
hereof), that would materially and adversely affect any power,
preference, or special right of the Series B Preferred Units or of the
holders thereof;
PROVIDED, HOWEVER, that any increase in the number of Series B
Preferred Units or any increase or decrease in the number of
any class or series of Preferred Units of the Partnership or
the creation and issuance of other classes or series of OP
Units or Preferred Units of the Partnership, in each case
ranking on a parity with or junior to the Series B Preferred
Units with respect to the payment of dividends and the
distribution of assets upon liquidation, dissolution or
winding up, shall not be deemed to materially and adversely
affect such powers, preferences or special rights.
9. REGISTRATION RIGHTS. Each holder of Series B Preferred Units shall have the
registration rights set forth in the Preferred Unit Recipient Agreement executed
by such holder of Series B Preferred Units.
<PAGE>
IN WITNESS WHEREOF, this Partnership Unit Designation has been
duly executed by the General Partner on behalf of the Partnership as of the day
and year set forth below.
DATED: December 24, 1998 GENERAL PARTNER
KEYSTONE PROPERTY TRUST
By: /s/ Timothy A. Peterson
Name: Timothy A. Peterson
Title: Chief Financial Officer
<PAGE>
EXHIBIT 3-(k)
PARTNERSHIP UNIT DESIGNATION OF SERIES D CONVERTIBLE PREFERRED UNITS
The following is a statement of the designations, qualifications,
special or relative rights and privileges of the Series D Convertible Preferred
Units of Keystone Operating Partnership, L.P. (the "Partnership"). Capitalized
terms used but not otherwise defined in this Partnership Unit Designation shall
have the same meanings ascribed to them in the Partnership's Amended and
Restated Agreement of Limited partnership, dated as of December 12, 1997, and
any amendments thereto (collectively, the "PARTNERSHIP AGREEMENT").
1. DEFINITIONS. For purposes of this Partnership Unit Designation of Series D
Convertible Preferred Units, the following terms shall have the meanings
indicated:
"BOARD OF DIRECTORS" shall mean the Board of Directors of the
General Partner or any committee authorized by such Board of Directors
to perform any of its responsibilities with respect to the Series D
Preferred Units.
"BUSINESS DAY" shall mean any day other than a Saturday,
Sunday or a day on which state or federally chartered banking
institutions in New York, New York are not required to be open.
"COMMON SHARES" shall mean the shares of common stock, par
value $.001 per share, of the General Partner.
"CONVERSION PRICE" shall mean the conversion price per Common
Share or OP Unit (as defined below) for which each Series D Preferred
Unit is convertible, as such Conversion Price may be adjusted pursuant
to Section 8 hereof. The initial conversion price shall be $16.50
(equivalent to a conversion rate of 1.51515 Common Shares or OP Units
for each Series D Preferred Unit).
"CURRENT MARKET PRICE" shall mean, with respect to the Common
Shares, on any date specified herein, the arithmetic average of the
Market Price during the period of the most recent ten consecutive
Trading Days ending on such date.
"DISTRIBUTION PAYMENT DATES" shall mean, with respect to each
Distribution Period, the last calendar day of January, April, July and
October, in each year, commencing on July 31, 1999; provided, however,
that if any Distribution Payment Date falls on any day other than a
Business Day, the distribution payment due on such Distribution Payment
Date shall be paid on the first Business Day immediately following such
Distribution Payment Date.
"DISTRIBUTION PERIODS" shall mean quarterly distribution
periods commencing on February 1, May 1, August 1 and November 1 of
each year and ending on and including the day preceding the first day
of the next succeeding Distribution Period (other than the initial
Distribution Period, which shall commence on the Issue Date and end on
and include July 31, 1999).
"GENERAL PARTNER" shall mean Keystone Property trust, a
Maryland real estate investment trust and the general partner of the
Partnership.
"ISSUE DATE" shall mean the first date on which any Series D
Preferred Units are issued.
"MARKET PRICE" shall mean, with respect to the Common Shares
on any date, the last reported sales price, regular way on such day,
or, in case no such sale takes place on such day, the average of the
closing bid and asked prices, regular way on such day, in either case
as reported in the principal consolidated transaction reporting system
with respect to securities listed or admitted to trading on the
American Stock Exchange or, if the Common Shares are not listed or
admitted for trading on the American Stock Exchange, as reported in the
principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange on
which the Common Shares are listed or admitted for trading or, if the
Common Shares are not listed or admitted for 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 NASD 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 the Common Shares are not quoted
by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker regularly making a
market in the Common Shares selected for such purpose by the Board of
Directors or, if there is no such professional market maker, such
amount as an independent investment banking firm selected by the Board
of Directors determines to be the value of a Common Share.
<PAGE>
"PERSON" shall mean any individual, firm, partnership,
corporation, limited liability company or other entity, and shall
include any successor (by merger or otherwise) of such entity.
"TRADING DAY" shall mean any day on which the securities in
question are traded on the American Stock Exchange, or if such
securities are not listed or admitted for trading on the American Stock
Exchange, on the principal national securities exchange on which such
securities are listed or admitted, or if not listed or admitted for
trading on any national securities exchange, on the Nasdaq National
Market, or if such securities are not quoted on such Nasdaq National
Market, in the applicable securities market in which the securities are
traded.
2. DESIGNATION AND NUMBER. The designation for the class of Preferred Units
authorized by this Partnership Unit Designation shall be Series D Convertible
Preferred Units (the "SERIES D PREFERRED UNITS"). The number of Series D
Preferred Units shall be 450,700, which number may be decreased (but not below
the number thereof then outstanding) from time to time by the General Partner.
3. RANK. For the purposes of this Partnership Unit Designation and
notwithstanding any provision to the contrary in the Partnership Agreement, any
class or classes of Partnership Units in the Partnership shall be deemed to
rank:
(A) prior to the Series D Preferred Units (if authorized by a vote of
the holders of Series D Preferred Units pursuant to Section 9), either as to
distributions or upon liquidation, dissolution or winding up, or both, if the
holders of Partnership Units of such class or classes shall be entitled by the
terms thereof 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 the Series D Preferred Units;
(B) on a parity with the Series D Preferred Units, either as to
distributions or upon liquidation, dissolution or winding up, or both, whether
or not the distribution payment dates, or redemption or liquidation prices per
Partnership Unit thereof, be different from those of the Series D Preferred
Units, if the holders of Partnership Units of such class or classes shall be
entitled by the terms thereof to the receipt of distributions or of amounts
distributed upon liquidation, dissolution or winding up, as the case may be, in
proportion to their respective distribution rates or liquidation prices, without
preference or priority of one over the other as between the holders of such
Partnership Units and the holders of Series D Partnership Preferred Units (the
term "PARITY PREFERRED UNIT" being used to refer to any Partnership Unit on a
parity with the Series D Preferred Units, either as to distributions or upon
liquidation, dissolution or winding up, or both, as the context may require and
shall include the Series A Convertible Preferred Units and the Series B
Convertible Preferred Units of the Partnership); and
(C) junior to Series D Preferred Units, either as to distributions or
upon liquidation, dissolution or winding up, or both, if such class shall be OP
Units or any other common Partnership Unit (the "JUNIOR UNITS") or if the
holders of the Series D 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 preference or priority to the holders of
Partnership Units of such class or classes.
4. DISTRIBUTIONS.
(A) The holders of Series D Preferred Units shall be entitled to
receive, when, as and if authorized and declared by the General Partner out of
funds legally available for that purpose, distributions payable in cash at the
rate per annum equal to the greater of (i) $2.25 per Series D Preferred Unit or
(ii) an amount per Series D Preferred Unit equal to the aggregate annual amount
of cash dividends paid or payable, if any, with respect to that number of Common
Shares, or portion thereof, into which each Series D Preferred Unit is then
convertible, in accordance with the terms of this Partnership Unit Designation
(such greater amount, the "ANNUAL DISTRIBUTION Rate"); PROVIDED, HOWEVER, that
on and after the ten year anniversary of the Issue Date, the Annual Distribution
Rate shall be a rate per annum equal to the greater of (i) $4.50 per Series D
Preferred Unit or (ii) an amount per Series D Preferred Unit
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<PAGE>
equal to the aggregate annual amount of cash dividends paid or payable, if any,
with respect to that number of Common Shares, or portion thereof, into which
each Series D Preferred Unit is then convertible, in accordance with the terms
of this Partnership Unit Designation. The amount referred to in each clause (ii)
of this subparagraph (a) with respect to each Distribution Period shall be
determined as of the applicable Distribution Payment Date by multiplying the
number of Common Shares, or portion thereof calculated to the fourth decimal
point, into which a Series D Preferred Unit would be convertible at the opening
of business on such Distribution Payment Date (based on the Conversion Price
then in effect) by the quarterly cash distribution payable or paid for such
Distribution Period in respect of a Common Share outstanding as of the record
date for the payment of distributions on the Common Shares with respect to such
Distribution Period or, if different, with respect to the most recent quarterly
period for which dividends with respect to the Common Shares have been declared.
Such distributions shall be cumulative from the Issue Date, whether or not in
any Distribution Period or Periods there shall be funds of the Partnership
legally available for the payment of such distributions, shall compound
quarterly at a rate per annum equal to (a) on or prior to the tenth
(10th)anniversary of the Issue Date, nine percent (9%), or (b) after the tenth
(10th) anniversary of the Issue Date, eighteen percent (18%); and shall be
payable quarterly, when, as and if authorized and declared by the General
Partner, in arrears on Distribution Payment Dates, commencing on the first
Distribution Payment Date after the Issue Date. Each such distribution shall be
payable in arrears to the holders of record of the Series D Preferred Units, as
they appear on the records of the Partnership at the close of business on each
record date which shall not be more than 30 days preceding the applicable
Distribution Payment Date (the "DISTRIBUTION PAYMENT RECORD DATE"), as shall be
fixed by the General Partner. Accrued and unpaid distributions for any past
Distribution Periods may be authorized and declared and paid at any time,
without reference to any regular Distribution Payment Date, to holders of record
on such date, which shall not be more than 45 days preceding the payment date
thereof, as may be fixed by the General Partner. The amount of accrued and
unpaid distributions on any Series D Preferred Unit at any date shall be the
amount of any distributions thereon calculated and compounded at the applicable
rate to and including such date, whether or not earned or declared, which have
not been paid in cash.
(B) The amount of distributions payable for each full Distribution
Period for the Series D Preferred Units shall be computed by dividing the Annual
Distribution Rate by four. The amount of distributions payable for the initial
Distribution Period, or any other period shorter or longer than a full
Distribution Period, on the Series D Preferred Units shall be compounded on the
basis of twelve 30-day months and a 360-day year. Holders of Series D Preferred
Units shall not be entitled to any distributions, whether payable in cash or
property, in excess of cumulative distributions, as herein provided, on the
Series D Preferred Units, plus any other amounts provided in this Partnership
Unit Designation.
(C) So long as any Series D Preferred Units are outstanding, no
distributions, except as described in the immediately following sentence, shall
be authorized and declared or paid or set apart for payment on any series or
class or classes of Parity Preferred Units for any period unless full cumulative
distributions have been or contemporaneously are authorized and declared and
paid or authorized and declared and a sum sufficient for the payment thereof set
apart for such payment on the Series D Preferred Units for all Distribution
Periods terminating on or prior to the distribution payment date for such class
or series of Parity Preferred Units. When distributions are not paid in full or
a sum sufficient for such payment is not set apart, as aforesaid, all
distributions authorized and declared upon Series D Preferred Units and all
distributions authorized and declared upon any other series or class or classes
of Parity Preferred Units shall be authorized and declared ratably in proportion
to the respective amounts of distributions accumulated and unpaid on the Series
D Preferred Units and such Parity Preferred Units.
(D) So long as any Series D Preferred Units are outstanding, no
distributions (other than distributions paid solely in units of, or options,
warrants or rights to subscribe for or purchase units of, Junior Units) shall be
authorized and declared or paid or set apart for payment or other distribution
3
<PAGE>
authorized and declared or made upon Junior Units, nor shall any Junior Units be
redeemed, purchased or otherwise acquired (other than a redemption, purchase or
other acquisition of OP Units made for purposes of and in compliance with
requirements of an employee incentive or benefit plan of the Partnership or any
subsidiary), for any consideration (or any moneys to be paid to or made
available for a sinking fund for the redemption of any units) by the
Partnership, directly or indirectly (except by conversion into or exchange for
Junior Units), unless in each case (i) the full cumulative distributions on all
outstanding Series D Preferred Units and any other Parity Preferred Units of the
Partnership shall have been paid or set apart for payment for all past
Distribution Periods with respect to the Series D Preferred Units and all past
distribution periods with respect to such Parity Preferred Units and (ii)
sufficient funds shall have been paid or "set apart for the payment" of the
distribution for the current Distribution Period with respect to the Series D
Preferred Units and any Parity Preferred Units. For the purposes of this Section
4(d), "set apart for payment" shall be deemed to include, without any action
other than the following, the recording by the Partnership in its accounting
ledgers of any accounting or bookkeeping entry which indicates, pursuant to a
declaration of a distribution by the General Partner, the allocation of funds to
be so paid on any Partnership Units; PROVIDED, HOWEVER, that if any funds for
any class or series of Junior Units or any series of Parity Preferred Units are
placed in a separate account of the Partnership or delivered to a disbursing,
paying or other similar agent, then "set apart for payment" with respect to the
Series D Preferred Units shall mean placing such funds in a separate account or
delivering such funds to a disbursing, paying or other similar agent.
5. ALLOCATIONS. Allocations of the Partnership's items of income, gain, loss and
deduction shall be allocated among the holders of Series D Preferred Units in
accordance with Article VI of the Partnership Agreement.
6. LIQUIDATION PREFERENCE. The Series D Preferred Units shall rank, as to any
Liquidation (as herein defined), of the Partnership, prior to the OP Units and
any other class of Partnership Units of the Partnership ranking junior to Series
D Preferred Units as to rights upon Liquidation, so that in the event of any
Liquidation, whether voluntary or involuntary, the holders of the Series D
Preferred Units shall be entitled to receive out of the assets of the
Partnership available for distribution to holders of Partnership Units, whether
from capital, surplus or earnings, before any distribution is made to holders of
OP Units or any other Junior Units, an amount (collectively, the "LIQUIDATION
AMOUNT") equal to the greater of (a)(i) $25.00 per Series D Preferred Unit plus
an amount equal to all distributions (whether or not earned or declared) accrued
pursuant to Section 4(a) and unpaid thereon to the date of final distribution to
such holders (the "LIQUIDATION PREFERENCE") plus (ii) the Liquidation Premium
(as herein defined) or (b) an amount per Series D Preferred Unit equal to the
amount which would have been payable had each Series D Preferred Unit been
converted into Common Shares immediately prior to such Liquidation. The holders
of the Series D Preferred Units will not be entitled to receive the Liquidation
Preference until the liquidation preference of any other class of Partnership
Units ranking senior to the Series D Preferred Units as to rights upon
Liquidation shall have been paid (or a sum set aside therefor sufficient to
provide for payment) in full. After payment of the full amount of the
Liquidation Amount, the holders of Series D Preferred Units will not be entitled
to any further participation in any distribution of assets by the Partnership.
If, upon any such Liquidation, the assets of the Partnership, or proceeds
thereof, distributable among the holders of Series D Preferred Units and any
other units of any class or series of Parity Preferred Units shall be
insufficient to pay in full the Liquidation Amount, then such assets, or the
proceeds thereof, shall be distributable among such holders of Series D
Preferred Units and Parity Preferred Units ratably in accordance with the
respective amounts which would be payable on such Partnership Units if all
amounts payable thereon were paid in full. For the purposes hereof, a
"LIQUIDATION" shall mean (a) a dissolution or winding up of the General Partner
or the Partnership, whether voluntary or involuntary; or (b) a sale or transfer
of all or substantially all of the General Partner's or the Partnership's assets
other than to an affiliate of either the General Partner or the Partnership if
such Affiliate agrees to assume the obligations set forth herein; PROVIDED,
HOWEVER, that a
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consolidation or merger of the General Partner or the Partnership with and into
one or more entities which are not affiliates of the General Partner or the
Partnership which results in a Change in Control (as herein defined) shall be
deemed to be a Liquidation. For the purposes hereof, the "LIQUIDATION PREMIUM"
shall mean (a) on or prior to the fifth (5th)anniversary of the Issue Date, an
amount equal to ten percent of the Liquidation Preference, or (b) after the
fifth (5th)anniversary of the Issue Date, in connection with any Liquidation, an
amount equal to the Redemption Premium which would be payable on the Series D
Preferred Shares if such shares were called for redemption by the General
Partner. For the purposes hereof, a "CHANGE IN CONTROL" shall mean any merger or
consolidation of the General Partner or the Partnership in which one or more
entities or persons which are not affiliates of the General Partner or the
Partnership, as the case may be, acquire more than 50% of the General Partner's
or the Partnership's outstanding voting equity securities or as a result of
which security holders of the General Partner or the Partnership immediately
before such merger or consolidation hold, immediately after such merger or
consolidation, less than 50% of the surviving entity's outstanding securities.
7. Redemption at the Option of the Partnership.
(A) At any time from and after the fifth anniversary of the Issue Date
the Partnership may, and, upon the written election of the Partnership given to
each record holder of Series D Preferred Units (the "REDEMPTION NOTICE"), the
Partnership shall, redeem for cash on the date specified in the Redemption
Notice (which date shall not be less than 15 days nor more than 30 days after
the date of the Redemption Notice) (the "REDEMPTION DATE"), all, but not less
than all, of the outstanding Series D Preferred Units at a price per Series D
Preferred Unit equal to the Liquidation Preference plus a premium (the
"REDEMPTION PREMIUM") which shall equal the following percentages of the
Liquidation Preference during the following periods:
<TABLE>
<S> <C>
From the fifth anniversary of the Issue Date
through and including the sixth anniversary of the Issue Date..................................4.5%
From the sixth anniversary of the Issue Date
through and including the seventh anniversary of the Issue Date..............................3.375%
From the seventh anniversary of the Issue Date
through and including the eighth anniversary of the Issue Date................................2.25%
From the eighth anniversary of the Issue Date and thereafter.....................................0%
</TABLE>
(B) From and after full payment of the Liquidation Preference plus the
Redemption Premium, if any, payable to the holders of Series D Preferred Units
on the Redemption Date, (i) except as otherwise provided herein, distributions
on the Series D 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 holders thereof as holders of Series D Preferred Units of the
Partnership shall cease (except the rights to receive the cash payable upon such
redemption, without interest thereon and to receive any distributions payable
thereon). The Partnership's obligation to provide cash in accordance with this
Section 7 shall be deemed fulfilled, and the Partnership will have no further
liability with respect to such Series D Preferred Units, if, on or before the
Redemption Date, the Partnership shall deposit in an account with a bank or
trust company designated by the holders of the Series D Preferred Units, all
cash necessary for such redemption, in trust, with irrevocable instructions that
such cash be applied to the redemption of the Series D Preferred Units so called
for redemption. No interest shall accrue for the benefit of the holder of Series
D Preferred Units to be redeemed on any cash so set aside by the Partnership.
8. CONVERSION.
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(A) Holders of Series D Preferred Units shall have the right to convert
all or a portion of such units into Common Shares or units of limited
partnership interest ("OP UNITS"), as follows:
(a) Subject to and upon compliance with the provisions of this
Section 8, a holder of Series D Preferred Units shall have the right,
at his or her option, at any time and from time to time, to convert
such units into (i) that amount of cash obtained by multiplying the
Current Market Price by a fraction, the numerator of which is the
aggregate Liquidation Preference of such Series D Preferred Units and
the denominator of which is the Conversion Price (as in effect at the
time and on the date provided for in Section 8(d)), payable in
accordance with the provisions of the Partnership Agreement (the "CASH
Payment"), or (ii) at the election of such holder, the number of fully
paid and non assessable Common Shares or OP Units obtained by dividing
the aggregate Liquidation Preference of such Series D Preferred Units
(computed on the date of conversion) by the Conversion Price (as in
effect at the time and on the date provided for in Section 8(d)), at
the election of the General Partner, by surrendering such Series D
Preferred Units to be converted, such surrender to be made in the
manner provided in paragraph (b) of this Section 8; PROVIDED, HOWEVER,
that the right to convert Series D Preferred Units called for
redemption pursuant to Section 7 hereof shall terminate at the close
of business 10 days after delivery by the Partnership of a Redemption
Notice for such redemption, unless the Partnership shall default in
making payment of any cash payable upon such redemption under Section
7 hereof.
(b) In order to exercise the conversion right, the holder of
each Series D Preferred Unit shall deliver to the Partnership written
notice (specifying the number of Series D Preferred Units to be
converted) (the "WRITTEN NOTICE") that the holder thereof elects to
convert such Series D Preferred Units (the "OFFERED UNITS") and
whether the holder thereof desires to receive OP Units or Common
Shares. Each unit surrendered for conversion shall be accompanied by
instruments of transfer, in the form attached hereto as EXHIBIT A,
duly executed by the holder or such holder's duly authorized attorney
and unless the Common Shares or OP Units issuable on conversion are to
be issued in the same name as the name in which such Series D
Preferred Units are registered, an amount sufficient to pay any
transfer or similar tax (or evidence reasonably satisfactory to the
Partnership demonstrating that such taxes have been paid).
(B) Holders of Offered Units at the close of business on any
Distribution Payment Record Date shall be entitled to receive the distribution
payable on such Offered Units on the corresponding Distribution Payment Date
(and of any accrued and unpaid distributions to the date or conversion),
notwithstanding the conversion thereof, following such Distribution Payment
Record Date and prior to such Distribution Payment Date; PROVIDED, HOWEVER, that
no holder of Offered Units shall be entitled to receive a distribution for such
Distribution Period with respect to an Offered Unit if such holder is entitled
to receive a distribution with respect to a OP Unit or Common Share for which
such Offered Unit has been exchanged and such distribution shall be made to the
General Partner.
(C) As promptly as practicable after the receipt of the Written Notice
as aforesaid, if the General Partner does not elect to make the Cash Payment for
such Offered Units, the General Partner shall issue and deliver at such office
to such holder, or send on his or her written order, a certificate or
certificates for the number of full Common Shares issuable upon the conversion
of such Offered Units in accordance with the provisions of this Section 8, and
any fractional interest in respect of a Common Share arising upon conversion
shall be settled as provided in paragraph (e) of this Section 8.
(D) If the General Partner does not elect to make the Cash Payment for
such Offered Units, each conversion shall be deemed to have been effected
immediately prior to the close of business on the date on which the Written
Notice shall have been received by the Partnership as aforesaid, and the person
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<PAGE>
or persons in whose name or names any certificate or certificates for Common
Shares shall be issuable upon such conversion shall be deemed to have become the
holder or holders of record of the Common Shares represented thereby at such
time on such date, and such conversion shall be at the Conversion Price in
effect at such time and on such date unless the stock transfer books of the
General Partner shall be closed on that date, in which event such person or
persons shall be deemed to have become such holder or holders of record at the
close of business on the next succeeding day on which such stock transfer books
are open, but such conversion shall be at the Conversion Price in effect on the
date on which such Series D Preferred Units shall have been surrendered and such
notice received by the Partnership.
(E) No fractional shares or scrip representing fractions of Common
Shares shall be issued upon conversion of Series D Preferred Units. Instead of
any fractional interest in a Common Share that would otherwise be deliverable
upon the conversion of a Series D Preferred Unit, the Partnership shall pay to
the holder of such Series D Preferred Unit an amount in cash based upon the
Current Market Price of Common Shares on the Trading Day immediately preceding
the date of conversion. If more than one Series D Preferred Unit shall be
surrendered for conversion at one time by the same holder, the number of full
Common Shares issuable upon conversion thereof shall be computed on the basis of
the aggregate number of Series D Preferred Units so surrendered.
(F) The Conversion Price shall be adjusted from time to time as
follows:
(a) If the General Partner shall after the Issue Date (A) pay
a dividend or make a distribution on its shares of capital stock in
Common Shares, (B) subdivide its outstanding Common Shares into a
greater number of shares, (C) combine its outstanding Common Shares
into a smaller number of shares or (D) issue any shares of capital
stock by reclassification of its Common Shares, the Conversion Price
in effect at the opening of business on the day following the date
fixed for the determination of stockholders entitled to receive such
dividend or distribution or at the opening of business on the day
following the day on which such subdivision, combination or
reclassification becomes effective, as the case may be, shall be
adjusted so that the holder of any Series D Preferred Unit thereafter
surrendered for conversion shall be entitled to receive the number of
Common Shares that such holder would have owned or have been entitled
to receive after the happening of any of the events described above,
had such Series D Preferred Unit been converted immediately prior to
the record date in the case of a dividend or distribution or the
effective date in the case of a subdivision, combination or
reclassification. An adjustment made pursuant to this subparagraph (i)
shall become effective immediately upon the opening of business on the
day next following the record date (subject to subparagraph (iv)
below) in the case of a dividend or distribution and shall become
effective immediately upon the opening of business on the day next
following the effective date in the case of a subdivision, combination
or reclassification.
(b) If the General Partner shall issue after the Issue Date
rights, options or warrants to all holders of Common Shares entitling
them (for a period expiring within 45 days after the record date
mentioned below in this subparagraph (ii)) to subscribe for or
purchase Common Shares at a price per share less than the Current
Market Price per Common Share on the record date for the determination
of stockholders entitled to receive such rights, options or warrants,
then the Conversion Price in effect at the opening of business on the
day next following such record date shall be adjusted to equal the
price determined by multiplying (A) the Conversion Price in effect
immediately prior to the opening of business on the day following the
date fixed for such determination by (B) a fraction, the numerator of
which shall be the sum of (I) the number of Common Shares outstanding
on the close of business on the date fixed for such determination and
(II) the number of Common Shares that the aggregate proceeds to the
General Partner from the exercise of such rights, options or warrants
for Common Shares would purchase
7
<PAGE>
at such Current Market Price, and the denominator of which shall be
the sum of (I) the number of Common Shares outstanding on the close of
business on the date fixed for such determination and (II) the number
of additional Common Shares offered for subscription or purchase
pursuant to such rights, options or warrants. Such adjustment shall
become effective immediately upon the opening of business on the day
next following such record date (subject to subparagraph (vii) below).
In determining whether any rights, options or warrants entitle the
holders of Common Shares to subscribe for or purchase Common Shares at
less than such Current Market Price, there shall be taken into account
any consideration received by the General Partner upon issuance and
upon exercise of such rights, options or warrants, the value of such
consideration, if other than cash, to be determined by the Chief
Executive Officer or the Board of Directors, whose determination shall
be conclusive.
(c) If the General Partner shall distribute to all holders of
its Common Shares any shares of capital stock of the General Partner
(other than Common Shares) or evidence of its indebtedness or assets
(excluding cash dividends or distributions paid out of assets based
upon a fair valuation of the assets, in excess of the sum of the
liabilities of the General Partner and the amount of stated capital
attributable to Common Shares, determined on the basis of the most
recent annual consolidated cost basis and current value basis and
quarterly consolidated balance sheets of the General Partner and its
consolidated subsidiaries available at the time of the declaration of
the dividend or distribution) or rights or warrants to subscribe for
or purchase any of its securities (excluding those rights and warrants
issued to all holders of Common Shares entitling them for a period
expiring within 45 days after the record date referred to in
subparagraph (ii) above to subscribe for or purchase Common Shares,
which rights and warrants are referred to in and treated under
subparagraph (ii) above) (any of the foregoing being hereinafter in
this subparagraph (iii) called the "SECURITIES"), then in each case
the Conversion Price shall be adjusted so that it shall equal the
price determined by multiplying (A) the Conversion Price in effect
immediately prior to the close of business on the date fixed for the
determination of shareholders entitled to receive such distribution by
(B) a fraction, the numerator of which shall be the Current Market
Price per Common Share on the record date mentioned below less the
then fair market value (as determined by the Board of Directors, whose
determination shall be conclusive) of the portion of the shares of
capital stock or assets or evidences of indebtedness so distributed or
of such rights or warrants applicable to one Common Share, and the
denominator of which shall be the Current Market Price per Common
Share on the record date mentioned below. Such adjustment shall become
effective immediately upon the opening of business on the day next
following (subject to subparagraph (vii) below) the record date for
the determination of stockholders entitled to receive such
distribution. For the purposes of this subparagraph (iii), the
distribution of a Security, which is distributed not only to the
holders of the Common Shares on the date fixed for the determination
of shareholders entitled to such distribution of such Security, but
also is required to be distributed with each Common Share delivered to
a Person converting a Series D Preferred Unit after such determination
date, shall not require an adjustment of the Conversion Price pursuant
to this subparagraph (iii); provided that on the date, if any, on
which a person converting a Series D Preferred Unit would no longer be
entitled to receive such Security with a Common Share (other than as a
result of the termination of all such Securities), a distribution of
such Securities shall be deemed to have occurred, and the Conversion
Price shall be adjusted as provided in this subparagraph (iii) (and
such day shall be deemed to be "the date fixed for the determination
of the shareholders entitled to receive such distribution" and "the
record date" within the meaning of the two preceding sentences).
(d) The occurrence of a distribution or the occurrence of any
other event as a result of which holders of Series D Preferred Units
shall not be entitled to receive rights, including
8
<PAGE>
exchange rights (the "Rights"), pursuant to any shareholders
protective rights agreement (the "Agreement") that may be adopted by
the General Partner as if such holders had converted such shares into
Common Shares immediately prior to the occurrence of such distribution
or event shall not be deemed a distribution of Securities for the
purposes of any Conversion Price adjustment pursuant to this
subparagraph (iii) or otherwise give rise to any Conversion Price
adjustment pursuant to this Section 8; PROVIDED, HOWEVER, that in lieu
of any adjustment to the Conversion Price as a result of any such a
distribution or occurrence, the General Partner shall make provision
so that Rights, to the extent issuable at the time of conversion of
any Series D Preferred Units into Common Shares, shall issue and
attach to such Common Shares then issued upon conversion in the amount
and manner and to the extent and as provided in the Agreement in
respect of issuances at the time of Common Shares other than upon
conversion.
(e) No adjustment in the Conversion Price shall be required
unless such adjustment would require a cumulative increase or decrease
of at least 1% in such price; provided, however, that any adjustments
that by reason of this subparagraph (v) are not required to be made
shall be carried forward and taken into account in any subsequent
adjustment until made. Notwithstanding any other provisions of this
Section 8, the General Partner shall not be required to make any
adjustment of the Conversion Price for the issuance of any Common
Shares pursuant to any plan providing for the reinvestment of
dividends or interest payable on securities of the General Partner and
the investment of additional optional amounts in Common Shares under
such plan. All calculations under this Section 8 shall be made to the
nearest cent (with $.005 being rounded upward) or to the nearest
one-tenth of a share (with .05 of a share being rounded upward), as
the case may be. Anything in this Section 8 to the contrary
notwithstanding, the General Partner shall be entitled, to the extent
permitted by law, to make such reductions in the Conversion Price, in
addition to those required by this Section 8, as it in its discretion
shall determine to be advisable in order that any stock dividends,
subdivision of shares, reclassification or combination of shares,
distribution of rights, options or warrants to purchase stock or
securities, or a distribution of other assets (other than cash
dividends) hereafter made by the General Partner to its stockholders
shall not be taxable or, if that is not possible, to determine any
income taxes that are otherwise payable because of such event.
(f) Whenever the Conversion Price is adjusted as herein
provided, the Partnership shall prepare and deliver to the holders of
the Series D Preferred Units in a reasonable time period a notice of
such adjustment of the Conversion Price setting forth the adjusted
Conversion Price and the effective date of such adjustment and an
officer's certificate setting forth the Conversion Price after such
adjustment and setting forth a brief statement of the facts requiring
such adjustment and the calculation thereof. The General Partner shall
mail such notice and such certificate to the holders of each Series D
Preferred Unit at such holder's last address as shown on the records
of the Partnership.
(g) In any case in which this Section 8 provides that an
adjustment shall become effective on the day next following the record
date for an event, the General Partner may defer until the occurrence
of such event (A) issuing to the holder of any Series D Preferred Unit
converted after such record date and before the occurrence of such
event the additional Common Shares issuable upon such conversion by
reason of the adjustment required by such event over and above the
Common Shares issuable upon such conversion before giving effect to
such adjustment and (B) paying to such holder any amount of cash in
lieu of any fraction pursuant to this Section 8.
(G) The General Partner will at all times reserve and keep available,
free from preemptive rights, out of the aggregate of its authorized but unissued
Common Shares, for the purpose of effecting
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<PAGE>
conversion of the Series D Preferred Units, the full number of Common Shares
deliverable upon the conversion of all outstanding Series D Preferred Units not
theretofore converted. For purposes of this paragraph (e), the number of Common
Shares that shall be deliverable upon the conversion of all outstanding shares
of Series D Preferred Units shall be computed as if at the time of computation
all such outstanding units were held by a single holder. The General Partner
covenants that any Common Shares issued upon conversion of the Series D
Preferred Units shall be validly issued, fully paid and non-assessable.
(H) The Partnership shall pay any and all documentary stamp or similar
issue or transfer taxes payable in respect of the issue or delivery of Common
Shares or other securities or property on conversion of the Series D Preferred
Units pursuant hereto; provided, however, that the Partnership shall not be
required to pay any tax that may be payable in respect of any transfer involved
in the issue or delivery of any Common Shares, the Cash Payment or other
securities or property in a name other than that of the holder of the Series D
Preferred Units to be converted, and no such issue or delivery shall be made
unless and until the person requesting such issue or delivery has paid to the
Partnership the amount of any such tax or established, to the reasonable
satisfaction of the Partnership, that such tax has been paid.
9. VOTING RIGHTS. The holders of Series D Preferred Units shall have the right
(voting on an as converted basis as a single class with all holders of OP Units,
and Parity Preferred Units or Junior Units which are given similar rights) to
vote on all matters which require a Consent of the Limited Partners (as defined
in the Partnership Agreement) as well as (i) any voting rights to which they may
be entitled under the laws of the State of Delaware, and (ii) as follows:
(A) So long as any Series D Preferred Units remain outstanding, the
consent of the holders of at least two-thirds of the Series D Preferred Units
outstanding at the time, given in person or by proxy, either in writing or at
any meeting called for the purpose, shall be necessary to permit, effect or
validate any one or more of the following:
(B) the issuance or increase of any class or series of Partnership
Units ranking prior (as that term is defined in paragraph 3(a) hereof) to the
Series D Preferred Units; or
(C) the amendment, alteration or repeal, whether by merger,
consolidation or otherwise, of any of the provisions of the Partnership
Agreement (including this Partnership Unit Designation or any provision hereof),
that would materially and adversely affect any power, preference, or special
right of the Series D Preferred Units or of the holders thereof;
PROVIDED, HOWEVER, that any increase in the number of Series D
Preferred Units or any increase or decrease in the number of any class or series
of Preferred Units of the Partnership or the creation and issuance of other
classes or series of OP Units or Preferred Units of the Partnership, in each
case ranking on a parity with or junior to the Series D Preferred Units with
respect to the payment of dividends and the distribution of assets upon
liquidation, dissolution or winding up, shall not be deemed to materially and
adversely affect such powers, preferences or special rights.
10. INFORMATION. In the event that the General Partner ceases to be subject to
the periodic reporting requirements of the Securities Exchange Act of 1934, as
amended, the Partnership shall cause all information that is generally provided
to the shareholders or other securityholders, or required to be provided to
creditors of the General Partner to be sent to holders of Series D Preferred
Units at approximately the same time as such information is distributed to the
shareholders or other securityholders or creditors of the General Partner.
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10
<PAGE>
IN WITNESS WHEREOF, this Partnership Unit Designation has been duly
executed by the General Partner on behalf of the Partnership as of the day and
year set forth below.
DATED: July 21, 1999 GENERAL PARTNER
KEYSTONE PROPERTY TRUST
By: /s/ Timothy A. Peterson
Name: Timothy A. Peterson
Title: Chief Financial Officer
11
<PAGE>
Exhibit 4(a)
====================================================
AMERICAN BANK NOTE COMPANY
850 BLAIR MILL ROAD
HORSHAM, PA 19044
(215) 837-3480
----------------------------------------------------
SALES: J. NAPOLITANO: 212-583-5700
----------------------------------------------------
new zip 1 KEYSTONE H83705
====================================================
====================================================
PRODUCTION COORDINATOR: MARY TARTAGLIA: 215-830-2154
PROOF OF OCTOBER 8, 1999
KEYSTONE PROPERTY TRUST
H 83705 fc
----------------------------------------------------
OPERATOR: JW/MT/lr
----------------------------------------------------
Rev 3
====================================================
================================================================================
[LOGO]
================= ==================
NUMBER S H A R E S
KEYSTONE
K
PROPERTY TRUST
================ ==================
A Real Estate Investment Trust organized under the laws of the State of Maryland
CUSIP 493596 10 0
SEE REVERSE FOR CERTAIN DEFINITIONS AND LEGENDS
- --------------------------------------------------------------------------------
THIS CERTIFIES THAT
is the owner of
- --------------------------------------------------------------------------------
FULLY-PAID AND NONASSESSABLE COMMON SHARES, $.001 PAR VALUE, OF
KEYSTONE PROPERTY TRUST
transferable on the books of the Trust by the holder hereof in person or by duly
authorized attorney, upon surrender of this Certificate properly endorsed. This
Certificate and the shares represented hereby are issued and shall be held
subject to all the provisions of the Declaration of Trust, as amended, and the
By-Laws of the Trust, as amended (copies of which are on file at the office of
the Transfer Agent), to all of which the holder of this Certificate by
acceptance hereof assents. This Certificate is not valid unless countersigned
and registered by the Transfer Agent and Registrar.
WITNESS the facsimile seal of the Trust and the facsimile signatures of
its duly authorized officers.
SHARE CERTIFICATE
Dated:
KEYSTONE PROPERTY TRUST
(SEAL)
1999
Maryland
/s/ [ILLEGIBLE] /s/ [ILLEGIBLE]
Executive Vice President and Secretary President and Chief Executive Officer
COUNTERSIGNED AND REGISTERED:
AMERICAN STOCK TRANSFER & TRUST COMPANY
(NEW YORK, NEW YORK)
TRANSFER AGENT
AND REGISTRAR
BY
AUTHORIZED OFFICER
================================================================================
<PAGE>
The Trust will furnish to any Shareholder on request and without charge a
full statement of the designations and any preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends or
distributions, qualifications, and terms and conditions of redemption of the
shares of each class which the Trust is authorized to issue, of the differences
in the relative rights and preferences between the shares of each series of a
preferred or special class in series which the Trust is authorized to issue, to
the extent they have been set, and of the authority of the Board of Trustees to
set the relative rights and preferences of subsequent series of a preferred or
special class of shares. Such request may be made to the secretary of the Trust
or to its transfer agent.
The securities represented by this certificate are subject to restrictions
on Beneficial and Constructive Ownership and Transfer for the purpose of the
Trust's maintenance of its status as Real Estate Investment Trust under the
Internal Revenue Code of 1986, as amended (the "Code"). Subject to the 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 4.9% (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 Ownership Limit shall be applicable); (ii) no Person
may Beneficially or Constructively Own Shares of the Trust in excess of 9.9% (in
value or number of shares) of the outstanding Shares of any class or series of
Preferred Stock of the Trust, unless such Person is an Excepted Holder (in which
case the Excepted Holder Ownership Limit shall be applicable); (iii) no Person
may Beneficially or Constructively Own 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; (iv) no Person may Transfer Shares if such
Transfer would result in the Shares of the Trust being owned by fewer than 100
Persons; (v) no Person may Transfer Shares if such Transfer would result in
Shares of the Trust being owned by a Disqualified Person; and (vi) no plans and
certain other Persons described in or subject to the Plan Asset Regulations may
own more than 24.9% of the value of any class of Shares of the Trust. Any Person
who Beneficially or Constructively Owns or attempts to Beneficially or
Constructively Own Shares which causes or will cause a Person to Beneficially or
Constructively Own 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 Shares represented hereby may be automatically
transferred to a Charitable 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 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 Shares of the Trust on request and without
charge.
Keep this certificate in a safe place. If it is lost, stolen, or
destroyed, the Trust will require a bond of indemnity as a condition to the
issuance of a replacement certificate.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right
of survivorship and not as
tenants in common
UNIF GIFT MIN ACT- __________Custodian___________
(Cust) (Minor)
under Uniform Gifts to Minors
Act___________________________
(State)
Additional abbreviations may also be used though not in the above list.
For value received,_______________________ hereby sell, assign and
transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
______________________________________
| |
| |
|_____________________________________|_________________________________________
________________________________________________________________________________
Please print or typewrite name and address including postal zip code of assignee
________________________________________________________________________________
________________________________________________________________________________
__________________________________________________________________ Common Shares
represented by the within Certificate, and do hereby irrevocably constitute and
appoint
________________________________________________________________________________
________________________________________________________________________________
Attorney to transfer the said shares on the books of the within-named Trust with
full power of substitution in the premises.
Dated _______________________________
__________________________________
SIGNATURE
Signature Guaranteed
By:_____________________________________________________________________________
The signature(s) must be guaranteed by an eligible guarantor institution (Banks,
Stockbrokers, Savings and Loan Associations and Credit Unions with membership in
an approved signature guarantee Medallion Program), pursuant to S.E.C. Rule
17Ad-15.
NOTICE: The signature to this assignment must correspond with the name as
written upon the face of the Certificate, in every particular, without
alteration or enlargement, or any change whatever.
====================================================
AMERICAN BANK NOTE COMPANY
850 BLAIR MILL ROAD
HORSHAM, PA 19044
(215) 837-3480
----------------------------------------------------
SALES: J. NAPOLITANO: 212-583-5700
----------------------------------------------------
new zip 1 KEYSTONE H83705
====================================================
====================================================
PRODUCTION COORDINATOR: MARY TARTAGLIA: 215-830-2154
PROOF OF OCTOBER 8, 1999
KEYSTONE PROPERTY TRUST
H 83705 back
----------------------------------------------------
OPERATOR: lr/mt
----------------------------------------------------
Rev 1
====================================================
<PAGE>
EXHIBIT 4-(b)
================================================================================
=============== KEYSTONE PROPERTY ==================
NUMBER TRUST PREFERRED STOCK
================================================================================
A Real Estate Investment Trust organized under the laws
of the State of Maryland.
SEE REVERSE FOR CERTAIN DEFINITIONS AND LEGENDS
- --------------------------------------------------------------------------------
THIS CERTIFIES THAT
is the owner of
- --------------------------------------------------------------------------------
PREFERRED STOCK SERIES, $.001 PAR VALUE, OF KEYSTONE PROPERTY TRUST
transferable on the books of the Trust by the holder hereof in person or by duly
authorized attorney, upon surrender of this Certificate properly endorsed. This
Certificate and the stock represented hereby are issued and shall be held
subject to all the provisions of the Declaration of Trust, as amended, and the
By-Laws of the Trust, as amended (copies of which are on file at the office of
the Transfer Agent), to all of which the holder of this Certificate by
acceptance hereof assents. This Certificate is not valid unless countersigned
and registered by the Transfer Agent and Registrar.
WITNESS the facsimile seal of the Trust and the facsimile signatures of
its duly authorized officers.
STOCK CERTIFICATE
Dated:
KEYSTONE PROPERTY TRUST
(SEAL)
1999
Maryland
/s/ [ILLEGIBLE] /s/ [ILLEGIBLE]
<PAGE>
Executive Vice President and Secretary President and Chief Executive Officer
<PAGE>
The securities represented hereby have not been registered under the
United States Securities Act of 1933, as amended (the "Securities Act"), or
registered or qualified under the securities law of any state and may not be
sold, transferred, assigned, pledged, or hypothecated (1) absent an effective
registration thereof under such act, (2) absent an opinion of counsel, which
opinion is reasonably satisfactory in form and substance to the company and its
counsel, to the effect that such registration is not required under said act or
such states or that such transaction complies with the rules promulgated by the
Securities and Exchange Commission under said act or such states or, (3) except
in a transaction in compliance with Rule 144 under the Securities Act.
The shares represented by this certificate are subject to restrictions
on Beneficial and Constructive Ownership and Transfer for the purpose of the
Company's maintenance of its status as 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
Charter, (i) no Person may Beneficially or Constructively Own Common Stock of
the Company in excess of 4.9% (in value or number of shares, whichever is more
restrictive) of the outstanding shares of Common Stock unless such Person is an
Excepted Holder (in which case the Excepted Holder's Limit shall be applicable);
(ii) with respect to any class or series of Preferred Stock, no Person may
Beneficially or Constructively Own more that 9.9% (in value or number of shares,
whichever is more restrictive) of the outstanding shares of such class or series
of Preferred Stock of the Company, 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 Shares that would result in the Company being
"closely held" under Section 856(h) of the Code or otherwise cause the Company
to fail to qualify as a REIT; and (iv) no Person may Transfer Shares if such
Transfer would result in Shares of the Company being owned by fewer than 100
Persons Any Person who Beneficially or Constructively Owns or attempts to
Beneficially or Constructively Own Shares which cause or will cause a Person to
Beneficially or Constructively Own 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 Shares represented hereby will be
automatically transferred to a Charitable Trustee of a Charitable Trust for the
benefit of one or more Charitable Beneficiaries. In addition, upon the
occurrence of certain vents, attempted Transfers in violation of the
restrictions described above may be void AB INITIO. A Person who attempts to
Beneficially or Constructively Own Shares in violation of the ownership
limitations described above shall have no claim, cause of action, or any
recourse whatsoever against a transferor of such Shares. All capitalized terms
in this legend have the meanings defined in the Company's Charter, 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 holders of Shares of the
Company on request and without charge.
The Corporation will furnish to any shareholder upon request and
without charge a statement of the designations, preferences, limitations and
relative rights of the shares of each class or series authorized to be issued,
so far s they have been determined, and the authority of the board to determine
the relative rights and preferences of subsequent classes or series. Such
requests may be made tot he Secretary of the Corporation.
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
______________________________________
______________________________________
<PAGE>
Please print or typewrite name and address including postal zip code of assignee
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Preferred Stock represented by the within Certificate, and do hereby irrevocably
constitute and appoint
________________________________________________________________________________
________________________________________________________________________________
Attorney to transfer the said shares on the books of the within-named Trust with
full power of substitution in the premises.
Dated _________________________
__________________________________
Signature
<PAGE>
EXHIBIT 10-(a)
The Amended and Restated Agreement of Limited Partnership of
American Real Estate Investment, L.P., dated as of December 12, 1997, as
amended, by and among American Real Estate Investment Corporation, a Maryland
corporation, as general partner, and the Persons whose names are set forth on
EXHIBIT A attached thereto and any other Persons who may have become partners in
such partnership as provided therein, as limited partners, is hereby amended and
restated in its entirety as of October 13, 1999 to reflect (i) the change of the
name of the Partnership from "American Real Estate Investment, L.P." to
"Keystone Operating Partnership, L.P.", (ii) the admission of Keystone Property
Trust, a Maryland statutory real estate investment trust (the "COMPANY"),
successor to all of the General Partner Interest originally held by American
Real Estate Investment Corporation pursuant to Section 9.2 hereof, as the
successor General Partner and (iii) certain other changes that do not adversely
affect the limited partners in any material respect.
ARTICLE I
DEFINED TERMS
Except as otherwise herein expressly provided, the following
terms and phrases shall have the meanings set forth below:
"ACCOUNTANTS" shall mean the firm or firms of independent
certified public accountants selected by the General Partner on behalf of the
Partnership to audit the books and records of the Partnership and to prepare
statements and reports in connection therewith.
"ACT" shall mean the Revised Uniform Limited Partnership Act
as enacted in the State of Delaware, and as the same may hereafter be amended
from time to time.
"ADDITIONAL PARTNERSHIP INTERESTS" shall have the meaning set
forth in Section 4.2(a) hereof.
"ADDITIONAL LIMITED PARTNER" shall have the meaning set forth
in Section 4.2(b) hereof.
"ADJUSTED CAPITAL ACCOUNT DEFICIT" shall mean, with respect to
any Partner, the deficit balance, if any, in such Partner's Capital Account as
of the end of the relevant Partnership Fiscal Year, after giving effect to the
following adjustments:
(i) Credit to such Capital Account any amounts which
such Partner is obligated to restore pursuant to this Agreement or is deemed to
be obligated to restore to the Partnership pursuant to the second to last
sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5).
(ii) Debit to such Capital Account the items
described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6).
1
<PAGE>
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with Regulation Section 1.704-1(b)(2)(ii)(d) and shall be interpreted
consistently therewith.
"ADJUSTED CURRENT PER SHARE MARKET PRICE" shall mean the
Current Per Share Market Price multiplied by the Conversion Factor.
"ADJUSTMENT DATE" shall have the meaning set forth in Section
4.2(b) hereof.
"AFFILIATE" shall mean, with respect to any Partner (or as to
any other person the affiliates of whom are relevant for purposes of any of the
provisions of this Agreement), (i) any member of the Immediate Family of such
Partner; (ii) any trustee or beneficiary of a Partner; (iii) any legal
representative, successor, or assignee of any Person referred to in the
preceding clauses (i) and (ii); (iv) any trustee or trust for the benefit of any
Person referred to in the preceding clauses (i) through (iii); or (v) any Entity
which directly or indirectly through one or more intermediaries, Controls, is
Controlled by, or is under common Control with, any Person referred to in the
preceding clauses (i) through (iv).
"AFFILIATE FINANCING" shall mean financing or refinancing
obtained from a Partner or an Affiliate of a Partner by the Partnership.
"AGREEMENT" shall mean this Agreement of Limited Partnership,
as originally executed and as amended, modified, supplemented or restated from
time to time, as the context requires.
"ASSIGNEE" shall mean a Person to whom one or more Partnership
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 9.5.
"BANKRUPTCY" shall mean, with respect to any Partner, (i) the
commencement by such Partner of any proceeding seeking relief under any
provision or chapter of the federal Bankruptcy Code or any other federal or
state law relating to insolvency, bankruptcy or reorganization; (ii) an
adjudication that such Partner is insolvent or bankrupt; (iii) the entry of an
order for relief under the federal Bankruptcy Code with respect to such Partner;
(iv) the filing of any such petition or the commencement of any such case or
proceeding against such Partner, unless such petition and the case or proceeding
initiated thereby are dismissed within one hundred twenty (120) days from the
date of such filing; (v) the filing of an answer by such Partner admitting the
allegations of any such petition; (vi) the appointment of a trustee, receiver or
custodian for all or substantially all of the assets of such Partner unless such
appointment is vacated or dismissed within ninety (90) days from the date of
such appointment but not less than five (5) days before the proposed sale of any
assets of such Partner; (vii) the insolvency of such Partner or the execution by
such Partner of a general assignment for the benefit of creditors; (viii) the
failure of such Partner to pay its debts as they mature; (ix) the levy,
attachment, execution or other seizure of substantially all of the assets of
such Partner where such seizure is not discharged within thirty (30) days
thereafter, or (x) the admission by such Partner in writing of its inability to
pay its debts as they mature or that it is generally not paying its debts as
they become due.
2
<PAGE>
"CAPITAL ACCOUNT" shall mean a book account established and
maintained for each Partner in accordance with the following provisions:
(i) To each Partner's Capital Account there shall be
credited such Partner's Capital Contributions, such Partner's
distributive share of Profits and any items in the nature of
income or gain which are allocated to such Partner pursuant to
Section 5.2, and the amount of any Partnership liabilities that
are assumed by such Partner or that are secured by any Partnership
property distributed to such Partner.
(ii) To each Partner's Capital Account there shall be
debited the amount of cash and the Gross Asset Value of any
Partnership asset distributed to such Partner pursuant to any
provision of this Agreement (except for distributions made in
repayment of loans made by such Partner to the Partnership), such
Partner's distributive share of Losses and any items in the nature
of expenses or losses which are allocated to such Partner pursuant
to Section 5.2, and the amount of any liabilities of such Partner
that are assumed by the Partnership or which are secured by any
property contributed to the Partnership by such Partner (except to
the extent already reflected in the amount of the Partner's
Capital Contributions).
In the event that the Gross Asset Value of Partnership assets
are adjusted pursuant to paragraph (ii), (iii) or (iv) of the definition of
Gross Asset Value, the Capital Accounts of the Partners shall be adjusted to
reflect the aggregate net adjustments as if the Partnership sold all of its
assets for their fair market values, and recognized gain or loss for federal
income tax purposes equal to the aggregate amount of such net adjustment.
The foregoing provisions and the other provisions of this
Agreement relating to the maintenance of Capital Accounts are intended to comply
with Code Section 704(b) and the Regulations thereunder, and shall be
interpreted and applied in a manner consistent with such Regulations. In the
event the General Partner determines that it is prudent to modify the manner in
which the Capital Accounts, or any debits or credits thereto, are computed in
order to comply with such Regulations, the General Partner may make such
modification, PROVIDED THAT it is not likely to have a material effect on the
amounts distributable to any Partner pursuant to Section 8.2 upon the
liquidation of the Partnership. Any questions with respect to a Partner's
Capital Account shall be resolved by the General Partner in its reasonable
discretion, applying principles consistent with this Agreement.
Any transferee of a Partnership Interest or a portion thereof
shall succeed to the Capital Account relating to the Partnership Interest
transferred or the corresponding portion thereof.
"CAPITAL CONTRIBUTIONS" shall mean, with respect to any
Partner, the amount of cash and the initial Gross Asset Value of any other
property contributed to the capital of the Partnership by or on behalf of such
Partner reduced by the amount of any liability assumed by the Partnership
relating to such property and any liability to which such property is subject.
3
<PAGE>
"CERTIFICATE" shall mean the Certificate of Limited
Partnership establishing the Partnership, as filed with the office of the
Delaware Secretary of State, as it may be amended from time to time in
accordance with the terms of this Agreement and the Act.
"CHARTER" shall mean the Company's Articles of Incorporation,
as amended from time to time.
"CLOSING DATE" shall mean December 12, 1997.
"CLOSING PRICE" on any date shall mean (A) the last reported
sale price of the Shares on the principal stock exchange on which the Shares are
listed, or (B) if the Shares are not listed on a stock exchange, the last
reported sale price of the Shares on the principal automated securities price
quotation system on which sale prices of the Shares are reported, or (C) if the
Shares are not listed on a stock exchange and sale prices of the Shares are not
reported on an automated quotation system, the mean of the high bid and low
asked price quotations for the Shares as reported by National Quotation Bureau
Incorporated if at least two securities dealers have inserted both bid and asked
quotations for the Shares on at least five of the ten preceding Trading Days. If
the Shares are not traded or quoted as described in any of clause (A), (B) or
(C), the Closing Price of the Shares on a day will be the fair market value of
the Shares on that day as determined by a member firm of the New York Stock
Exchange, Inc. selected by the Board of Directors of the General Partner. In the
event that the Shares received upon exercise of the Conversion Rights include
rights that a holder of Shares 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.
"CODE" shall mean the Internal Revenue Code of 1986, as
amended.
"CONSENT OF THE LIMITED PARTNERS" shall mean the written
consent of a Majority-In-Interest of the Limited Partners, which consent shall
be obtained prior to the taking of any action for which it is required by this
Agreement and may be given or withheld by a Majority-In-Interest of the Limited
Partners, unless otherwise expressly provided herein, in their sole and absolute
discretion.
"CONSENTING PARTNERS" shall have the meaning set forth in
Section 8.1(a) hereof.
"CONTRIBUTED FUNDS" shall have the meaning set forth in
Section 4.2(b) hereof.
"CONTRIBUTED LIMITED PARTNER ASSETS" shall mean properties or
interests in entities owning such properties, interests in certain property
management and related assets, or cash, contributed by the Limited Partners.
"CONTRIBUTION DATE" shall have the meaning set forth in
Section 4.2(b) hereof.
"CONTROL" shall mean the ability, whether by the direct or
indirect ownership of shares or other equity interests, by contract or
otherwise, to elect a majority of the directors of a corporation, to select the
managing partner of a partnership, or otherwise to select, or have the power to
remove and then select, a majority of those persons exercising governing
authority over an Entity. In the case of a limited partnership, the sole general
partner, all of the general partners
4
<PAGE>
to the extent each has equal management control and authority, or the managing
general partner or managing general partners thereof shall be deemed to have
control of such partnership and, in the case of a trust, any trustee thereof or
any Person having the right to select any such trustee shall be deemed to have
control of such trust.
"CONVERSION FACTOR" means 1.0; PROVIDED THAT, in the event
that the General Partner (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 its outstanding Shares, or (iii) combines its
outstanding Shares into a smaller number of Shares, the Conversion Factor shall
be adjusted by multiplying the Conversion Factor then in effect 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 Conversion Factor shall become effective
immediately after the effective date of such event retroactive to the record
date, if any, for such event; PROVIDED, HOWEVER, that if the General Partner
receives an Exercise Notice after the record date, but prior to the effective
date of such dividend, distribution, subdivision or combination, the Conversion
Factor shall be determined as if the General Partner has received the Exercise
Notice immediately prior to the record date for such dividend, distribution,
subdivision or combination.
"CONVERSION RIGHT" shall have the meaning set forth in Section
12.1 hereof.
"CURRENT PER SHARE MARKET PRICE" on any date shall mean the
average of the Closing Price for the ten (10) consecutive Trading Days ending on
such date.
"DEPRECIATION" shall mean for each Partnership Fiscal Year or
other period, an amount equal to the depreciation, amortization, or other cost
recovery deduction allowable under the Code with respect to an asset for such
year or other period, except that if the Gross Asset Value of an asset differs
from its adjusted basis for federal income tax purposes at the beginning of such
year or other period, Depreciation shall be an amount which bears the same ratio
to such beginning Gross Asset Value as the federal income tax depreciation,
amortization, or other cost recovery deduction for such year or other period
bears to such beginning adjusted tax basis; PROVIDED, HOWEVER, that if the
federal income tax depreciation, amortization, or other cost recovery deduction
for such year is zero, Depreciation shall be determined with reference to such
beginning Gross Asset Value using any reasonable method selected by the General
Partner.
"DESIGNATED PROPERTIES" shall mean those properties known as
1655 Valley Road, 5 Thornton Road and Urban Farms Shopping Center.
"ENTITY" shall mean any general partnership, limited
partnership, limited liability company, corporation, joint venture, trust,
business trust, cooperative or association.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time (or any corresponding provisions of
succeeding laws).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
5
<PAGE>
"EXERCISE NOTICE" shall have the meaning set forth in Section
12.2 hereof.
"EXERCISING PARTNERS" shall have the meaning set forth in
Section 12.2 hereof.
"GAAP" shall mean generally accepted accounting principles
consistently applied.
"GENERAL PARTNER" shall mean Keystone Property Trust, a
Maryland statutory real estate investment trust, its duly admitted successors
and assigns and any other Person who is a general partner of the Partnership at
the time of reference thereto.
"GENERAL PARTNER CAPITAL CONTRIBUTION" shall have the meaning
set forth in Section 4.1 hereof.
"GENERAL PARTNER INTEREST" shall mean a Partnership Interest
held by the General Partner. A General Partner Interest shall be expressed as a
number of Partnership Units, with such Partnership Units being designated as
either OP Units or Preferred Units.
"GROSS ASSET VALUE" shall mean, with respect to any asset, the
asset's adjusted basis for federal income tax purposes, except as follows:
(i) The initial Gross Asset Value of any asset contributed
by a Partner to the Partnership shall be (a) in the case of any
asset described on attached EXHIBIT A, the gross fair market value
ascribed thereto on such EXHIBIT A and (b) in the case of any
other asset hereafter contributed by a Partner, the gross fair
market value of such asset at the time of contribution, as
reasonably determined by the General Partner;
(ii) The Gross Asset Values of all Partnership assets shall
be adjusted to equal their respective gross fair market values, as
reasonably determined by the General Partner, as of the following
times: (a) the acquisition of an additional interest in the
Partnership by any new or existing Partner in exchange for more
than a DE MINIMIS Capital Contribution; (b) the distribution by
the Partnership to a Partner of more than a DE MINIMIS amount of
property as consideration for an interest in the Partnership; and
(c) the liquidation of the Partnership within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g);
(iii) The Gross Asset Value of any Partnership Asset
distributed to any Partner shall be the gross fair market value of
such asset on the date of distribution; and
(iv) 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 Code Section 734(b) or
Code Section 743(b), but only to the extent that such adjustments
are taken into account in determining Capital Accounts pursuant to
Regulations Section 1.704-1(b)(2)(iv)(m).
If the Gross Asset Value of an asset has been determined or adjusted pursuant to
this provision, such Gross Asset Value shall thereafter be adjusted by the
Depreciation taken into account with
6
<PAGE>
respect to such asset for purposes of computing Profits and Losses. Any
adjustment to the Gross Asset Values of Partnership Assets shall require an
adjustment to the Partner's Capital Account as provided in the definition of
Capital Account.
"HART-SCOTT ACT" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"IMMEDIATE FAMILY" shall mean, with respect to any Person,
such Person's spouse, parents, parents-in-law, descendants by blood or adoption,
nephews, nieces, brothers, sisters, brothers-in-law, sisters-in-law and
children-in-law.
"INCAPACITY" or "INCAPACITATED" shall mean, (i) as to any
individual Partner, death, total physical disability or entry by a court of
competent jurisdiction adjudicating him or her incompetent to manage his or her
Person or estate; (ii) as to any corporation which is a Partner, the filing of a
certificate or articles 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.
"INCENTIVE OPTION" shall mean an option to purchase Shares
granted under the Stock Incentive Plan.
"INCENTIVE OPTION AGREEMENT" shall mean the form or forms of
Incentive Option Agreement to be used under the Stock Incentive Plan.
"INDEMNITEE" shall mean (i) any Person made a party to a
proceeding by reason of his status as (a) a General Partner, (b) a director or
officer of a General Partner, or (c) an officer of the Partnership, 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
discretion.
"LIEN" shall mean any liens, security interests, mortgages,
deeds of trust, charges, claims, encumbrances, restrictions, pledges, options,
rights of first offer or first refusal and any other rights or interests of
others of any kind or nature, actual or contingent, or other similar
encumbrances of any nature whatsoever.
"LIMITED PARTNER" shall mean any Person listed under the
heading "Limited Partners" on the signature page hereto who have executed (in
person or pursuant to power of attorney) this Agreement in their respective
capacities as limited partners of the Partnership, their permitted successors or
assigns as a limited partner hereof, or any Person who, at the time of reference
thereto, is a limited partner of the Partnership.
"LIMITED PARTNER INTEREST" shall mean 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
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with the terms and provisions of this Agreement. A Limited Partner Interest
shall be expressed as a number of Partnership Units, with such Partnership Units
being designated as either OP Units or Preferred Units.
"LIQUIDATING TRUSTEE" shall mean such individual or Entity as
is selected as the Liquidating Trustee hereunder by the General Partner, which
individual or Entity may include the General Partner or an Affiliate of the
General Partner, PROVIDED such Liquidating Trustee agrees in writing to be bound
by the terms of this Agreement. The Liquidating Trustee shall be empowered to
give and receive notices, reports and payments in connection with the
dissolution, liquidation and/or winding-up of the Partnership and shall hold and
exercise such other rights and powers as are necessary or required to permit all
parties to deal with the Liquidating Trustee in connection with the dissolution,
liquidation and/or winding-up of the Partnership.
"MAJOR DECISIONS" shall have the meaning set forth in Section
7.2 hereof.
"MAJORITY-IN-INTEREST OF THE LIMITED PARTNERS" shall mean
Limited Partner(s) who hold in the aggregate more than fifty percent (50%) of
the OP Units then allocable to and held by the Limited Partners, as a class.
"NASD" means the National Association of Securities Dealers,
Inc.
"NET FINANCING PROCEEDS" shall mean the cash proceeds received
by the Partnership in connection with any borrowing by or on behalf of the
Partnership (whether or not secured), after deduction of all costs and expenses
incurred by the Partnership in connection with such borrowing, and after
deduction of that portion of such proceeds used to repay any other indebtedness
of the Partnership, or any interest or premium thereon.
"NET OPERATING CASH FLOW" shall mean, with respect to any
fiscal period of the Partnership, the excess, if any, of "Receipts" over
"Expenditures". For purposes hereof, the term "Receipts" means the sum of all
cash receipts of the Partnership from all sources for such period, including Net
Sale Proceeds and Net Financing Proceeds but excluding Capital Contributions,
and any amounts held as reserves as of the last day of such period which the
General Partner reasonably deems to be in excess of necessary reserves as
determined below. The term "Expenditures" means the sum of (i) all cash expenses
of the Partnership for such period; (ii) the amount of all payments of principal
and interest on account of any indebtedness of the Partnership, or amounts due
on such indebtedness during such period; and (iii) such additional cash reserves
as of the last day of such period as the General Partner deems necessary for any
capital or operating expenditure permitted hereunder.
"NET SALE PROCEEDS" shall mean the cash proceeds received by
the Partnership in connection with a sale of any asset by or on behalf of the
Partnership after deduction of any costs or expenses incurred by the
Partnership, or payable specifically out of the proceeds of such sale
(including, without limitation, any repayment of any indebtedness required to be
repaid as a result of such sale or which the General Partner elects to repay out
of the proceeds of such sale, together with accrued interest and premium, if
any, thereon and any sales commissions or other costs and expenses due and
payable to any Person in connection with a sale).
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"NONRECOURSE DEDUCTIONS" shall have the meaning set forth in
Regulations Section 1.704-2(b)(1). The amount of Nonrecourse Deductions for a
Partnership Fiscal Year equals the net increase, if any, in the amount of
Partnership Minimum Gain during such Partnership Fiscal Year reduced by any
distributions during such Partnership Fiscal Year of proceeds of a Nonrecourse
Liability that are allocable to an increase in Partnership Minimum Gain,
determined according to the provisions of Regulations Sections 1.704-2(c) and
1.704-2(h).
"NONRECOURSE LIABILITY" shall have the meaning set forth in
Regulations Section 1.704-2(b)(3).
"OP UNITS" shall have the meaning set forth in Section 4.1.
"OFFERED UNITS" shall have the meaning set forth in
Section 12.2.
"ORIGINAL PROPERTIES" means the Americana Lakewood apartments,
the Emerald Pointe apartments, the Sedona apartments and the Quadrangles Village
apartments (or any property the federal income tax basis of which is determined
in whole or in part by reference to the basis of the foregoing).
"OWNERSHIP LIMIT" shall have the meaning set forth in Section
12.4 hereof.
"PARTNERS" shall mean the General Partner and the Limited
Partners, their duly admitted successors or assigns or any Person who is a
partner of the Partnership at the time of reference thereto.
"PARTNER MINIMUM GAIN" shall mean 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" shall have the meaning set forth in
Regulations Section 1.704-2(b)(4).
"PARTNER NONRECOURSE DEDUCTIONS" shall have the meaning set
forth in Regulations Section 1.704-2(i)(2). The amount of Partner Nonrecourse
Deductions with respect to a Partner Nonrecourse Debt for a Partnership Fiscal
Year equals the net increase, if any, in the amount of Partner Minimum Gain
during such Partnership Fiscal Year attributable to such Partner Nonrecourse
Debt, reduced by any distributions during that Partnership Fiscal Year to the
Partner that bears the economic risk of loss for such Partner Nonrecourse Debt
to the extent that such distributions are from the proceeds of such Partner
Nonrecourse Debt and are allocable to an increase in Partner Minimum Gain
attributable to such Partner Nonrecourse Debt, determined according to the
provisions of Regulations Sections 1.704-2(h) and 1.704-2(i).
"PARTNERSHIP" shall mean the limited partnership hereby
constituted, as such limited partnership may from time to time be constituted.
"PARTNERSHIP FISCAL YEAR" shall mean the calendar year.
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"PARTNERSHIP INTEREST" shall mean with respect to a Partner,
such Partner's right to the allocations (and each item thereof) specified in
Article V hereof and all distributions from the Partnership, and its rights of
management, consent, approval or participation, if any, as provided in this
Agreement.
"PARTNERSHIP MINIMUM GAIN" shall have the meaning set forth in
Regulations Section 1.704-2(d).
"PARTNERSHIP UNIT" means a fractional, undivided share of
Partnership Interests of all Partners issued pursuant to Sections 4.1 and 4.2,
with such Partnership Units being designated as either OP Units or Preferred
Units.
"PARTNERSHIP UNIT DESIGNATION" shall have the meaning set
forth in Section 4.2.
"PERCENTAGE INTEREST" shall mean, with respect to any Partner
holding a class or series of Partnership Interests, its interest in such class
or series, determined by dividing the number of Partnership Units of such class
or series owned by such Partner by the total number of Partnership Units of such
class or series then outstanding.
"PERSON" shall mean any individual or Entity.
"PLEDGE shall mean a pledge or grant of a mortgage, security
interest, lien or other encumbrance in respect of a Partnership Interest.
"PREFERRED UNIT" shall mean a Partnership Unit, which may be
issued in one or more series or classes, having such rights, powers, duties and
preferences as may be determined by the General Partner in its sole and absolute
discretion (but not in violation of the provisions of Section 4.2 or the terms
of any other Preferred Units).
"PRIOR AGREEMENT" shall mean the Agreement of Limited
Partnership of the Partnership, dated as of November 10, 1993, and amended as of
June 30, 1997 and August 11, 1997, between the Company, as the sole general
partner, and the limited partners listed on the signature page thereto, which
Prior Agreement is amended and restated in its entirety by this Agreement as of
the Closing Date.
"PROFITS" and "LOSSES" shall mean, for each Partnership Fiscal
Year or other period, an amount equal to the Partnership's taxable income or
loss for such Partnership Fiscal Year or period, determined in accordance with
Code Section 703(a) (for this purpose, all items of income, gain, loss, or
deduction required to be stated separately pursuant to Code Section 703(a)(1)
shall be included in taxable income or loss), with the following adjustments:
(i) Any income of the Partnership that is exempt from
federal income tax or excluded from federal gross income and not
otherwise taken into account in computing Profits or Losses
pursuant to this Section shall be added to such taxable income or
loss;
(ii) Any expenditures of the Partnership described in Code
Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B)
expenditures pursuant to Regulations
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Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account
in computing Profits or Losses pursuant to this Section, shall be
subtracted from such taxable income or loss;
(iii) In the event the Gross Asset Value of any Partnership
Asset is adjusted pursuant to any provision of this Agreement in
accordance with the definition of Gross Asset Value, the amount of
such adjustment shall be taken into account as gain or loss from
the disposition of such Asset for purposes of computing Profits or
Losses;
(iv) Gain or loss resulting from any disposition of any
Partnership Asset with respect to which gain or loss is recognized
for federal income tax purposes shall be computed by reference to
the Gross Asset Value of the property disposed of, notwithstanding
that the adjusted tax basis of such Asset differs from its Gross
Asset Value;
(v) In lieu of the depreciation, amortization, and other
cost recovery deductions taken into account in computing such
taxable income or loss, there shall be taken into account
Depreciation for such Partnership Fiscal Year or other period,
computed in accordance with the definition of Depreciation; and
(vi) Notwithstanding any other provision of this Section,
any items which are allocated pursuant to Section 5.2 shall not be
taken into account in computing Profits or Losses.
"PROPERTY" shall mean any real estate in which the
Partnership, directly or indirectly, acquires ownership of a fee or leasehold
interest.
"PROSPECTUS" means a prospectus included in the Shelf
Registration Statement, including any preliminary prospectus, and any such
prospectus as amended or supplemented by any prospectus supplement with respect
to the terms of the offering of any portion of the Registrable Securities
covered by the Shelf Registration Statement, and by all other amendments and
supplements to such prospectus, including post-effective amendments, and in each
case including all material incorporated by reference therein.
"PURCHASE PRICE" shall have the meaning set forth in Section
12.2.
"REGISTRABLE SECURITIES" means Shares issued or issuable to
Limited Partners upon exchange of their OP Units, excluding (i) Shares for which
the Shelf Registration Statement shall have become effective under the
Securities Act and which have been disposed of under the Shelf Registration
Statement, and (ii) Shares sold or otherwise distributed pursuant to Rule 144
under the Securities Act.
"REGISTRATION EXPENSES" means any and all expenses incident to
performance of or compliance with Article XV of this Agreement, including,
without limitation: (i) all SEC, stock exchange or NASD registration and filing
fees, (ii) all fees and expenses incurred in connection with compliance with
state securities or blue sky laws (including reasonable fees and disbursements
of counsel in connection with blue sky qualification of any of the Registrable
Securities and the preparation of a Blue Sky Memorandum, if necessary) and
compliance with the rules of the NASD, (iii) all expenses of any Persons in
preparing or assisting in preparing,
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word processing, printing and distributing the Shelf Registration Statement, any
Prospectus, certificates and other documents relating to the performance of and
compliance with Article XV of this Agreement, (iv) all fees and expenses
incurred in connection with the listing, if any, of any of the Registrable
Securities on any securities exchange or exchanges pursuant to Section 3(k)
hereof, and (v) the fees and disbursements of counsel for the Company and of the
independent public accountants of the Company, including the expenses of any
special audits or "cold comfort" letters, if any, required by or incident to
such performance and compliance. Registration Expenses shall specifically
exclude underwriting discounts and commissions, brokerage or dealer fees, the
fees and disbursements of counsel, accountants or other representatives of a
selling Limited Partner, and transfer taxes, if any, relating to the sale or
disposition of Registrable Securities by a selling Limited Partner, all of which
shall be borne by such Limited Partner in all cases.
"REGISTRATION RIGHTS AGREEMENT" shall mean the Registration
Agreement dated November 10, 1993 by and between the Company and the
Partnership, relating to the registration of Shares issued upon exercise of the
Conversion Rights granted herein.
"REGULATIONS" shall mean the Income Tax Regulations
promulgated under the Code as such regulations may be amended from time to time
(including Temporary Regulations).
"REIT" shall mean a real estate investment trust as defined in
Section 856 of the Code.
"REQUIRED FUNDS" shall have the meaning set forth in Section
4.2 hereof.
"RIGHTS" shall have the meaning set forth in Section 12.1
hereof.
"SALE PERIOD" shall mean the 45-day period immediately
following the filing with the SEC by the Company of an annual report of the
Company on Form 10-K or a quarterly report of the Company on Form 10-Q or such
other period as the Company may determine.
"SEC" shall mean the United States Securities and Exchange
Commission.
"SECTION 1031 EXCHANGE" means, with respect to any property,
the exchange of such property for property of like kind in a transaction
qualifying under Section 1031 of the Code in which not more than 10% of the
built-in gain associated with such property is required to be recognized by the
partners of the Operating Partnership for federal income tax purposes.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
"SHARES" shall mean the shares of Common Stock, par value
$.001 per share, of the Company.
"SHARE VALUE" as of any date shall mean the total number of
Shares issued and outstanding at the close of business on such date (and
excluding any treasury shares) multiplied by the Current Per Share Market Price
on such date.
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"SHELF REGISTRATION STATEMENT" shall mean a "shelf"
registration statement of the Company and any other entity required to be a
registrant with respect to such shelf registration statement pursuant to the
requirements of the Securities Act which covers all of the Registrable
Securities on an appropriate form under Rule 415 under the Securities Act, or
any similar rule that may be adopted by the SEC, and all amendments and
supplements to such registration statement, including post-effective amendments,
in each case including the Prospectus contained therein, all exhibits thereto
and all materials incorporated by reference therein.
"SPECIAL CONSENTING PARTNERS" means, initially, McBride Hudson
Bay, L.P., until McBride Hudson Bay, L.P. notifies the Partnership of its
successors to the rights of the Special Consenting Partners under this
Agreement.
"STOCK INCENTIVE PLAN" shall mean the General Partner's 1993
Omnibus Incentive Plan, and any other stock incentive plan adopted in the future
by the General Partner.
"SUBSTITUTED LIMITED PARTNER" shall have the meaning set forth
in Section 9.4 hereof.
"THIRD PARTY" or "THIRD PARTIES" shall mean a Person or
Persons who is or are neither a Partner or Partners nor an Affiliate or
Affiliates of a Partner or Partners.
"THIRD PARTY FINANCING" shall mean financing or refinancing
obtained from a Third Party by the Partnership.
"TRADING DAY" shall mean (x) if the Shares are listed on at
least one stock exchange, a day on which there is trading on the principal stock
exchange on which the Shares are listed, (y) if the Shares are not listed on a
stock exchange, but sale prices of the Shares are reported on an automated
quotation system, a day on which trading is reported on the principal automated
quotation system on which sales of the Shares are reported, or (z) if the Shares
are not listed on a stock exchange and sale prices of the Shares are not
reported on an automated quotation system, a day on which quotations are
reported by National Quotation Bureau Incorporated.
"TRANSFER" shall mean any assignment, sale, transfer,
conveyance, Pledge, grant of an option or proxy, or other disposition or act of
alienation, whether voluntary or involuntary, or by operation of law.
ARTICLE II
ORGANIZATIONAL MATTERS
2.1. ORGANIZATION AND CONTINUATION. The Partnership is continued as a
limited partnership organized pursuant to the provisions of the Act and upon the
terms and conditions set forth in the Prior Agreement. The Partners hereby amend
and restate the Prior Agreement in its entirety as of the Closing Date. Except
as expressly provided herein to the contrary, the rights and obligations of the
Partners and the administration and termination of the Partnership shall
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continue to 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 Keystone 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. Subject to the condition set forth in the
second sentence of this Section 2.2, the General Partner in its sole discretion
may change the name of the Partnership at any time and from time to time and
shall notify the Limited Partners of such change in the next regular
communication by the Partnership to the Limited Partners.
2.3. REGISTERED OFFICE AND AGENT, PRINCIPAL OFFICE. The name and
address of the Partnership's registered agent is Corporation Service Company,
1013 Centre Road, Wilmington, Delaware 19805. Such registered agent may be
changed as the General Partner may from time to time designate by notice to the
Limited Partners. The principal executive office of the Partnership is located
at 200 Four Falls Corporate Center, Suite 208, West Conshohocken, Pennsylvania
19428, and may be changed to such other place as the General Partner may from
time to time designate. 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; Compliance with Act.
(a) The Limited Partners hereby irrevocably constitute and
appoint the General Partner, with full power of substitution and resubstitution,
as the Limited Partners' true and lawful attorney-in-fact with full power and
authority to act in the Limited Partners' name, place and stead to:
(1) make, execute, swear to, seal, acknowledge, deliver,
file and record in the appropriate public offices (a) all certificates,
documents and other instruments (including, without limitation, this Agreement
and the Certificate and all amendments or restatements thereof) that the General
Partner or the Liquidating Trustee deems appropriate or necessary to form,
qualify or continue the existence or qualification of the Partnership as a
limited partnership (or a partnership in which the limited partners have limited
liability to the extent provided by applicable law) in the State of Delaware and
in all other jurisdictions in which the Partnership may or plans to conduct
business or own property; (b) all instruments that the General Partner deems
appropriate or necessary to reflect any amendment or restatement of this
Agreement in accordance with its terms; (c) all conveyances and other
instruments or documents that the General Partner deems appropriate or necessary
to reflect the dissolution and liquidation 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,
Articles VIII or IX, or the Capital Contribution of any Partner; (e) any
agreements, waivers or other instruments required by any state or local tax
authority to enable the Partnership to file combined, consolidated or similar
state or local income tax returns and/or to pay state and
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local taxes on behalf of the Partnership or all of the Partners; (f) all
documents and other instruments relating to the determination of the rights,
preferences and privileges of Partnership Interests; and (g) the Registration
Rights Agreement and all amendments to such agreement approved in accordance
with its respective terms; and
(2) execute, swear to, seal, acknowledge and file all
ballots, consents, approvals, waivers, certificates and other instruments
appropriate or necessary, in the sole discretion of the General Partner, 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, to effectuate the terms or intent of
this Agreement.
(b) The foregoing power of attorney is irrevocable and coupled
with an interest, in recognition of the fact that each of the Partners will be
relying upon the power of the General Partner 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 Partnership Interest 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, 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, taken in good faith under such power of attorney.
Each Limited Partner or Assignee shall execute and deliver to the General
Partner or the Liquidating Trustee, within fifteen (15) days after receipt of
the General Partner's or Liquidating Trustee's request therefor, such further
designation, powers of attorney and other instruments as the General Partner or
the Liquidating Trustee, as the case may be, deems necessary to effectuate this
power of attorney.
2.5. TERM. The term of the Partnership commenced on the date the
Certificate was filed in the office of the Delaware Secretary of State in
accordance with the Act and shall continue until dissolved and terminated
pursuant to the provisions of Article VIII or as otherwise provided by law.
2.6. FILING OF CERTIFICATE AND PERFECTION OF LIMITED PARTNERSHIP. The
General Partner shall execute, acknowledge, record and file at the expense of
the Partnership, the Certificate and any and all amendments thereto and all
requisite fictitious name statements and notices in such places and
jurisdictions as may be necessary to cause the Partnership to be treated as a
limited partnership under, and otherwise to comply with, the laws of each state
or other jurisdiction in which the Partnership conducts business.
2.7. CERTIFICATES DESCRIBING PARTNERSHIP UNITS. At the request of a
Limited Partner, the General Partner, at its option, may issue a certificate
summarizing the terms of such Limited Partner's interest in the Partnership,
including the number of Partnership Units owned and the Percentage Interest
represented by such Partnership Units as of the date of such certificate. Any
such certificate (i) shall be in form and substance as approved by the General
Partner; (ii) shall not be negotiable and (iii) shall bear a legend to the
following effect:
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This certificate is not negotiable. The Partnership Units
represented by this certificate are governed by and transferable
only in accordance with the provisions of the Amended and Restated
Agreement of Limited Partnership of Keystone Operating
Partnership, L.P., as amended and restated.
ARTICLE III
PURPOSE
3.1. PURPOSE AND BUSINESS. The purpose and nature of the business to be
conducted by the Partnership is as follows: (i) to conduct any business that may
be lawfully conducted by a limited partnership organized pursuant to the Act,
including, without limitation, investing in (either directly or through the
acquisition of interest in partnerships or other entities), purchasing (either
directly or through the acquisition of interest in partnerships or other
entities), developing, owning, managing, leasing and disposing of real estate
and any improvements thereon, entering into any partnership, joint venture, or
similar arrangement to engage in any of the foregoing, or to own interests in
any entity engaged in any of the foregoing, as well as any other activity as the
General Partner may from time to time approve, and to do anything necessary or
appropriate to accomplish the foregoing; PROVIDED THAT, such business shall be
limited to and conducted in such a manner as to permit the General Partner at
all times to be classified as a REIT, unless the General Partner ceases to
qualify as a REIT for reasons other than the conduct of the business of the
Partnership; (ii) to enter into any partnership, joint venture or other similar
arrangement to engage in any of the foregoing or to own interests in any entity
engaged in any of the foregoing; and (iii) to do anything necessary or
incidental to the foregoing. In connection with the foregoing, the Partners
acknowledge that the General Partner's status as a REIT inures to the benefit of
all the Partners and not solely the General Partner.
3.2. POWERS. The Partnership shall be empowered to do any and all acts
and things necessary, appropriate, proper, advisable, incidental to or
convenient for the furtherance and accomplishment of the purposes and business
described herein and for the protection and benefit of the Partnership; PROVIDED
THAT, the Partnership shall not take, or refrain from taking, any action which,
in the judgment of the General Partner, in its sole discretion, (i) could
adversely affect the ability of the General Partner to continue to qualify as a
REIT, unless the General Partner determines to terminate its qualification as a
REIT; (ii) could subject the General Partner to any additional taxes under Code
Section 857 or 4981, or (iii) could violate any law or regulation of any
governmental body or agency having jurisdiction over the General Partner or its
securities, unless such action (or inaction) shall have been specifically
consented to by the General Partner in writing.
ARTICLE IV
CAPITAL CONTRIBUTIONS
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4.1. CAPITAL CONTRIBUTIONS OF THE PARTNERS. The General Partner has
contributed to the capital of the Partnership the amount set forth on EXHIBIT A
(the "General Partner Capital Contribution"). Each Limited Partner has
contributed or has caused to be contributed as its initial Capital Contribution
to the capital of the Partnership, the Contributed Limited Partner Assets, with
the values as set forth opposite their names on attached EXHIBIT A. The
agreed-to gross fair market value of each of the Contributed Limited Partner
Assets, which shall be their initial Gross Asset Value, is as set forth opposite
the contributing Limited Partner's name on attached EXHIBIT A. Each Partner
shall own Partnership Units, which shall be designated under this Agreement as
either "OP Units" or "Preferred Units," in the amount set forth for such Partner
in EXHIBIT A and shall have a Percentage Interest in such class or series of
Partnership Units as set forth for such Partner in EXHIBIT A, which Percentage
Interest shall be adjusted in EXHIBIT A from time to time by the General Partner
to the extent necessary in accordance with the terms of this Agreement to
reflect (a) exchanges of OP Units for Shares in accordance with Article XII; (b)
transfers of Partnership Units that result in the admission of a Substituted
Limited Partner; (c) withdrawals of Partners; (d) Capital Contributions or (e)
issuances of additional Partnership Units (pursuant to any merger or otherwise).
Except as otherwise provided herein, the Partners shall have no obligation to
make any additional Capital Contributions or loans to the Partnership.
4.2. ISSUANCES OF ADDITIONAL PARTNERSHIP INTERESTS; ADDITIONAL
PARTNERS.
(a) The General Partner is hereby authorized to cause the
Partnership to issue such additional Partnership Interests ("Additional
Partnership Interests") in the form of Partnership Units for any Partnership
purpose at any time or from time to time, to the Partners (including the General
Partner) or to other Persons for such consideration and on such terms and
conditions as shall be established by the General Partner in its sole and
absolute discretion, all without the approval of any Limited Partner. Any
Additional Partnership Interests issued thereby 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, including rights, powers and duties senior to Limited
Partnership Interests, all as shall be determined by the General Partner in its
sole and absolute discretion and without the approval of any Limited Partner,
subject to Delaware law, including, without limitation, (i) the allocations of
items of Partnership income, gain, loss, deduction and credit to each such class
or series of Partnership Interests; (ii) the right of each such class or series
of Partnership Interests to share in Partnership distributions; and (iii) the
rights of each such class or series of Partnership Interests upon dissolution
and liquidation of the Partnership; provided that a written designation of
preferences setting forth the rights, powers, duties and preferences of each
class or series of Preferred Units shall be set forth as a schedule to EXHIBIT C
to this Agreement on or prior to the date of issuance of such Preferred Units
(each a "Partnership Unit Designation"); PROVIDED, HOWEVER, that no additional
Partnership Units or other Partnership Interests shall be issued to the General
Partner unless either:
(1) (A) the Additional Partnership Interests are issued in
connection with an issuance of shares of capital stock of or other interests in
the General Partner, which shares or interests have designations, preferences
and other rights, all such that the economic interests are substantially similar
to the designations, preferences and other rights of the Additional Partnership
Interests issued to the General Partner by the
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Partnership and (B) the General Partner shall make a Capital Contribution to the
Partnership in an amount equal to the proceeds raised in connection with the
issuance of such shares of capital stock of or other interests in the General
Partner, or
(2) the Additional Partnership Interests are issued to all
Partners in proportion to their respective Percentage Interests, or
(3) the General Partner makes an additional Capital
Contribution to the Partnership, other than as specified in (1) above.
If as a result of (3) above the number of OP Units held by the General Partner
would not equal the number of Shares then outstanding, the number of OP Units
outstanding shall be adjusted so that the General Partner will own its
Percentage Interest of the total OP Units outstanding by owning a number of OP
Units equal to the number of Shares then outstanding, and the number of OP Units
owned by each Limited Partner will accordingly be adjusted to equal its current
Percentage Interest.
Without limiting the foregoing, the General Partner is
expressly authorized to cause the Partnership to issue Partnership Units 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 General Partner and the
Partnership.
Anything in this Section 4.2(a) to the contrary
notwithstanding, the actions of the General Partner authorized in this Section
4.2(a) shall be subject to the approval of Limited Partners holding Preferred
Units of any series or class to the extent provided in the Partnership Unit
Designation for such series or class of Preferred Units.
(b) The General Partner may cause the Partnership to issue
additional Partnership Units to and admit as an additional Limited Partner
("Additional Limited Partner"), any Person in exchange for the Capital
Contribution by such Person of cash and/or property. In the event that the
Partnership issues Additional Partnership Units pursuant to this Section 4.2,
the number of Partnership Units issued shall be determined by dividing the U.S.
dollar amount of cash plus the agreed value of the property contributed as of
the date of contribution to the Partnership (the "CONTRIBUTION DATE") by the
Adjusted Current Per Share Market Price, computed as of the Trading Day
immediately preceding the Contribution Date.
(c) Notwithstanding anything contained herein to the contrary,
an Additional Limited Partner that acquires an Additional Partnership Interest
pursuant to this Section 4.2 shall not acquire any interest in, and may not
exercise or otherwise participate in, any Conversion Rights pursuant to Article
XII, without the Agreement of the General Partner.
4.3. ISSUANCE OF SHARES.
(a) UPON ISSUANCE OF ADDITIONAL SECURITIES. The Company shall
not issue any additional Shares (other than Shares issued in connection with an
exchange pursuant to Article XII hereof) or rights, options, warrants or
convertible or exchangeable securities containing the right to subscribe for or
purchase Shares (collectively, "Additional Securities") other than to all
holders of Shares, unless (A) the Company shall cause the Partnership to issue
to
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the Company, Partnership Interests or rights, options, warrants or convertible
or exchangeable securities of the Partnership having designations, preferences
and other rights, all such that the economic interests are substantially similar
to those of the Additional Securities, and (B) the Company contributes the
proceeds from the issuance of such Additional Securities and from any exercise
of rights contained in such Additional Securities, directly and through the
Company, to the Partnership; PROVIDED, HOWEVER, that the Company is allowed to
issue Additional Securities in connection with an acquisition of a property to
be held directly by the Company, but if and only if, such direct acquisition and
issuance of Additional Securities have been approved and determined to be in the
best interests of the Company and the Partnership by a majority of the Directors
(as defined in the Charter). Without limiting the foregoing, the Company is
expressly authorized to issue Additional Securities for less than fair market
value, and to cause the Partnership to issue to the Company corresponding
Partnership Interests, so long as (x) the Company concludes in good faith that
such issuance is in the best interests of the Company and the Partnership,
including without limitation, the issuance of Shares and corresponding
Partnership Units pursuant to an employee share purchase plan providing for
employee purchases of Shares at a discount from fair market value or employee
stock options that have an exercise price that is less than the fair market
value of the Shares, either at the time of issuance or at the time of exercise,
and (y) the Company contributes all proceeds from such issuance to the
Partnership. For example, in the event the Company issues Shares for a cash
purchase price and contributes all of the proceeds of such issuance to the
Partnership as required hereunder, the Company shall be issued a number of
additional Partnership Units equal to the product of (A) the number of such
Shares issued by the Company, the proceeds of which were so contributed,
multiplied by (B) a fraction, the numerator of which is 100%, and the
denominator of which is the Conversion Factor in effect on the date of such
contribution.
(b) CERTAIN DEEMED CONTRIBUTIONS OF PROCEEDS OF ISSUANCE OF
SHARES. In connection with any and all issuance of Shares, the Company shall
make Capital Contributions to the Partnership of the proceeds therefrom,
PROVIDED THAT if the proceeds actually received and contributed by the Company
are less than the gross proceeds of such issuance as a result of any
underwriter's discount or other expenses paid or incurred in connection with
such issuance, then the Company shall be deemed to have made Capital
Contributions to the Partnership in the aggregate amount of the gross proceeds
of such issuance and the Partnership shall be deemed simultaneously to have paid
such offering expenses in accordance with Section 7.7 hereof and in connection
with the required issuance of additional Partnership Units to the Company for
such Capital Contributions pursuant to Section 4.3(a) hereof.
4.4. STOCK INCENTIVE PLAN. If at any time or from time to time
Incentive Options granted in connection with the Company's Stock Incentive Plan
are exercised in accordance with the terms of the Incentive Option Agreement,
the Company shall, as soon as practicable after such exercise, contribute to the
capital of the Partnership an amount equal to the exercise price paid to the
Company by such exercising party in connection with the exercise of the
Incentive Option.
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 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
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the benefit of, and may be enforced solely by, the parties hereto and their
respective successors and assigns. None of the rights or obligations of the
Partners herein set forth to make Capital Contributions to the Partnership shall
be deemed an asset of the Partnership for any purpose by any creditor or other
third party, nor may such rights or obligations be sold, transferred or assigned
by the Partnership or pledged or encumbered by the Partnership to secure any
debt or other obligation of the Partnership or of any of the Partners.
Notwithstanding the foregoing, the stockholders of the Company shall not be
considered creditors or third parties for the purposes of this Agreement but
shall be considered third party beneficiaries with the right to enforce this
Agreement.
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 withdraw any part
of its Capital Account or to demand or receive the return of its Capital
Contribution from the Partnership.
4.7. NO PREEMPTIVE RIGHTS. No Person shall have any preemptive,
preferential or other similar right with respect to (i) additional Capital
Contributions or loans to the Partnership; or (ii) issuance or sale of any
Partnership Interests.
4.8. PERCENTAGE INTERESTS. If the number of outstanding Partnership
Units of a class or series increases or decreases during the taxable year, each
Partner's Percentage Interest of such class or series of Partnership Units shall
be adjusted by the General Partner effective as of the effective date of such
increase or decrease to a percentage equal to the number of Partnership Units of
such class or series held by such Partner divided by the aggregate number of
Partnership Units of such class or series outstanding after giving effect to
such increase or decrease. If the Partners' Percentage Interests are adjusted
pursuant to this Section 4.8, the Profits and Losses for the taxable year in
which the adjustment occurs shall be allocated between the part of the year
ending on the day when the Partnership's property is revalued by the General
Partner and the part of the year beginning on the following day either (i) as if
the taxable year had ended on the date of the adjustment or (ii) based on the
number of days in each part. The General Partner, in its sole discretion, shall
determine which method shall be used to allocate Profits and Losses for the
taxable year in which the adjustment occurs. The allocation of Profits and
Losses for the earlier part of the year shall be based on the Percentage
Interests before adjustment, and the allocation of Profits and Losses for the
later part shall be based on the adjusted Percentage Interests.
ARTICLE V
ALLOCATIONS, DISTRIBUTIONS AND
OTHER TAX AND ACCOUNTING MATTERS
5.1. PROFITS AND LOSSES.
After giving effect to the mandatory Partnership allocations
set forth in Section 5.2, Profits and Losses for any Fiscal Year or other
applicable period shall be allocated to the holders of OP Units pro rata in
accordance with their Percentage Interests.
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5.2. MANDATORY ALLOCATIONS.
(a) (1) Minimum Gain Chargeback. Notwithstanding any other
provision of this Article 5, if there is a net decrease in Partnership Minimum
Gain during any Partnership Fiscal Year or other applicable period, then,
subject to the exceptions set forth in Regulations Section 1.704-2(f)(2), (3),
(4) and (5), each Partner shall be specially allocated items of Partnership
income and gain for such Partnership Fiscal Year (and, if necessary, subsequent
Partnership Fiscal Years) in an amount equal to such Partner's share of the net
decrease in Partnership Minimum Gain, as determined in accordance with
Regulations Section 1.704-2(g). Allocations pursuant to the previous sentence
shall be determined in accordance with Regulations Section 1.704-2(f). This
Section 5.2(a)(1) is intended to comply with the minimum gain chargeback
requirement in Regulations Section 1.704-2(f) shall be interpreted consistently
therewith.
(2) Partner Minimum Gain Chargeback. Notwithstanding any
other provision of this Article 5 except Section 5.2(a)(1), if there is a net
decrease in Partner Minimum Gain attributable to a Partner Nonrecourse Debt
during any Partnership Fiscal Year or other applicable period, then, subject to
the exceptions set forth in Regulations Section 1.704-2(i)(4), each Partner who
has a share of the Partner Minimum Gain attributable to such Partner Nonrecourse
Debt, determined in accordance with Regulations Section 1.704-2(i)(5) shall be
specially allocated items of Partnership income and gain for such Partnership
Fiscal Year (and, if necessary, subsequent Partnership Fiscal Years) in an
amount equal to such Partner's share of the net decrease in Partner Minimum Gain
attributable to such Partner Nonrecourse Debt, determined in accordance with
Regulations Section 1.704-2(i)(4). Allocations pursuant to the previous sentence
shall be made in proportion to the respective amounts required to be allocated
to each Partner pursuant thereto. The items to be so allocated shall be
determined in accordance with Regulations Section 1.704-2(i)(4). This Section
5.2(a)(2) is intended to comply with the minimum gain chargeback requirement in
Regulations Section 1.704-2(i)(4) and shall be interpreted consistently
therewith.
(b) Qualified Income Offset. Notwithstanding any provision of this
Article 5, except Section 5.2(a), in the event any Partner receives any
adjustments, allocations, or distributions described in Regulations Sections
1.704-1(b)(2)(ii)(d)(4), (5) or (6), that cause or increase an Adjusted Capital
Account Deficit of such Partner, items of Partnership income and gain shall be
specially allocated to such Partner in an amount and manner sufficient to
eliminate, to the extent required by the Regulations, the Adjusted Capital
Account Deficit of such Partner as quickly as possible. This Section 5.2(b) is
intended to comply with the qualified income offset provision of Regulations
Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
(c) No Excess Deficit. To the extent that any Partner has or
would have, as a result of an allocation of Loss (or item thereof) an Adjusted
Capital Account Deficit, such amount of Loss (or item thereof) shall be
allocated to the holders of Preferred Units so as to cause the Capital Account
balances of such holders of Preferred Units (adjusted as described in the
definition of Adjusted Capital Account Deficit) to be in proportion to their
aggregate respective liquidation preferences with respect to such Preferred
Units (taking into account any preferences which may exist among such Preferred
Units). To the extent an allocation of Loss (or item thereof) would result in
all Partners having Adjusted Capital Account Deficits, any Loss
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causing or creating such Adjusted Capital Account Deficit shall be allocated to
the General Partner. Any allocations of Loss pursuant to this Section 5.2(c)
shall be reversed with a corresponding amount of Profits in subsequent years.
(d) Nonrecourse Deductions. Nonrecourse Deductions for any
Partnership Fiscal Year or other applicable period shall be allocated to the
holders of OP Units pro rata in accordance with their Percentage Interests.
(e) Partner Nonrecourse Deductions. Any Partner Nonrecourse
Deductions for any Partnership Fiscal Year or other applicable period shall be
specially allocated to the Partner who bears the economic risk of loss with
respect to the Partner Nonrecourse Debt to which such Partner Nonrecourse
Deductions are attributable in accordance with Regulations Section
1.704-2(i)(1).
(f) Code Section 754 Adjustments. To the extent an adjustment
to the adjusted tax basis of any Partnership asset pursuant to Code Section
734(b) or Code Section 743(b) is required, pursuant to Regulations Sections
1.704-1(b)(2)(iv)(m), 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 to the Partners in a manner consistent with the manner in which their
Capital Accounts are required to be adjusted pursuant to such Section of the
Regulations.
Each Partner hereby agrees to provide the Partnership with all
information necessary to give effect to an election made under Code Section 754
if the General Partner determines to make such an election. With respect to such
election:
(1) Any change in the amount of the depreciation deducted
by the partnership and any change in the gain or loss of the Partnership, for
federal income tax purposes, resulting from an adjustment pursuant to Section
743(b) or the Code shall be allocated entirely to the transferee of the
Partnership Interest or portion thereof so transferred. Neither the capital
contribution obligations of, nor the Partnership Interest of, nor the amount of
any cash distributions to, the Partners shall be affected as a result of such
election, and except as provided in Regulations Section 1.704-1(b)(2)(iv)(m),
the making of such election shall have no effect except for federal and (if
applicable) state and local income tax purposes.
(2) Solely for federal and (if applicable) state and local
income tax purposes and not for the purpose of maintaining the Partners' Capital
Accounts (except as provided in Regulations Section 1.704-1(b)(2)(iv)(m)), the
Partnership shall keep a written record for those assets, the bases of which is
adjusted as a result of such election, and the amount at which such assets are
carried on such record shall be debited (in the case of an increase in basis) or
credited (in the case of a decrease in basis) by the amount of such basis
adjustment. Any change in the amount of the depreciation deducted by the
Partnership and any change in the gain or loss of the Partnership, for federal
and (if applicable) state and local income tax purposes, attributable to the
basis adjustment
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made as a result of such election shall be debited or credited, as the case may
be, on such record.
(g) Curative Allocations. Any mandatory allocations of items
of income, gain, loss or deduction pursuant to Sections 5.2(a), (b), (c) and (e)
above shall be taken into account for the purpose of equitably adjusting
subsequent allocations of income, gain, loss or deduction so that the net
allocations, in the aggregate, allocated to each Partner pursuant to this
Article 5, and the Capital Accounts of each Partner, shall as quickly as
possible and to the extent possible, be the same as if no mandatory allocations
had been made.
(h) Preferential Income Allocations. After giving effect to
the mandatory allocations set forth above, gross income of the Partnership shall
be allocated to the holders of Partnership Interests of a class or series that
are entitled to a preference in distribution (and within such class or series,
pro rata in accordance with their respective Percentage Interests) until the
cumulative amount allocated to each such holder pursuant to this Section 5.2(h)
equals the cumulative amount for the current and all prior years of the sum of
(A) the distributions made to each such holder, pursuant to Section 5.6(b)(i)
and (B) the portions of the distributions made to each such holder pursuant to
the redemption section of such Partnership Unit Designation, if any, that exceed
the liquidation preference (excluding any accrued but unpaid distributions
thereon) per Preferred Unit established for such Preferred Units in the
applicable Partnership Unit Designation.
(i) Allocations Upon Liquidation. Gain of the Partnership from
a sale or other disposition of all or substantially all of the assets of the
Partnership shall be allocated (A) first, to the holders of Partnership
Interests of a class or series that is entitled to a preference in distribution
(and, within such class or series, pro rata in accordance with their respective
Percentage Interests) in an amount necessary to cause the Capital Account
balances of such holders to equal the amount payable to such holders upon a
liquidation (each a "Liquidation Preference") pursuant to the applicable
Partnership Unit Designation for such Partnership Interests (taking into account
preferences which may exist among such Preferred Units); (B) second, to the
Partners, to the extent of and in proportion to the amounts required to cause
the Capital Account balance of the Company in excess of its aggregate
Liquidation Preferences and the Capital Account balance of each other Partner to
be in proportion to the Percentage Interests of OP Units held by the Company and
such other Partners, and (C) thereafter, to the holders of OP Units pro rata in
proportion to their respective Percentage Interests.
5.3. OTHER ALLOCATION RULES.
(a) Pursuant to Regulations Section 1.752-3(a), for the
purpose of determining each Partner's share of excess Nonrecourse Liabilities of
the Partnership, and solely for such purpose, each Partner's interest in
partnership profits shall equal such Partner's Percentage Interest.
(b) The allocation of Profits and Losses for any Partnership
Year during which a person acquires a Partnership Interest (other than upon
formation of the Partnership), or during which there is a change in the
Partners' Percentage Interests, shall take into account the Partners' varying
interests for such Partnership Year pursuant to any method
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permissible under Code Section 706 that is selected by the General Partner. The
method selected by the General Partner shall not apply notwithstanding any
agreement between the assignor and assignee of such Partnership Interest
although the General Partner may recognize any such agreement.
(c) To the extent permitted by Regulations Section
1.704-2(h)(3) and 1.704-2(i)(6), the General Partner shall endeavor to treat
distributions as having been made from the proceeds of Nonrecourse Liabilities
or Partner Nonrecourse Debt only to the extent that such distributions would
cause or increase a deficit balance in any Partner's Capital Account that
exceeds the amount such Partner is otherwise obligated to restore (within the
meaning of Regulations Section 1.704-1(b)(ii)(c)) as of the end of the
Partnership's taxable year in which the distribution occurs.
5.4. ALLOCATIONS FOR TAX PURPOSES.
(a) Except as otherwise provided in this Section 5.4, for
federal income tax purposes, each item of income, gain, loss and deduction shall
be allocated among the Partners in the same manner as its correlative item of
"book" income, gain, loss or deduction is allocated pursuant to Sections 5.1,
5.2 and 5.3 above.
(b) In accordance with Code Section 704(b) and 704(c) and the
Regulations thereunder, income, gain, loss and deduction with respect to any
property contributed to the capital of the Partnership shall, solely for federal
income tax purposes, be allocated among the Partners so as to take into account
any variation between the adjusted basis of such property to the Partnership for
federal income tax purposes and the initial Gross Asset Value of such property.
If the Gross Asset Value of any Partnership property is adjusted as described in
the definition of Gross Asset Value, subsequent allocations of income, gain,
loss and deduction with respect to such asset shall take account of any
variation between the adjusted basis of such asset for federal income tax
purposes and the Gross Asset Value of such asset in the manner prescribed under
Code Section 704(b) and 704(c) and the Regulations thereunder. In accordance
with the foregoing, the Partnership shall elect to use the "traditional method"
set forth in Regulation Section 1.704-3(b) with respect to the properties
contributed by or on behalf of the Special Consenting Partners.
5.5. REVISIONS TO ALLOCATIONS TO REFLECT ISSUANCE OF ADDITIONAL
PARTNERSHIP INTERESTS.
In the event that the Partnership issues Additional
Partnership Interests to the General Partner or any Additional Limited Partner
pursuant to Article IV hereof, the General Partner shall make such revisions to
this Article V as it deems necessary to reflect the terms of the issuance of
such Partnership Interests, including any preferential allocations to classes of
Partnership Interests that are entitled thereto.
5.6. DISTRIBUTIONS. Except with respect to a liquidation of the
Partnership pursuant to Article VIII hereof:
(a) The General Partner shall cause the Partnership to
distribute all or a portion of Net Operating Cash Flow to the Partners from time
to time as determined by the
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General Partner, but in any event not less frequently than quarterly in such
amounts as the General Partner shall determine;
(b) For each Partnership Fiscal Year, all distributions made
pursuant to this Section 5.6 shall be made to the Partners (i) first, at the
time and in the manner set forth in the applicable Partnership Unit Designation,
to each holder of Partnership Interests of a class or series that is entitled to
a preference in distribution in accordance with the rights of such class or
series of Partnership Interests (and, within such class or series, pro rata in
accordance with their respective Partnership Interests); and (ii) thereafter, to
the holders of OP Units pro rata in proportion to their respective Percentage
Interests; PROVIDED that the General Partner shall use its best efforts to cause
the Partnership to make distributions such that the cumulative distributions per
OP Unit shall equal the cumulative distributions per Share; PROVIDED FURTHER
that in no event may a Partner receive a distribution of Net Operating Cash Flow
with respect to an OP Unit if such Partner is entitled to receive a distribution
out of such Net Operating Cash Flow with respect to a Share for which such
Partnership Unit has been exchanged and such distribution shall be made to the
Company; and
(c) Notwithstanding the provisions of Section 5.6 (a) and (b),
the General Partner shall use its best efforts to cause the Partnership to
distribute sufficient amounts to enable the General Partner to pay shareholder
dividends that will (1) satisfy the requirements for qualification as a REIT
under the Code and the Regulations (the "REIT Requirements") and (2) avoid any
federal income or excise tax liability of the General Partner.
ARTICLE VI
TAX MATTERS
6.1. 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 all 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.
6.2. TAX ELECTIONS.
Except as otherwise provided herein, the General Partner
shall, in its sole and absolute discretion, determine whether to make any
available election pursuant to the Code; PROVIDED THAT the General Partner shall
make the election under Code Section 754 in accordance with applicable
Regulations thereunder. The General Partner shall have the right to seek to
revoke any such elections (including, without limitation, the election under
Code Section 754) upon the General Partner's determination in its sole and
absolute discretion that such revocation is in the best interests of the
Partners.
6.3. TAX MATTERS PARTNER.
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(a) The General Partner shall be the "tax matters partner" of
the Partnership for federal income tax purposes within the meaning of Code
Section 6231(a)(7). Pursuant to Code Section 6223(c)(3), upon receipt of notice
from the IRS of the beginning of an administrative proceeding with respect to
the Partnership, the tax matters partner shall furnish the IRS with the name,
address and profit interest of each of the Limited Partners and the Assignees to
the extent that such information is provided to the Partnership by the Limited
Partners and the Assignees. The General Partner is authorized to take any action
in connection with any tax audit or continuing judicial action as it determines
in good faith is in the best interests of the Partners.
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 7.5 of this Agreement shall be fully
applicable to the tax matters partner in its capacity as such.
(b) The tax matters partner shall receive no compensation for
its services. All third party costs and expenses incurred by the tax matters
partner in performing its duties as such (including legal and accounting fees
and expenses) shall be borne by the Partnership. Nothing herein shall be
construed to restrict the Partnership from engaging an independent accounting
firm or the accountants for the Partnership 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.
6.4. ORGANIZATIONAL EXPENSES
The Partnership shall elect to deduct expenses, if any,
incurred by it in organizing the Partnership ratably over a sixty (60) month
period as provided in Code Section 709.
6.5. WITHHOLDING; COMBINED RETURNS
(a) Each Partner hereby authorizes the Partnership to withhold
from or pay on behalf of or with respect to such Partner and Assignee any amount
of federal, state, local, or foreign taxes that the General Partner reasonably
determines that the Partnership is required to withhold or pay with respect to
any amount distributable or allocable to such Partner or Assignee pursuant to
this Agreement, including, without limitation, any taxes required to be withheld
or paid by the Partnership pursuant to Code Section 1441, 1442, 1445, or 1446.
Any amount paid on behalf of or with respect to a Partner or Assignee shall
constitute a loan by the Partnership to such Partner or Assignee, which loan
shall be repaid through withholding of subsequent distributions to such Partner
or Assignee. In the event that a Limited Partner fails to pay any amounts owed
to the Partnership pursuant to this Section 6.5 when due, the General Partner
may, in its sole and absolute discretion, elect to make the payment to the
Partnership on behalf of such defaulting 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
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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 amounts payable by a Limited Partner hereunder shall bear interest at
the lesser of (i) the base rate on corporate loans at large United States money
center commercial banks, as published from time to time in THE WALL STREET
JOURNAL or (ii) the maximum lawful rate of interest on such obligation, such
interest to accrue from the date such amount is due (which shall be fifteen (15)
days after demand) until such amount is paid in full.
(b) The General Partner is authorized, if it determines in
good faith that such action is in the interests to both it and the Limited
Partners, to negotiate with state and local tax authorities and/or file state
and local combined or consolidated income tax returns on behalf of the
Partnership and for all of the Partners and Assignees in respect of income of
the Partnership. To the extent any payment or accrual of state or local income
taxes result in a federal, state or local tax credit to one or more Partners,
such credit shall be allocated between the Partners in proportion to their
respective average daily Percentage Interests for the Partnership Fiscal Year
for which such tax is paid or accrued and the amount allocated to each Partner
shall be treated as a distribution to such Partner and shall reduce the amount
of available cash otherwise distributable to such Partners under Article 5.
ARTICLE VII
RIGHTS, DUTIES AND RESTRICTIONS OF THE GENERAL PARTNER
7.1. MANAGEMENT. The General Partner shall be responsible for the
management of the Partnership's business and affairs. Except as otherwise herein
expressly provided, and subject to the limitations contained in Section 7.2
hereof with respect to Major Decisions, the General Partner shall have, and is
hereby granted, full and complete power to the fullest extent permissible under
the Act, authority and discretion to take such action for and on behalf of the
Partnership and in its name as the General Partner shall, in its sole and
absolute discretion, deem necessary or appropriate to carry out the purposes for
which the Partnership was organized. Except as otherwise expressly provided
herein, and subject to Section 7.2 hereof, the General Partner shall have the
right, power and authority:
(a) To manage, control, invest, lend, reinvest, acquire by
purchase, lease or otherwise, sell, contract to purchase or sell, grant, obtain,
or exercise options to purchase, options to sell or conversion rights, assign,
transfer, convey, deliver, endorse, exchange, pledge, mortgage, abandon,
improve, repair, maintain, insure, lease for any term and otherwise deal with
any and all property of whatsoever kind and nature, and wheresoever situated, in
furtherance of the purposes of the Partnership;
(b) To acquire, directly or indirectly, interests in real or
personal property of any kind and of any type, and any and all kinds of
interests therein, and to determine the manner in which title thereto is to be
held; to manage, insure against loss, protect and subdivide any of the real or
personal property, interests therein or parts thereof; to improve, develop or
redevelop any such real or personal property; to participate in the ownership
and development of any property; to dedicate for public use, to vacate any
subdivisions or parts thereof, to resubdivide, to contract to sell, to grant
options to purchase or lease, to sell on any
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terms; to convey, to mortgage, pledge or otherwise encumber said property, or
any part thereof; to lease said property or any part thereof from time to time,
upon any terms and for any period of time, and to renew or extend leases, to
amend, change or modify the terms and provisions of any leases and to grant
options to lease and options to renew leases and options to purchase; to
partition or to exchange said real property, or any part thereof, for other real
or personal property; to grant easements or charges of any kind; to release,
convey or assign any right, title or interest in or about or easement
appurtenant to said property or any part thereof; to construct and reconstruct,
remodel, alter, repair, add to or take from buildings on said property; to
insure any Person having an interest in or responsibility for the care,
management or repair of such property; to direct the trustee of any land trust
to mortgage, lease, convey or contract to convey the real estate held in such
land trust or to execute and deliver deeds, mortgages, notes, and any and all
documents pertaining to the property subject to such land trust or in any matter
regarding such trust; to execute assignments of all or any part of the
beneficial interest in such land trust;
(c) To employ, engage or contract with or dismiss from
employment or engagement Persons to the extent deemed necessary by the General
Partner for the operation and management of the Partnership business, including
but not limited to, contractors, subcontractors, engineers, architects,
surveyors, mechanics, consultants, accountants, attorneys, insurance brokers,
real estate brokers and others;
(d) To enter into contracts on behalf of the Partnership;
(e) To borrow or lend money, procure loans and advances from
any Person for Partnership purposes, and to apply for and secure, from any
Person, credit or accommodations; to contract liabilities and obligations,
direct or contingent and of every kind and nature with or without security; and
to repay, discharge, settle, adjust, compromise, or liquidate any such loan,
advance, credit, obligation or liability;
(f) To Pledge, hypothecate, mortgage, assign, deposit,
deliver, enter into sale and leaseback arrangements or otherwise give as
security or as additional or substitute security, or for sale or other
disposition any and all Partnership property, tangible or intangible, including,
but not limited to, real estate and beneficial interests in land trusts, and to
make substitutions thereof, and to receive any proceeds thereof upon the release
or surrender thereof; to sign, execute and deliver any and all assignments,
deeds and other contracts and instruments in writing; to authorize, give, make,
procure, accept and receive moneys, payments, property, notices, demands,
vouchers, receipts, releases, compromises and adjustments; to waive notices,
demands, protests and authorize and execute waivers of every kind and nature; to
enter into, make, execute, deliver and receive written agreements, undertakings
and instruments of every kind and nature; to give oral instructions and make
oral agreements; and generally to do any and all other acts and things
incidental to any of the foregoing or with reference to any dealings or
transactions which any attorney may deem necessary, proper or advisable;
(g) To acquire and enter into any contract of insurance which
the General Partner deems necessary or appropriate for the protection of the
Partnership, for the conservation of the Partnership's assets or for any purpose
convenient or beneficial to the Partnership;
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(h) To conduct any and all banking transactions on behalf of
the Partnership; to adjust and settle checking, savings, and other accounts with
such institutions as the General Partner shall deem appropriate; to draw, sign,
execute, accept, endorse, guarantee, deliver, receive and pay any checks,
drafts, bills of exchange, acceptances, notes, obligations, undertakings and
other instruments for or relating to the payment of money in, into, or from any
account in the Partnership's name; to execute, procure, consent to and authorize
extensions and renewals of the same; to make deposits and withdraw the same and
to negotiate or discount commercial paper, acceptances, negotiable instruments,
bills of exchange and dollar drafts;
(i) To demand, sue for, receive, and otherwise take steps to
collect or recover all debts, rents, proceeds, interests, dividends, goods,
chattels, income from property, damages and all other property, to which the
Partnership may be entitled or which are or may become due the Partnership from
any Person; to commence, prosecute or enforce, or to defend, answer or oppose,
contest and abandon all legal proceedings in which the Partnership is or may
hereafter be interested; and to settle, compromise or submit to arbitration any
accounts, debts, claims, disputes and matters which may arise between the
Partnership and any other Person and to grant an extension of time for the
payment or satisfaction thereof on any terms, with or without security;
(j) To make arrangements for financing, including the taking
of all action deemed necessary or appropriate by the General Partner to cause
any approved loans to be closed;
(k) To take all reasonable measures necessary to insure
compliance by the Partnership with applicable arrangements, and other
contractual obligations and arrangements entered into by the Partnership from
time to time in accordance with the provisions of this Agreement, including
periodic reports as required to lenders and using all due diligence to insure
that the Partnership is in compliance with its contractual obligations;
(l) To maintain the Partnership's books and records; and
(m) To prepare and deliver, or cause to be prepared and
delivered by the Accountants, all financial and other reports with respect to
the operations of the Partnership, and preparation and filing of all federal and
state tax returns and reports.
Except as otherwise provided herein, to the extent the duties
of the General Partner require expenditures of funds to be paid to third
parties, the General Partner shall not have any obligations hereunder except to
the extent that Partnership funds are reasonably available to it for the
performance of such duties, and nothing herein contained shall be deemed to
authorize or require the General Partner, in its capacity as such, to expend its
individual funds for payment to third parties or to undertake any individual
liability or obligation on behalf of the Partnership.
7.2. MAJOR DECISIONS. The General Partner shall not, without the prior
Consent of the Limited Partners, on behalf of the Partnership, undertake any of
the following actions (the "Major Decisions"):
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(a) Amend, modify or terminate this Agreement other than to
reflect the admission of Additional Limited Partners pursuant to Section 4.2
hereof or as otherwise described in Article XIV.
(b) Make a general assignment for the benefit of creditors or
appoint or acquiesce in the appointment of a custodian, receiver or trustee for
all or any part of the assets of the Partnership.
(c) Take title to any personal or real property, other than in
the name of the Partnership or pursuant to Section 7.10 hereof.
(d) Institute any proceeding for Bankruptcy on behalf of the
Partnership.
(e) Act or cause the taking of any action with respect to the
following matters:
(1) the dissolution and winding up of the Partnership or an
election to continue the Partnership or to continue the business
of the Partnership;
(2) a change in the nature of the business of the
Partnership.
7.3. PROSCRIPTIONS. The General Partner shall not have the authority
to:
(a) Do any act in contravention of this Agreement or which
would make it impossible to carry on the ordinary business of the Partnership;
(b) Possess any Partnership property or assign rights in
specific Partnership property for other than Partnership purposes; or
(c) Do any act in contravention of applicable law.
Nothing herein contained shall impose any obligation on any Person or firm doing
business with the Partnership to inquire as to whether or not the General
Partner has properly exercised its authority in executing any contract, lease,
mortgage, deed or any other instrument or document on behalf of the Partnership,
and any such Third Person shall be fully protected in relying upon such
authority.
7.4. OUTSIDE ACTIVITIES OF GENERAL PARTNER. Without Consent of the
Limited Partners, the General Partner shall not, directly or indirectly, enter
into or conduct any business other than in connection with the ownership,
acquisition and disposition of Partnership Interests as a General Partner or
Limited Partner and the management of the business of the Partnership and such
activities as are incidental thereto. Without the Consent of the Limited
Partners, the assets of the General Partner shall be limited to Partnership
Interests and permitted debt obligations of the Partnership, so that Shares and
Partnership Units are completely fungible except as otherwise specifically
provided herein; PROVIDED, THAT the General Partner shall be permitted to (i)
hold such bank accounts or similar instruments or accounts in its own name as it
deems necessary to carry out its responsibilities and purposes as contemplated
under this
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Agreement and its organizational documents; (ii) acquire, directly or through
any subsidiary of the General Partner that is a qualified REIT subsidiary within
the meaning of Section 856(i) of the Code, up to a one percent (1%) interest in
any partnership or limited liability company at least ninety-nine percent (99%)
of the equity of which is owned by the Partnership; and (iii) own all of the
equity interest in FLIP/BRE II, Inc., and the property known as 100 Oak Hill
Road. The General Partner and any of its Affiliates 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. INDEMNIFICATION.
(a) The Partnership shall indemnify each Indemnitee from and
against any and all losses, claims, damages, liabilities, joint or several,
expenses (including, without limitation, reasonable attorney's 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 the activities of such Indemnitee acting on behalf of the
Partnership, an Affiliate of the Partnership or an entity in which the
Partnership holds an interest as set forth in this Agreement in which such
Indemnitee may be involved, or is threatened to be involved, as a party or
otherwise; PROVIDED THAT, the Partnership shall not indemnify an Indemnitee for
any such losses, claims, damages, liabilities, expenses, judgments, fines,
settlements or other amounts arising out of or resulting from (i) fraud, gross
negligence, intentional misconduct by such Indemnitee, or a violation of law by
such Indemnitee when the Indemnitee has reasonable cause to believe such action
was unlawful; (ii) the violation or breach by such Indemnitee of the provisions
of this Agreement or (iii) any transaction from which such Indemnitee received a
personal benefit in violation or breach of any provision of this Agreement. The
termination of any proceeding by judgment, order or settlement does not create a
presumption that the Indemnitee did not meet the requisite standard of conduct
set forth in this Section 7.5(a). The termination of any proceeding by
conviction of an Indemnitee or upon a plea of NOLO CONTENDERE or its equivalent
by an Indemnitee, or an entry of an order of probation against an Indemnitee
prior to judgment, creates a rebuttable presumption that such Indemnitee acted
in a manner contrary to that specified in this Section 7.5(a) with respect to
the subject matter of such proceeding. Any indemnification pursuant to this
Section 7.5 shall be made only out of the assets of the Partnership, and neither
the General Partner nor any Limited Partners 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 7.5.
(b) Reasonable expenses incurred by an Indemnitee who is a
party to a proceeding may be paid or reimbursed by the Partnership in advance of
the final disposition of the proceeding upon receipt by the Partnership of (i) a
written affirmation by the Indemnitee of the Indemnitee's good faith belief that
the standard of conduct necessary for indemnification by the Partnership as
authorized in Section 7.5(a) has been met; and (ii) a written undertaking by or
on behalf of the Indemnitee to repay the amount if it shall ultimately be
determined that the standard of conduct has not been met.
(c) The indemnification provided by this Section 7.5 shall be
in addition to any other rights to which an Indemnitee 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
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Indemnitee who has ceased to serve in such capacity unless otherwise provided in
a written agreement with such Indemnitee or in the writing pursuant to which
such Indemnitee is indemnified.
(d) The Partnership may, but shall not be obligated to,
purchase and maintain insurance on behalf of any of the Indemnities 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 to indemnify such Person against such liability
under the provisions of this Agreement.
(e) Any liabilities which an Indemnitee incurs as a result of
acting on behalf of the Partnership or the General Partner (whether as a
fiduciary or otherwise) in connection with the operation, administration or
maintenance of an employee benefit plan or any related trust or funding
mechanism (whether such liabilities are in the form of excise taxes, penalties,
restitutions or other funding mechanism or to a participant or beneficiary of
such plan, trust or other funding mechanism, or otherwise) shall be treated as
liabilities or judgments or fines under this Section 7.5.
(f) The provisions of this Section 7.5 are for the benefit of
the Indemnities, 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 7.5 or any provision hereof
shall be prospective only and shall not in any way affect the limitations on the
Partnership's liability to any Indemnitee under this Section 7.5 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.
7.6. LIABILITY OF THE GENERAL PARTNER.
(a) Notwithstanding anything to the contrary set forth in this
Agreement, the General Partner shall not be liable for monetary damages to the
Partnership, any Partners or any Assignees for any losses, claims, damages,
liabilities, expenses, judgments, fines, settlements or other amounts incurred
due to acts or omissions of the General Partner, except if such losses, claims,
damages, liabilities, expenses, judgments, fines, settlements or other amounts
arose out of or resulted from (i) fraud, gross negligence, intentional
misconduct or a knowing violation of law by the General Partner when it had
reasonable cause to believe such action giving rise to the violation was
unlawful; (ii) the violation or breach by the General Partner of the provisions
of this Agreement or (iii) any transaction in which the General Partner received
a personal benefit in violation or breach of any provision of this Agreement.
(b) Subject to its obligations and duties as General Partner
set forth in Section 7.1 hereof, 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 acts or omissions on the part of any
agent appointed by it in good faith.
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(c) 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 limitations on the General Partner's liability to the Partnership and
the Limited Partners 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.
(d) The Limited Partners expressly acknowledge that the
General Partner is acting on behalf of the Partnership and the General Partner's
stockholders collectively, that the General Partner is under no obligation to
consider the separate interest of the Limited Partners (including, without
limitation, the tax consequences to Limited Partnerships or Assignees) in
deciding whether to cause the Partnerships to take (or decline to take) any
actions, and that the General Partner shall not be liable for monetary damages
to the Partnership or any Partner for Losses sustained, liabilities incurred, or
benefits not derived by Limited Partners in connection with such decisions, so
long as the General Partner has acted in good faith.
7.7. REIMBURSEMENT OF THE GENERAL PARTNER.
(a) No Compensation. Except as provided in this Section 7.7
and elsewhere in this Agreement, the General Partner shall not be compensated
for its services as general partner to the Partnership.
(b) Responsibility for Partnership Expenses. The Partnership
shall be responsible for and shall pay all expenses relating to the
Partnership's organization, the ownership of its assets and its operations. The
General Partner shall be reimbursed on a monthly basis, or such other basis as
the General Partner may determine in its sole and absolute discretion, for all
expenses it incurs relating to the ownership and operation of, or for the
benefit of, the Partnership (including, without limitation, expenses related to
the management and administration of any subsidiaries of the General Partner or
the Partnership or Affiliates of the Partnership such as auditing expenses and
filing fees); PROVIDED THAT, the amount of any such reimbursement shall be
reduced by (i) any interest earned by the General Partner with respect to bank
accounts or other instruments or accounts held by it as permitted elsewhere in
this Agreement and (ii) any amount derived by the General Partner from any
investments as permitted elsewhere in this Agreement (including, without
limitation, amounts derived from its ownership of those subsidiaries described
in Section 7.4) and; PROVIDED FURTHER, that the General Partner shall not be
reimbursed for (i) income tax liabilities or (ii) filing or similar fees in
connection with maintaining the General Partner's continued corporate existence
that are incurred by the General Partner. The General Partner shall determine in
good faith the amount of expenses incurred by it related to the ownership and
operation of, or for the benefit of, the Partnership. In the event that certain
expenses are incurred for the benefit of the Partnership and other entities
(including the General Partner), such expenses will be allocated to the
Partnership and such other entities in such a manner as the General Partner in
its sole and absolute discretion deems fair and reasonable. Such reimbursements
shall be in addition to any reimbursement to the General Partner as a result of
indemnification pursuant to Section 7.5. All payments and reimbursements
hereunder shall be characterized for federal income tax purposes as expenses of
the Partnership incurred on its behalf, and not as expenses of the General
Partner.
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(c) Partnership Interest Issuance Expenses. The General
Partner shall also be reimbursed for all expenses it incurs relating to any
issuance of Additional Partnership Interests, Shares, debt of the Partnership or
the General Partner or rights, options, warrants or convertible or exchangeable
securities pursuant to this Agreement (including, without limitation, all costs,
expenses, damages and other payments resulting from or arising in connection
with litigation related to any of the foregoing), all of which expenses are
considered by the Partners to constitute expenses of, and for the benefit of,
the Partnership.
(d) Purchases of Shares by the General Partner. In the event
that the General Partner exercises its obligation under Article XII hereof to
purchase Shares or otherwise elects to purchase from its shareholders Shares in
connection with a stock repurchase or similar program or for the purpose of
delivering such Shares to satisfy an obligation under any dividend reinvestment
or stock purchase program adopted by the General Partner, any employee stock
purchase plan adopted by the General Partner or any similar obligation or
arrangement undertaken by the General Partner in the future, the purchase price
paid by the General Partner for such Shares and any other expenses incurred by
the General Partner in connection with such purchase shall be considered
expenses of the Partnership and shall be reimbursable to the General Partner,
subject to the conditions that: (i) if such Shares subsequently are to be sold
by the General Partner, the General Partner pays to the Partnership any proceeds
received by the General Partner for such Shares (PROVIDED THAT a transfer of
Shares for Partnership Units pursuant to Section 12.5 hereof would not be
considered a sale for such purposes); and (ii) if such Shares are not
retransferred by the General Partner within thirty (30) days after the purchase
thereof, the General Partner shall cause the Partnership to cancel a number of
Partnership Units of the appropriate class (rounded to the nearest whole
Partnership Unit) held by the General Partner equal to the product attained by
multiplying the number of such Shares by a fraction, the numerator of which is
one and the denominator of which is the Conversion Factor.
(e) Reimbursement not a Distribution. If and to the extent any
reimbursement made pursuant to this Section 7.7 is determined for federal income
tax purposes not to constitute a payment of expenses of the Partnership, the
amount so determined shall constitute a guaranteed payment with respect to
capital 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 a distribution for purposes of computing the Partners' Capital
Accounts.
7.8. REIT QUALIFICATION OF THE GENERAL PARTNER. 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 General Partner to continue to qualify as a REIT or (ii) to
avoid the General Partner incurring any taxes under Code Section 857 or 4981, is
expressly authorized under this Agreement and is deemed approved by all of the
Limited Partners. Nothing, however, in this Agreement shall be deemed to give
rise to any liability on the part of the Limited Partners for the General
Partner's failure to qualify or continue to qualify as a REIT or failure to
avoid incurring any taxes under the foregoing Sections of the Code, or to give
rise to any liability of the General Partner for such failure so to qualify.
7.9. EMPLOYMENT OR RETENTION OF AFFILIATES.
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(a) Any Affiliate of the General Partner may be employed or
retained by the Partnership and may otherwise deal with the Partnership (whether
as a buyer, lessor, lessee, manager, furnisher of goods or services, broker,
agent, lender or otherwise) and may receive from the Partnership any
compensation, price, or other payment therefor which the General Partner
determines to be fair and reasonable.
(b) The Partnership may lend or contribute to its subsidiaries
or other Persons in which it has an equity investment, and such Persons may
borrow funds from he 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.
(c) 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 as
the General Partner deems are consistent with this Agreement and applicable law.
(d) Except as expressly permitted by this Agreement, neither
the General Partner nor any of its Affiliates shall sell, transfer or convey any
property to, or purchase any property from, the Partnership, directly or
indirectly, except pursuant to transactions that are on terms that are fair and
reasonable to the Partnership.
7.10. 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 assets 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 its best 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.
7.11. OTHER MATTERS CONCERNING THE GENERAL PARTNER.
(a) The General Partner 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
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taken in reliance upon the opinion of such Persons as to matters which such
General Partner reasonably believes to be with 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.
(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 a duly appointed attorney or attorney-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.
7.12. ORIGINAL PROPERTIES. The General Partner shall use all commercially
reasonable efforts in disposing of any of the Original Properties to structure
such transaction as one or more Section 1031 Exchanges.
ARTICLE VIII
DISSOLUTION, LIQUIDATION AND WINDING-UP
8.1. 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. Upon 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, upon the first to occur of any of
the following ("LIQUIDATING EVENTS"):
(a) an event of withdrawal of the last remaining General
Partner, as defined in the Act, unless within ninety (90) days following such
event of withdrawal, the remaining Partners representing a majority of the
Partnership Units held by such remaining Partners (the "CONSENTING PARTNERS")
(i) agree in writing to continue the Partnership and designate a successor
General Partner whose Partnership Interest in the Partnership shall be derived,
on an equitable basis, from the Partnership Interests of all remaining Partners
on terms to be determined by the Consenting Partners and (ii) provide written
notice of such agreement and designation to all other Partners;
(b) entry of a decree of judicial dissolution of the
Partnership pursuant to the provisions of the Act;
(c) the sale or other disposition of all or substantially all
of the assets and properties of the Partnership;
(d) the exchange of all Limited Partnership Interests; or
(e) the election by the General Partner that the Partnership
should be dissolved (in accordance with Section 7.2(e)(1).
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8.2. DISTRIBUTION ON DISSOLUTION. Upon the occurrence of a Liquidating
Event, the Partnership shall continue solely for the purposes of winding up its
affairs in an orderly manner, liquidating its assets, and satisfying the claims
of its creditors and Partners. No Partner shall take any action that is
inconsistent with, or not necessary to or appropriate for, the winding up of the
Partnership's business and affairs. The Liquidating Trustee shall be responsible
for overseeing the winding up and dissolution of the Partnership and shall take
full account of the Partnership's liabilities and property and the Partnership
property shall be liquidated as promptly as is consistent with obtaining the
fair value thereof, and the proceeds therefrom shall be applied and distributed
in the following order:
(a) Payment of creditors of the Partnership (other than
Partners) in the order of priority as provided by law;
(b) Establishment of reserves as provided by the General
Partner to provide for contingent liabilities, if any;
(c) Payment of debts of the Partnership to Partners, if any,
in the order of priority provided by law;
(d) To the Partners in accordance with the positive balances
in their Capital Accounts (after giving effect to all contributions,
distributions and allocations for all periods pursuant to this Section 8.2(d)
hereof).
Whenever the Liquidating Trustee reasonably determines that any reserves
established pursuant to paragraph (b) above are in excess of the reasonable
requirements of the Partnership, the amount determined to be excess shall be
distributed to the Partners in accordance with the above provisions.
8.3. SALE OF PARTNERSHIP ASSETS. In the event of the liquidation of the
Partnership in accordance with the terms of this Agreement, the Liquidating
Trustee may sell Partnership property; PROVIDED, HOWEVER, all sales, leases,
encumbrances or transfers of Partnership assets shall be made by the Liquidating
Trustee solely on an "arm's-length" basis, at the best price and on the best
terms and conditions as the Liquidating Trustee in good faith believes are
reasonably available at the time and under the circumstances and on a
non-recourse basis to the Limited Partners. The liquidation of the Partnership
shall not be deemed finally terminated until the Partnership shall have received
cash payments in full with respect to obligations such as notes, purchase money
mortgages, installment sale contracts or other similar receivables received by
the Partnership in connection with the sale of Partnership assets and all
obligations of the Partnership have been satisfied or assumed by the General
Partner. The Liquidating Trustee shall continue to act to enforce all of the
rights of the Partnership pursuant to any such obligations until paid in full.
8.4. DISTRIBUTIONS IN KIND. In the event that it becomes necessary to
make a distribution of Partnership property in kind, the General Partner may,
with the Consent of the Limited Partners, transfer and convey such property to
the distributees as tenants in common, subject to any liabilities attached
thereto, so as to vest in them undivided interests in the whole of
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such property in proportion to their respective rights to share in the
proceeds of the sale of such property (other than as a creditor) in
accordance with the provisions of Section 8.2 hereof.
8.5. DOCUMENTATION OF LIQUIDATION. Upon the completion of the
dissolution and liquidation of the Partnership, the Partnership shall terminate
and the Liquidating Trustee shall have the authority to execute and record any
and all documents or instruments required to effect the dissolution, liquidation
and termination of the Partnership.
8.6. LIABILITY OF THE LIQUIDATING TRUSTEE. The Liquidating Trustee
shall be indemnified and held harmless by the Partnership from and against any
and all claims, demands, liabilities, costs, damages and causes of action of any
nature whatsoever arising out of or incidental to the Liquidating Trustee' s
taking of any action authorized under or within the scope of this Agreement;
PROVIDED, HOWEVER, that the Liquidating Trustee shall not be entitled to
indemnification, and shall not be held harmless, where the claim, demand,
liability, cost, damage or cause of action at issue arose out of:
(a) A matter entirely unrelated to the Liquidating Trustee's
action or conduct pursuant to the provisions of this Agreement; or
(b) The proven misconduct or negligence of the Liquidating
Trustee.
8.7. ACCOUNTING. In the event of the dissolution, liquidating and
winding-up of the Partnership, a proper accounting (which shall be certified)
shall be made of the Capital Account of each Partner and of the Profits or
Losses of the Partnership from the date of the last previous accounting to the
date of dissolution. Financial statements presenting such accounting shall
include a report of a certified public accountant selected by the Liquidating
Trustee.
8.8. NEGATIVE CAPITAL ACCOUNTS. No Partner shall be liable to the
Partnership or to any other Partner for any deficit or negative balance which
may exist in such Partner's Capital Account, whether such negative Capital
Account results from the allocation of Losses or other items of deduction and
loss to such Partner or from distribution to such Partner.
8.9. RIGHTS OF PARTNERS. Except as otherwise provided in this
Agreement, each Partner shall look solely to the assets of the Partnership for
the return of such Partner's 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 Partner shall have priority over any
other Partner as to the return of his Capital Contributions, distributions, or
allocations.
8.10. NOTICE OF DISSOLUTION. In the event a Liquidating Event occurs or
an event occurs that would result in a dissolution of the Partnership, the
General Partner shall, within 30 days thereafter, provide written notice thereof
to each of the Partners.
8.11. TERMINATION OF PARTNERSHIP AND CANCELLATION OF CERTIFICATE OF
LIMITED PARTNERSHIP. Upon the completion of the liquidation of the Partnership
and the distribution of all cash and property as provided in Section 8.2 hereof,
the Partnership shall be terminated, a certificate of cancellation shall be
filed, and all qualifications of the Partnership as a foreign
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limited partnership in any jurisdiction other than the State of Delaware shall
be cancelled and such other actions as may be necessary to terminate the
Partnership shall be taken.
8.12. WAIVER OF PARTITION. Each Partner hereby waives any right to
partition of the Partnership property.
ARTICLE IX
TRANSFER OF PARTNERSHIP INTERESTS
9.1. GENERAL.
(a) The term "transfer," when used in this Article IX with
respect to a Partnership Unit, shall be deemed to refer to a transaction by
which the General Partner purports to assign all or any part of its General
Partner Interest to another Person or by which a Limited Partner purports to
assign all or any part of its Limited Partner Interest to another Person, and
includes a sale, assignment, gift, pledge, encumbrance, hypothecation, mortgage,
exchange or any other disposition by law or otherwise. The term "transfer" when
used in this Article IX does not include any redemption of Partnership Units by
the Partnership from a Limited Partner or acquisition of Partnership Units from
a Limited Partner by the General Partner pursuant to the Conversion Rights.
(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 IX. Any transfer or purported transfer of a Partnership Interest not
made in accordance with this Article IX shall be null and void.
9.2. GENERAL PARTNER TRANSFER.
(a) The General Partner shall not withdraw from the
Partnership and shall not sell, assign, pledge, encumber or otherwise dispose of
all or any portion of its interest in the Partnership without the Consent of the
Limited Partners, which shall not be unreasonably withheld.
(b) Except for the merger with Fairlawn Industrial Park, Inc.
effected on the Closing Date, the General Partner shall not engage in any
merger, consolidation or other combination with or into another Person, or sale
of all or substantially all of its assets, or any reclassification, or
recapitalization or change of outstanding Shares (other than a reincorporation,
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 "Conversion
Factor," which require no Consent of the Limited Partners under this Agreement)
("Transaction"), unless the Transaction either:
(1) includes a merger of the Partnership or sale of
substantially all of the assets of the Partnership, as a result of
which all Limited Partners will receive for each OP Unit an amount
of cash, securities, or other property equal to the product of the
Conversion Factor and the greatest amount of cash, securities or
other property paid to a holder of one Share in consideration of
one Share at any time during the period from
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and after the date on which the Transaction is consummated,
PROVIDED THAT if, in connection with the Transaction, a purchase,
tender or exchange offer shall have been made to and accepted by
the holders of more than fifty percent (50%) of the outstanding
Shares, the holders of OP Units shall receive the greatest amount
of cash, securities, or other property which a Limited Partner
would have received had it exercised the Conversion Right and
received Shares in exchange for all of its OP Units immediately
prior to the expiration of such purchase, tender or exchange
offer; or
(2) provides that the Partnership shall continue as a
separate entity and grants to the Limited Partners exchange rights
with respect to the ownership interests in the new entity that are
substantially equivalent to the Conversion Rights provided for in
Section 12.1.
(c) Upon any transfer of a Partnership Interest in accordance
with the provisions of this Section 9.2, the successor General Partner shall
become vested with the powers and rights of the transferor General Partner, and
shall be liable for all obligations and responsible for all duties of the
General Partner, once such successor has executed such instruments as may be
necessary to effectuate such admission and to confirm the agreement of such
successor to be bound by all the terms and provisions of this Agreement with
respect to the Partnership Interest so acquired. It is a condition to any
transfer otherwise permitted hereunder that the successor assumes by operation
of law or express agreement all of the obligations of the transferor General
Partner under this Agreement with respect to such transferred Partnership
Interest.
(d) In the event the General Partner withdraws from the
Partnership, in violation of this Agreement or otherwise, or dissolves,
terminates or upon the Bankruptcy of the General Partner, a Majority-In-Interest
of the Limited Partners may elect to continue the Partnership business by
selecting a successor general partner.
9.3. TRANSFERS BY LIMITED PARTNERS.
(a) No Limited Partner shall sell, assign, pledge, encumber,
or otherwise dispose of all or any portion of its Partnership Interest to any
transferee without the consent of the General Partner, which consent shall not
be unreasonably withheld; PROVIDED, HOWEVER, that each Limited Partner may at
any time, without the consent of the General Partner, transfer all or a portion
of its Partnership Interest to an Affiliate of such Limited Partner, subject to
the provisions of this Section 9.3 and Section 9.6 hereof.
(b) Nothing herein shall preclude a Limited Partner from
transferring its Limited Partnership Interest upon exercise of its Conversion
Rights under Article XII hereof.
(c) It is a condition to any transfer otherwise permitted
hereunder that the transferee assumes by operation of law or express agreement
all of the obligations of the transferor Limited Partner under this Agreement
with respect to such transferred Partnership Interest and no such transfer
(other than pursuant to a statutory merger or consolidation wherein all
obligations and liabilities of the transferor Partner are assumed by a successor
corporation by operation of law) shall relieve the transferor Partner of its
obligations under this Agreement without the approval of the General Partner, in
its reasonable discretion. Any transferee, whether
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or not admitted as a Substituted Limited Partner, shall take subject to the
obligations of the transferor hereunder.
(d) If a Limited Partner is subject to Incapacity, the
executor, administrator, trustee, committee, guardian, conservator or receiver
of such Limited Partner's estate shall have all the rights of a Limited Partner,
but not more rights than those enjoyed by other Limited Partners, for the
purpose of settling or managing the estate and such power as the Incapacitated
Limited Partner possessed to transfer all or any part of his or its interest in
the Partnership. The Incapacity of a Limited Partner, in and of itself, shall
not dissolve or terminate the Partnership.
9.4. SUBSTITUTED LIMITED PARTNERS.
(a) A Limited Partner shall have the right to substitute a
transferee as a Limited Partner in his place without the consent of the General
Partner in cases of transfer of all or a portion of its Partnership Interest to
an Affiliate of such Limited Partner, subject to the provisions of Section 9.6.
In all other situations, the General Partner shall have the right to consent to
the admission of a transferee of the interest of a Limited Partner as a
Substituted Limited Partner, which consent shall not be unreasonably withheld,
subject to the provisions of Section 9.6.
(b) A transferee who has been admitted as a Substituted
Limited Partner shall have all the rights and powers, including rights with
respect to the Conversion Rights, of the transferor Limited Partner, and be
subject to all the restrictions and liabilities of a Limited Partner under this
Agreement; PROVIDED, HOWEVER, that notwithstanding the foregoing, any transferee
shall be subject to any and all ownership limitations contained in the Charter.
(c) Unless admitted as a Substituted Limited Partner, no
transferee of a Partnership Interest pursuant to this Section 9.4, whether by a
voluntary transfer, by operation of law or otherwise, shall have rights
hereunder, other than to receive such portion of the distributions made by the
Partnership as are allocable to the Percentage Interest transferred.
9.5. ASSIGNEES. If the General Partner does not consent to the
admission of any permitted 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 Profits, Losses,
and any other items of income, gain, loss, deduction and credit of the
Partnership attributable to the Partnership Units assigned to such transferee,
but shall not be deemed to be a holder of Partnership Units for any other
purpose under this Agreement, and shall not be entitled to vote such Partnership
Units in any matter presented to the Limited Partners for a vote, such
Partnership Units continuing to be voted by the Partner appearing in the records
of the Partnership as owning the same. In the event any such transferee desires
to make a further assignment of any such Partnership Units, such transferee
shall be subject to all the provisions of this Article IX to the same extent and
in the same manner as any Limited Partner desiring to make an assignment of
Partnership Units.
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9.6. RESTRICTIONS ON TRANSFER. In addition to any other restrictions on
transfer herein contained, in no event may any transfer or assignment of a
Partnership Interest by any Partner be made (i) to any person or entity who
lacks the legal right, power or capacity to own a Partnership Interest; (ii) in
violation of any provision of any mortgage or trust deed (or the note or bond
secured thereby) constituting a Lien against a Property or any part thereof, or
other instrument, document or agreement to which the Partnership or any Property
is a party or otherwise bound; (iii) in violation of applicable law; (iv) of any
component portion of a Partnership Interest, such as the Capital Account, or
rights to distributions, separate and apart from all other components of a
Partnership Interest; (v) in the event such transfer would immediately or with
the passage of time cause the Company to fail to comply with the REIT
Requirements, such determination to be made assuming that the Company does
comply with the REIT Requirements immediately prior to the proposed transfer;
(vi) if such transfer would cause a termination of the Partnership for federal
income tax purposes; (vii) if such transfer would, in the opinion of counsel to
the Partnership, cause the Partnership to cease to be classified as a
partnership, or to be classified as a "publicly traded partnership," for federal
income tax purposes; (viii) if such transfer would cause the Partnership to
become, with respect to any employee benefit plan subject to Title I of ERISA, 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); (ix) if such transfer
would, in the opinion of counsel to the Partnership, cause any portion of the
underlying assets of the Partnership to constitute assets of any employee
benefit plan pursuant to Department of Labor Regulations Section 2510.3-101 or
(x) if such transfer would, in the opinion of counsel to the Partnership,
violate the Securities Act or applicable state blue sky laws.
ARTICLE X
ADMISSION OF PARTNERS
10.1. ADMISSION OF SUCCESSOR GENERAL PARTNER. A successor to all of the
General Partner Interest pursuant to Section 9.2 hereof shall be admitted to the
Partnership as the General Partner, effective as of the date of such transfer.
The successor General Partner shall carry on the business of the Partnership
without dissolution. In each case, the admission shall be subject to the
successor General Partner executing and delivering to the Partnership an
acceptance of all of the terms and conditions of this Agreement and such other
documents or instruments as may be required to effect the admission. In the case
of such admission on any day other than the first day of a Partnership Year, all
items attributable to the General Partner Interest for such Partnership Year
shall be allocated between the transferring Partner(s) and such successor as
provided in Section 5.1(g).
10.2. ADMISSION OF SUBSTITUTED OR ADDITIONAL LIMITED PARTNERS.
(a) An Additional Limited Partner shall be admitted only upon
furnishing to the General Partner (i) a written agreement of acceptance in form
satisfactory to the General Partner accepting all of the terms and conditions of
this Agreement, including, without limitation, the power of attorney granted in
Section 2.4 hereof and the Registration Rights Agreement; 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 a Substituted or
Additional Limited Partner.
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(b) The admission of any Person as a Substituted or Additional
Limited Partner shall become effective on the date upon which the name of such
Person is recorded in the books and records of the Partnership, following the
consent of the General Partner to such admission.
(c) If any Substituted or Additional Limited Partner is
admitted to the Partnership on any day other than the first day of a Partnership
Year, then Profits, 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 in
accordance with Section 5.1.
10.3. AMENDMENT OF AGREEMENT AND CERTIFICATE OF LIMITED PARTNERSHIP.
The General Partner shall take all steps necessary and appropriate under the Act
to amend the books and records of the Partnership and to prepare as soon as
practical an amendment of this Agreement (including an amendment of EXHIBIT A)
to reflect the admission to the Partnership of any Partner and any corresponding
changes in the Percentage Interests of the Partners, and, if required by law,
shall prepare and file an amendment to the Certificate and may for the purposes
of amending the Certificate exercise the power of attorney granted pursuant to
Section 2.4 hereof. The General Partner shall promptly deliver a copy of any
amendments to this Agreement or the Certificate to each Limited Partner.
ARTICLE XI
RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNERS
11.1. NO PARTICIPATION IN MANAGEMENT. Except as expressly permitted
hereunder, the Limited Partners shall not take part in the management 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.
11.2. BANKRUPTCY OF A LIMITED PARTNER. The Bankruptcy of any Limited
Partner shall not cause a dissolution of the Partnership, but the rights of such
Limited Partner to share in the Profits or Losses of the Partnership and to
receive distributions of Partnership funds shall, on the happening of such
event, devolve on its successors or assigns, subject to the terms and conditions
of this Agreement, and the Partnership shall continue as a limited partnership.
However, in no event shall such assignee(s) become a Substituted Limited
Partner.
11.3. NO WITHDRAWAL. No Limited Partner may withdraw from the
Partnership without the prior written consent of the General Partner, other than
as expressly provided in this Agreement.
11.4. DUTIES AND CONFLICTS. The General Partner recognizes that the
Limited Partners and their Affiliates have or may have other business interests,
activities and investments, some of which may be in conflict or competition with
the business of the Partnership, and that, such persons are entitled to carry on
such other business interests, activities and investments. The Limited Partners
and their Affiliates may engage in or possess an interest in any other business
or venture of any kind, independently or with others, on their own behalf or
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on behalf of other entities with which they are affiliated or associated, and
such persons may engage in any activities, whether or not competitive with the
Partnership, without any obligation to offer any interest in such activities to
the Partnership or to any Partner. Neither the Partnership nor any Partner shall
have any right, by virtue of this Agreement, in or to such activities, or the
income or profits derived therefrom, and the pursuit of such activities, even if
competitive with the business of the Partnership, shall not be deemed wrongful
or improper.
11.5. CONSENT OF CERTAIN LIMITED PARTNERS. At any time during the 7
year period following the Closing Date, the Partnership may not sell or
otherwise dispose of a Designated Property or a Successor Designated Property
(as hereinafter defined) in a transaction that causes gain recognition under
Sections 704(c) or 752 (or any other section) of the Code for the Special
Consenting Partners without the consent of the Special Consenting Partners. For
purposes of this Section 11.5, the term "Successor Designated Property" means a
property acquired by the Partnership upon the disposition of a Designated
Property in a Section 1031 like kind exchange or any other exchange transaction
that does not result in gain recognition. The provisions of this Section 11.5
shall not be applicable with respect to any Special Consenting Partner if at any
time such Special Consenting Partner beneficially owns fewer than 30% of the
number of Partnership Units beneficially owned by such Special Consenting
Partner on the Closing Date.
ARTICLE XII
CONVERSION RIGHT
12.1. GRANT OF RIGHTS. The General Partner does hereby grant to each of
the Limited Partners and the Limited Partners do hereby accept the right, but
not the obligation (hereinafter such right sometimes referred to as the "Rights"
or "Conversion Rights"), to convert all or any portion of their OP Units into
Shares or cash, as selected by the General Partner, at any time or from time to
time, on the terms and subject to the conditions and restrictions contained in
this Article XII. In the event the General Partner elects to cause the Offered
Units to be converted into Shares, upon the closing of the acquisition of the
Offered Units, the General Partner shall become the owner of such Offered Units
and be a Substituted Limited Partner pursuant to Section 9.4 hereof. In the
event the General Partner elects to cause the Offered Units to be converted into
cash, upon the closing of the acquisition of the Offered Units, the General
Partner shall effect such conversion by causing the Partnership to redeem the
Offered Units for cash.
12.2. DELIVERY OF EXERCISE NOTICES. The Conversion Rights granted
hereunder may be exercised by any one or more of the Limited Partners
("Exercising Partners"), on the terms and subject to the conditions and
restrictions contained in this Article XII, upon delivery to the General Partner
of a Exercise Notice (the "Exercise Notice") in the form of EXHIBIT B, which
notice shall specify the number of OP Units to be sold by such Limited Partner
(the "Offered Units"). Once delivered, the Exercise Notice shall be irrevocable,
subject to payment by the General Partner or the Partnership of the purchase
price in Shares or cash (the "Purchase Price") in respect of such Partnership
Interests in accordance with the terms hereof.
12.3. LIMITATION ON DELIVERY OF EXERCISE NOTICES. The ability of
Limited Partners to exercise Conversion Rights shall be restricted so that only
one (1) Exercise Notice
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may be delivered to the General Partner during each calendar quarter period;
PROVIDED, HOWEVER, such Exercise Notice may be delivered by or on behalf of one
or more Exercising Parties.
12.4. LIMITATION ON EXERCISE OF CONVERSION RIGHTS. Conversion Rights
may be exercised at any time and from time to time, subject to the limitation
contained in Section 12.3 above and as provided herein. To the extent that the
delivery of Shares to an Exercising Partner would violate the ownership
limitations set forth in the Charter (the "Ownership Limit"), including without
limitation the restrictions set forth in Section 6.2.1 of the Charter, the
General Partner shall not deliver Shares to such Exercising Partner but may, in
its sole and absolute discretion, elect to either (i) pay the Purchase Price to
the Exercising Partner in cash, or (ii) refuse, in whole or in part, to accept
the Exercise Notice. A Limited Partner may not exercise the Conversion Right for
less than 1,000 Partnership Units, or, if such Limited Partner holds less than
1,000 Partnership Units, all of the Partnership Units held by such Partner.
12.5. PURCHASE PRICE UPON CONVERSION. If the General Partner elects to
pay the Purchase Price in Shares, then the General Partner shall acquire the
Offered Units in exchange for that number of Shares equal to the number of
Offered Units multiplied by the Conversion Factor. If the General Partner elects
to cause the Purchase Price to be paid in cash, then the Partnership shall
acquire the Offered Units in exchange for that amount of cash equal to such
number of Offered Units multiplied by the Adjusted Current Per Share Market
Price as of the date of the Exercise Notice.
12.6. CLOSING; DELIVERY OF ELECTION NOTICE. The closing of the
acquisition of Offered Units shall, unless otherwise mutually agreed, be held at
the principal offices of the General Partner, on the date agreed to by the
General Partner and the Exercising Partners, which date shall be as soon as
practicable but in no event be later than the date which is the later of (i)
twenty (20) days after the date of the Exercise Notice and (ii) the expiration
or termination of the waiting period applicable to each Exercising Partner, if
any, under the Hart-Scott Act. Notwithstanding the foregoing, in the event that
the General Partner elects to cause the Purchase Price to be paid in cash
because payment in Shares would violate the Ownership Limit, then the General
Partner shall have up to one hundred eighty (180) days after the date of the
Exercise Notice to close the acquisition of the Offered Units; PROVIDED THAT
after twenty (20) days, interest shall be paid on the Purchase Price at the
prime rate as reported in the WALL STREET JOURNAL.
12.7. CLOSING DELIVERIES. At the closing of the acquisition of Offered
Units, payment of the Purchase Price shall be accompanied by proper instruments
of transfer and assignment to transfer and vest ownership of the Offered Units
in the General Partner or the Partnership, as the case may be, and by the
delivery of (i) representations and warranties of (A) the Exercising Partner
with respect to its due authority to sell all of the right, title and interest
in and to such Offered Units to the General Partner or the Partnership, as the
case may be, and with respect to the status of the Offered Unit being sold, free
and clear of all Liens, and (B) the General Partner with respect to its due
authority to acquire such Offered Units for Shares or to cause the Partnership
to redeem such Offered Units for cash; and (ii) to the extent that any Shares
are issued in payment of the Purchase Price or any portion thereof, (A) an
opinion of counsel for the General Partner, reasonably satisfactory to the
Exercising Partners, to the effect that such Shares have been duly authorized,
are validly issued, fully paid and non-assessable, and
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(B) a stock certificate or certificates evidencing the Shares to be issued and
registered in the name of the Exercising Partner or its designee.
12.8. COVENANTS OF THE GENERAL PARTNER. To facilitate the General
Partner's ability to fully perform its obligations hereunder, the General
Partner covenants and agrees as follows:
(a) At all times during the pendency of the Conversion Rights,
the General Partner shall reserve for issuance such number of Shares as may be
necessary to enable the General Partner to issue such Shares in full payment of
the Purchase Price in regard to all Limited Partners' Partnership Interests
which are from time to time outstanding.
(b) As long as the General Partner shall be obligated to file
periodic reports under the Exchange Act, the General Partner will timely file
such reports in such manner as shall enable any recipient of Shares issued to
Limited Partners hereunder in reliance upon an exemption from registration under
the Securities Act to continue to be eligible to utilize Rule 144 promulgated by
the SEC pursuant to the Securities Act, or any successor rule or regulation or
statute thereunder, for the resale thereof.
(c) During the pendency of the Conversion Rights, the Limited
Partners shall receive in a timely manner all reports filed by the General
Partner with the SEC and all other communications transmitted from time to time
by the General Partner to the owners of its Shares.
(d) The General Partner shall, within five days after request
by a Limited Partner, notify such Limited Partner of the then current Conversion
Factor.
12.9. LIMITED PARTNERS' COVENANT. Each Limited Partner covenants and
agrees with the General Partner that all Offered Units tendered to the General
Partner or the Partnership, as the case may be, in accordance with the exercise
of Rights herein provided shall be delivered free and clear of all Liens and
should any Liens exist or arise with respect to such Offered Units, the General
Partner or the Partnership, as the case may be, shall be under no obligation to
acquire or redeem the same. Each Limited Partner further agrees that, in the
event any state or local property transfer tax is payable as a result of the
transfer of its Offered Units to the General Partner, the Partnership or their
respective designees, such Limited Partner shall assume and pay such transfer
tax.
ARTICLE XIII
BOOKS, RECORDS, ACCOUNTING AND REPORTS
13.1. RECORDS AND ACCOUNTING.
(a) The General Partner, at the cost and expense of the
Partnership, shall keep or cause to be kept at the principal executive 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
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limitation, all books and records necessary to provide to the Limited Partners
any information, lists and copies of documents required to be provided pursuant
to Section 13.2 hereof. The books of the Partnership shall be maintained, for
financial and tax reporting purposes, on an accrual basis in accordance with
GAAP, or on such other basis as the General Partner determines to be necessary
or appropriate.
(b) All books and records of the Partnership shall be open to
inspection by any Limited Partner or duly authorized representative of such
Limited Partner on reasonable notice at any reasonable time during business
hours, for any purpose reasonably related to the Limited Partner's interest as a
Limited Partner, and such Limited Partner or its representative at its expense
shall have the further right to make copies or excerpts therefrom.
13.2. REPORTS.
(a) As soon as practicable 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 General Partner if such statements are
prepared solely on a consolidated basis with the General Partner, for such
Partnership Year, presented in accordance with GAAP, such statements to be
audited by a nationally recognized firm of independent public accountants
selected by the General Partner.
(b) As soon as practicable after the close of each calendar
quarter (except the last calendar quarter of each year), the General Partner
shall cause to be mailed to each Limited Partner as of the last day of the
calendar quarter, a report containing unaudited financial statements of the
Partnership, or of the General Partner, if such statements are prepared solely
on a consolidated basis with the General Partner, and such other information as
may be required by applicable law or regulation, or as the General Partner
determines to be appropriate.
13.3. BANK ACCOUNTS.
(a) All funds of the Partnership not otherwise invested shall
be deposited in one or more accounts maintained in such banking or brokerage
institutions as the General Partner shall determine, and withdrawals shall be
made only on such signature or signatures as the General Partner may, from time
to time, determine.
(b) All deposits and other funds not needed in the operation
of the business of the Partnership may be invested by the General Partner in
investment grade instruments (or investment companies whose portfolio consists
primarily thereof), government obligations, certificates of deposit, bankers'
acceptances and municipal notes and bonds. The funds of the Partnership shall
not be commingled with the funds of any other Person except for such commingling
as may necessarily result from an investment in those investment companies
permitted by this Section 13.3 (b).
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ARTICLE XIV
AMENDMENT OF PARTNERSHIP AGREEMENT
14.1. GENERAL. This Agreement may not be amended without the approval
of the General Partner and by the Consent of the Limited Partners, except as
provided below in this Article XIV.
14.2. AMENDMENT WITHOUT CONSENT. Notwithstanding Section 14.1, the
General Partner shall have the power, without the Consent of the Limited
Partners, to amend this Agreement as may be required to facilitate or implement
any of the following purposes:
(a) 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;
(b) to reflect the admission, substitution, termination, or
withdrawal of Partners in accordance with this Agreement;
(c) to set forth the rights, powers, duties, and preferences
of the holders of any Additional Partnership Interests issued pursuant to
Section 4.2 hereof;
(d) to reflect a change that does not adversely affect the
Limited Partners in any material respect, or to cure any ambiguity, correct or
supplement any provision in this Agreement not inconsistent with law or with
other provisions; and
(e) 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 will
provide notice to the Limited Partners promptly after any action under this
Section 14.2(e) is taken.
14.3. SPECIAL CONSENT RIGHTS. Notwithstanding Section 14.1 hereof, 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 partner's interest; (ii) modify the limited liability
of a Limited Partner; (iii) alter rights of the Partners to receive allocations
and distributions pursuant to Articles V or VIII hereof (except as permitted
pursuant to Section 4.2 and Section 14.2(c) hereof); (iv) alter or modify the
Rights set forth in Article XII hereof, (v) alter or modify the rights set forth
in Article XV hereof; (vi) cause a termination of the Partnership prior to the
time set forth in Section 8.1; (vii) alter or modify Section 11.5; or (viii)
amend this Section 14.3.
ARTICLE XV
REGISTRATION RIGHTS
15.1. SHELF REGISTRATION UNDER THE SECURITIES ACT. (a) Filing of Shelf
Registration Statement. Within 24 months following the Closing Date, the Company
shall cause
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to be filed a Shelf Registration Statement providing for the sale by the Limited
Partners of all of the Registrable Securities in accordance with the terms
hereof and will use its reasonable best efforts to cause such Shelf Registration
Statement to be declared effective by the SEC as soon as reasonably practicable.
The Company agrees to use its reasonable best efforts to keep the Shelf
Registration Statement continuously effective under the Securities Act until
such time as the aggregate number of OP Units held by Limited Partners and
Registrable Securities outstanding is less than 10% of the aggregate number of
OP Units held by Limited Partners and outstanding on the Closing Date and,
subject to Section 15.2(b) and Section 15.2(i), further agrees to supplement or
amend the Shelf Registration Statement, if and as required by the rules,
regulations or instructions applicable to the registration form used by the
Company for such Shelf Registration Statement or by the Securities Act or by any
other rules and regulations thereunder for Shelf Registration. Each Limited
Partner who sells Shares as part of the Shelf Registration shall be deemed to
have agreed to all of the terms and conditions of this Article XV and to have
agreed to perform any and all obligations of a Limited Partner hereunder.
(b) Expenses. The Company shall pay all Registration Expenses
in connection with the registration pursuant to Section 15.1(a). Each Limited
Partner shall pay all underwriting discounts and commissions, brokerage or
dealer fees, the fees and disbursements of counsel, accountants or other
representatives of such Limited Partner and transfer taxes, if any, relating to
the sale or disposition of such Limited Partner's Registrable Securities
pursuant to the Shelf Registration Statement or Rule 144 under the Securities
Act.
(c) Inclusion in Shelf Registration Statement. Not later than
30 days prior to filing the Shelf Registration Statement with the SEC, the
Company shall notify each Limited Partner of its intention to make such filing
and request advice from each Limited Partner as to whether such Limited Partner
desires to have Registrable Securities held by it or which it is entitled to
receive not later than the last day of the first Sale Period occurring in whole
or in part after the date of such notice included in the Shelf Registration
Statement at such time. Any Limited Partner who does not provide the information
reasonably requested by the Company in connection with the Shelf Registration
Statement as promptly as practicable after receipt of such notice, but in no
event later than 20 days thereafter, shall not be entitled to have its
Registrable Securities included in the Shelf Registration Statement at the time
it becomes effective, but shall have the right thereafter to deliver to the
Company a Registration Notice as contemplated by Section 15.2(b). The provisions
of this Article XV, and the obligations of the Company hereunder, apply only to
those Limited Partners who were Limited Partners as of the Closing Date, and
their permitted transferees and assignees.
15.2. REGISTRATION PROCEDURES. In connection with the obligations of
the Company with respect to the Shelf Registration Statement pursuant to Section
15.1 hereof, the Company shall:
(a) prepare and file with the SEC, within the time period set
forth in Section 15.1(a) hereof, a Shelf Registration Statement, which Shelf
Registration Statement (i) shall be available for the sale of the Registrable
Securities in accordance with the intended method or methods of distribution by
the selling Limited Partners thereof and (ii) shall comply as to form in all
material respects with the requirements of the applicable form and include all
financial statements required by the SEC to be filed therewith;
49
<PAGE>
(b) subject to the last three sentences of this Section
15.2(b) and to Section 15.2(i) hereof, (i) prepare and file with the SEC such
amendments and post-effective amendments to the Shelf Registration Statement as
may be necessary to keep the Shelf Registration Statement effective for the
applicable period; (ii) cause each Prospectus to be supplemented by any required
prospectus supplement, and as so supplemented to be filed pursuant to Rule 424
or any similar rule that may be adopted under the Securities Act; (iii) respond
promptly to any comments received from the SEC with respect to the Shelf
Registration Statement, or any amendment, post-effective amendment or supplement
relating thereto; and (iv) comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by the Shelf Registration
Statement during the applicable period in accordance with the intended method or
methods of distribution by the selling Limited Partners thereof. Notwithstanding
anything to the contrary contained herein, the Company shall not be required to
take any of the actions described in clauses (i), (ii) or (iii) above with
respect to each particular Limited Partner holding Registrable Securities unless
and until the Company has received either a written notice (a "Registration
Notice") from a Limited Partner that such Limited Partner intends to make offers
or sales under the Shelf Registration Statement as specified in such
Registration Notice or a written response from such Limited Partner of the type
contemplated by Section 15.1(c); provided, however, that the Company shall have
7 business days to prepare and file any such amendment or supplement after
receipt of a Registration Notice. Offers or sales under the Shelf Registration
Statement may be made only during a Sale Period. Such Limited Partner also shall
notify the Company in writing upon completion of such offer or sale or at such
time as such Limited Partner no longer intends to make offers or sales under the
Shelf Registration Statement;
(c) furnish to each Limited Partner holding Registrable
Securities that has delivered a Registration Notice to the Company, without
charge, as many copies of each applicable Prospectus, including each preliminary
Prospectus and any amendment or supplement thereto, and such other documents as
such Limited Partner may reasonably request, in order to facilitate the public
sale or other disposition of the Registrable Securities; the Company consents to
the use of such Prospectus, including each preliminary Prospectus, by each such
Limited Partner in connection with the offering and sale of the Registrable
Securities covered by such Prospectus or the preliminary Prospectus;
(d) use its reasonable best efforts to register or qualify the
Registrable Securities by the time the Shelf Registration Statement is declared
effective by the SEC under all applicable state securities or "blue sky" laws of
such jurisdictions as any Limited Partner holding Registrable Securities covered
by the Shelf Registration Statement shall reasonably request in writing, keep
each such registration or qualification effective during the period the Shelf
Registration Statement is required to be kept effective or during the period
offers or sales are being made by a Limited Partner that has delivered a
Registration Notice to the Company, whichever is shorter, and do any and all
other acts and things which may be reasonably necessary or advisable to enable
such Limited Partner to consummate the disposition in each such jurisdiction of
such Registrable Securities owned by such Limited Partner; provided, however,
that the Company shall not be required (i) to qualify generally to do business
in any jurisdiction or to register as a broker or dealer in such jurisdiction
where it would not be required so to qualify or register but for this Section
15.2(d), (ii) to subject itself to taxation in any such jurisdiction or (iii) to
submit to the general service of process in any such jurisdiction;
50
<PAGE>
(e) notify each Limited Partner when the Shelf Registration
Statement has become effective and notify each Limited Partner holding
Registrable Securities that has delivered a Registration Notice to the Company
promptly and, if requested by such Limited Partner, confirm such advice in
writing (i) when any post-effective amendments and supplements to the Shelf
Registration Statement become effective, (ii) of the issuance by the SEC or any
state securities authority of any stop order suspending the effectiveness of the
Shelf Registration Statement or the initiation of any proceedings for that
purpose, (iii) if the Company receives any notification with respect to the
suspension of the qualification of the Registrable Securities for sale in any
jurisdiction or the initiation of any proceeding for such purpose and (iv) of
the happening of any event during the period the Shelf Registration Statement is
effective as a result of which the Shelf Registration Statement or a related
Prospectus contains any untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to make the
statements therein (in the case of the Prospectus, in light of the circumstances
under which they were made) not misleading;
(f) make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of the Shelf Registration Statement at
the earliest possible moment;
(g) furnish to each Limited Partner holding Registrable
Securities that has delivered a Registration Notice to the Company, without
charge, at least one conformed copy of the Shelf Registration Statement and any
post-effective amendment thereto (without documents incorporated therein by
reference or exhibits thereto, unless requested);
(h) cooperate with the selling Limited Partners holding
Registrable Securities to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold and not bearing any
Securities Act legend; and enable certificates for such Registrable Securities
to be issued for such numbers of shares and registered in such names as the
selling Limited Partners may reasonably request at least two business days prior
to any sale of Registrable Securities;
(i) subject to the last three sentences of Section 15.2(b)
hereof, upon the occurrence of any event contemplated by Section 15.2(e)(iv)
hereof, use its reasonable best efforts promptly to prepare and file a
supplement or prepare, file and obtain effectiveness of a post-effective
amendment to the Shelf Registration Statement or a related Prospectus or any
document incorporated therein by reference or file any other required document
so that, as thereafter delivered to the purchasers of the Registrable
Securities, such Prospectus will 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 therein, in the light of the circumstances under which
they were made, not misleading;
(j) a reasonable time prior to the filing of any Prospectus,
any amendment to the Shelf Registration Statement or amendment or supplement to
a Prospectus, provide copies of such document (not including any documents
incorporated by reference therein unless requested) to the Limited Partners
holding Registrable Securities that have provided a Registration Notice to the
Company;
51
<PAGE>
(k) use its reasonable best efforts to cause all Registrable
Securities to be listed on any securities exchange on which similar securities
issued by the Company are then listed;
(l) otherwise use its reasonable efforts to comply with all
applicable rules and regulations of the SEC and make available to its security
holders, as soon as reasonably practicable, an earnings statement covering at
least 12 months which shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder; and
(m) use its reasonable best efforts to cause the Registrable
Securities covered by the Shelf Registration Statement to be registered with or
approved by such other governmental agencies or authorities as may be necessary
by virtue of the business and operations of the Company to enable Limited
Partners that have delivered Registration Notices to the Company to consummate
the disposition of such Registrable Securities.
The Company may require each Limited Partner holding
Registrable Securities to furnish to the Company in writing such information
regarding the proposed distribution by such Limited Partner as the Company may
from time to time reasonably request in writing.
In connection with and as a condition to the Company's
obligations with respect to the Shelf Registration Statement pursuant to Section
15.1 hereof and this Section 15.2, each Limited Partner agrees that (i) it will
not offer or sell its Registrable Securities under the Shelf Registration
Statement until (A) it has either (1) provided a Registration Notice pursuant to
Section 15.2(b) hereof or (2) had Registrable Securities included in the Shelf
Registration Statement at the time it became effective pursuant to Section
15.1(c) hereof and (B) it has received copies of the supplemented or amended
Prospectus contemplated by Section 15.2(b) hereof and receives notice that any
post-effective amendment has become effective; (ii) upon receipt of any notice
from the Company of the happening of any event of the kind described in Section
15.2(b)(iv) hereof, such Limited Partner will forthwith discontinue disposition
of Registrable Securities pursuant to the Shelf Registration Statement until
such Limited Partner receives copies of the supplemented or amended Prospectus
contemplated by Section 15.2(i) hereof and receives notice that any
post-effective amendment has become effective, and, if so directed by the
Company, such Limited Partner will deliver to the Company (at the expense of the
Company) all copies in its possession, other than permanent file copies then in
such Limited Partner's possession, of the Prospectus covering such Registrable
Securities current at the time of receipt of such notice; and (iii) all offers
and sales under the Shelf Registration Statement shall be completed within
forty-five (45) days after the first date on which offers or sales can be made
pursuant to clause (i) above, and upon expiration of such forty-five (45) day
period the Limited Partner will not offer or sell its Registrable Securities
under the Shelf Registration Statement until it has again complied with the
provisions of clause (i)(B) above, except that if the applicable Registration
Notice was delivered to the Company at a time which was not part of a Sale
Period, such forty-five (45) day period shall be the next succeeding Sale
Period.
15.3. RESTRICTIONS ON PUBLIC SALE BY HOLDERS OF REGISTRABLE SECURITIES.
Each Limited Partner agrees with the Company that:
52
<PAGE>
(a) If the Board of Directors of the Company determines in its
good faith judgment that the filing of the Shelf Registration Statement under
Section 15.1 hereof or the use of any Prospectus would materially impede, delay
or interfere with any pending material financing, acquisition or corporate
reorganization or other material corporate development involving the Company or
any of its subsidiaries, or require the disclosure of important information
which the Company has a bona fide business purpose for preserving as
confidential or the disclosure of which would impede the Company's ability to
consummate a significant transaction, upon written notice of such determination
by the Company, the rights of the Limited Partners to offer, sell or distribute
any Registrable Securities pursuant to the Shelf Registration Statement or to
require the Company to take action with respect to the registration or sale of
any Registrable Securities pursuant to the Shelf Registration Statement
(including any action contemplated by Section 15.2 hereof) will be suspended
until the date upon which the Company notifies the Limited Partners in writing
that suspension of such rights for the grounds set forth in this Section 15.3(a)
is no longer necessary, but no such period shall extend for longer than 90 days.
(b) In the case of the registration of any underwritten equity
offering proposed by the Company (other than any registration by the Company on
Form S-8, or a successor or substantially similar form, of (i) an employee stock
option, stock purchase or compensation plan or of securities issued or issuable
pursuant to any such plan or (ii) a dividend reinvestment plan), each Limited
Partner agrees, if requested in writing by the managing underwriter or
underwriters administering such offering, not to effect any offer, sale or
distribution of Registrable Securities (or any option or right to acquire
Registrable Securities) during the period commencing on the 7th day prior to the
expected effective date (which date shall be stated in such notice) of the
registration statement covering such underwritten primary equity offering and
ending on the date specified by such managing underwriter in such written
request to such Limited Partner, which date shall not be later than 90 days
after such expected date of effectiveness.
(c) In the event that any Limited Partner uses a Prospectus in
connection with the offering and sale of Registrable Securities covered by such
Prospectus, such Limited Partner will use only the latest version of such
Prospectus provided to it by the Company.
15.4. INDEMNIFICATION; CONTRIBUTION. (a) Indemnification by the
Company. The Company agrees to indemnify and hold harmless each Limited Partner
and its officers and directors and each person, if any, who controls any Limited
Partner within the meaning of Section 15 of the Securities Act as follows:
(1) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue
statement or alleged untrue statement of a material fact contained
in the Shelf Registration Statement (or any amendment thereto) or
any Prospectus, including all documents incorporated therein by
reference, or the omission or alleged omission therefrom of a
material fact necessary in order to make the statements therein,
in light of the circumstances under which they were made, not
misleading;
53
<PAGE>
(2) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate
amount paid in settlement of any litigation, or investigation or
proceeding by any governmental agency or body, commenced or
threatened, or of any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or
omission, if such settlement is effected with the written consent
of the Company; and
(3) against any and all expense whatsoever, as incurred
(including reasonable fees and disbursements of counsel),
reasonably incurred in investigating, preparing or defending
against any litigation, or investigation or proceeding by any
governmental agency or body, commenced or threatened, in each case
whether or not a party, or any claim whatsoever based upon any
such untrue statement or omission, or any such alleged untrue
statement or omission, to the extent that any such expense is not
paid under clause (i) or (ii) above;
PROVIDED, HOWEVER, that the indemnity provided pursuant to this
Section 15.4(a) does not apply to any Limited Partner with respect
to any loss, liability, claim, damage or expense to the extent
arising out of any untrue statement or omission or alleged untrue
statement or omission made in reliance upon and in conformity with
written information furnished to the Company by such Limited
Partner expressly for use in the Shelf Registration Statement (or
any amendment thereto) or any Prospectus.
(b) Indemnification by Limited Partners. Each Limited Partner
severally agrees to indemnify and hold harmless the Company and the other
selling Limited Partners, and each of their respective directors and officers
(including each director and officer of the Company who signed the Shelf
Registration Statement), and each person, if any, who controls the Company or
any other selling Limited Partner within the meaning of Section 15 of the
Securities Act, to the same extent as the indemnity contained in Section 15.4(a)
hereof (except that any settlement described in Section 15.4(a)(2) shall be
effected with the written consent of such Limited Partner), but only insofar as
such loss, liability, claim, damage or expense arises out of or is based upon
any untrue statement or omission, or alleged untrue statement or omission, made
in the Shelf Registration Statement (or any amendment thereto) or any Prospectus
in reliance upon and in conformity with written information furnished to the
Company by such selling Limited Partner expressly for use in the Shelf
Registration Statement (or any amendment thereto) or such Prospectus. In no
event shall the liability of any Limited Partner under this Section 15.4(b) be
greater in amount than the dollar amount of the proceeds received by such
Limited Partner upon the sale of the Registrable Securities giving rise to such
indemnification obligation.
(c) Each indemnified party shall give reasonably prompt notice
to each indemnifying party of any action or proceeding commenced against it in
respect of which indemnity may be sought hereunder, but failure so to notify an
indemnifying party (i) shall not relieve it from any liability which it may have
under the indemnity agreement provided in Section 15.4(a) or (b) unless and to
the extent it did not otherwise learn of such action and the lack of notice by
the indemnified party results in the forfeiture by the indemnifying party of
substantial rights and defenses and (ii) shall not, in any event, relieve the
indemnifying party from any obligations to any indemnified party other than the
indemnification obligation provided
54
<PAGE>
under Section 15.4(a) or (b). If the indemnifying party so elects within a
reasonable time after receipt of such notice, the indemnifying company may
assume the defense of such action or proceeding at such indemnifying party's own
expense with counsel chosen by the indemnifying party; PROVIDED, HOWEVER, that,
if such indemnified party or parties reasonably determine that a conflict of
interest exists where it is advisable for such indemnified party or parties to
be represented by separate counsel or that, upon advice of counsel, there may be
legal defenses available to them which are different from or in addition to
those available to the indemnifying party, then the indemnifying party shall not
be entitled to assume such defense and the indemnified party or parties in the
aggregate shall be entitled to one separate counsel at the indemnifying party's
expense. If an indemnifying party is not so entitled to assume the defense of
such action or does not assume such defense, after having received the notice
referred to in the first sentence of this Section 15.4(c), the indemnifying
party or parties will pay the reasonable fees and expenses of counsel for the
indemnified party or parties. In such event however, no indemnifying party will
be liable for any settlement effected without the written consent of such
indemnifying party. If an indemnifying party is entitled to assume, and assumes,
the defense of such action or proceeding in accordance with this paragraph, such
indemnifying party shall not be liable for any fees and expenses of counsel for
the indemnified parties incurred thereafter in connection with such action or
proceeding.
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for in this Section 15.4
is for any reason held to be unenforceable although applicable in accordance
with its terms, the Company and the selling Limited Partners shall contribute to
the aggregate losses, liabilities, claims, damages and expenses of the nature
contemplated by such indemnity agreement incurred by the Company and the selling
Limited Partners, in such proportion as is appropriate to reflect the relative
fault of and benefits to the Company on the one hand and the selling Limited
Partners on the other (in such proportions that the selling Limited Partners are
severally, not jointly, responsible for the balance), in connection with the
statements or omissions which resulted in such losses, liabilities, claims,
damages or expenses, as well as any other relevant equitable considerations. The
relative benefits to the indemnifying party and indemnified parties shall be
determined by reference to, among other things, the total proceeds received by
the indemnifying party and indemnified parties in connection with the offering
to which such losses, liabilities, claims, damages, or expenses relate. The
relative fault of the indemnifying party and indemnified parties shall be
determined by reference to, among other things, whether the action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact, has been made by, or relates to
information supplied by, such indemnifying party or the indemnified parties, and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such action.
The Company and the Limited Partners agree that it would not
be just or equitable if contribution pursuant to this Section 15.4(d) were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to in the
immediately preceding paragraph. Notwithstanding the provisions of this Section
15.4(d), no selling Limited Partner shall be required to contribute any amount
in excess of the amount by which the total price at which the Registrable
Securities of such selling Limited Partner were sold to the public, exceeds the
amount of any damages which such selling Limited Partner is otherwise required
to pay by reason of such untrue statement or omission.
55
<PAGE>
Notwithstanding the foregoing, no Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 15.4(d), each Person,
if any, who controls a Limited Partner within the meaning of Section 15 of the
Securities Act and directors and officers of a Limited Partner shall have the
same rights to contribution as such Limited Partner, and each director of the
Company, each officer of the Company who signed the Shelf Registration Statement
and each Person, if any, who controls the Company within the meaning of Section
15 of the Securities Act shall have the same rights to contribution as the
Company.
15.5. RULE 144 SALES. (a) The Company covenants that it will file the
reports required to be filed by the Company under the Securities Act and the
Exchange Act, so as to enable any Limited Partner to sell Registrable Securities
pursuant to Rule 144 under the Securities Act.
(b) In connection with any sale, transfer or other disposition
by any Limited Partner of any Registrable Securities pursuant to Rule 144 under
the Securities Act, the Company shall cooperate with such Limited Partner to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold and not bearing any Securities Act legend, and
enable certificates for such Registrable Securities to be for such number of
shares and registered in such names as the selling Limited Partners may
reasonably request at least two business days prior to any sale of Registrable
Securities.
ARTICLE XVI
GENERAL PROVISIONS
16.1. 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,
received by facsimile or overnight courier, or upon deposit in the United States
mail, registered or certified, postage prepaid, and properly addressed to the
Partner or Assignee at the address set forth in EXHIBIT A, or such other address
of which the Partner or Assignee shall notify the General Partner in writing.
16.2. BINDING EFFECT. This Agreement and all the terms and provisions
hereof shall be binding upon and shall inure to the benefit of all Partners, and
their legal representatives, heirs, successors and permitted assigns, except as
expressly herein otherwise provided.
16.3. LIABILITY OF LIMITED PARTNERS. The liability of the Limited
Partners for their obligations, covenants, representations and warranties under
this Agreement shall be several and not joint.
16.4. EFFECT AND INTERPRETATION. This Agreement shall be governed by
and construed in conformity with the laws of the State of Delaware.
16.5. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be an original, but all of which shall constitute one and
the same instrument.
56
<PAGE>
16.6. PARTNERS NOT AGENTS. Nothing contained herein shall be construed
to constitute any Partner the agent of another Partner, except as specifically
provided herein, or in any manner to limit the Partners in the carrying on of
their own respective businesses or activities.
16.7. TITLES AND CAPTIONS. All article or section titles or captions in
this Agreement are for convenience only. They shall not be deemed part of this
Agreement and in no way define, limit, extend or describe the scope or intent of
any provisions hereof. Except as specifically provided otherwise, references to
"Articles" and "Sections" are to Articles and Sections of this Agreement.
16.8. PRONOUNS AND PLURALS. Whenever the context may require, any
pronoun used in this Agreement shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns, pronouns and verbs
shall include the plural and vice versa.
16.9. SEVERABILITY. If any provision of this Agreement, or the
application of such provision to any person or circumstance, shall be held
invalid by a court of competent jurisdiction, the remainder of this Agreement,
or the application of such provision to persons or circumstances other than
those to which it is held invalid by such court, shall not be affected thereby.
16.10. ENTIRE AGREEMENT. This Agreement and all documents and
agreements referred to herein and therein contain the entire understanding and
agreement among the Partners with respect to the subject matter hereof and
supersede the Prior Agreement and any other prior written or oral understandings
or agreements among them with respect thereto.
16.11. ASSURANCES. Each of the Partners shall hereafter execute and
deliver such further instruments and do such further acts and things as may be
required or useful to carry out the intent and purpose of this Agreement and as
are not inconsistent with the terms hereof.
57
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement or caused this Agreement to be executed as of the date and year first
above written.
GENERAL PARTNER:
American Real Estate Investment Corporation
By: /s/ EVAN ZUCKER
---------------------------------------
Evan Zucker, President
LIMITED PARTNERS:
Executed by the below named Limited Partners
constituting a Majority-In-Interest of
the Limited Partners:
/s/ JAMES MULVIHILL
- -------------------------------
James Mulvihill
/s/ GAIL MULVIHILL
- -------------------------------
Gail Mulvihill
/s/ ROSALIND DAVIDOWITZ
- -------------------------------
Rosalind Davidowitz
/s/ EVAN ZUCKER
- -------------------------------
Evan Zucker
Dated: December 12, 1997
58
<PAGE>
ADMITTED LIMITED PARTNERS:
/s/ JEFFREY KELTER
- -------------------------------
Jeffrey Kelter
MCBRIDE HUDSON BAY, L.P.
By: Urban Farms Shopping Center, Inc.,
its General Partner
By: /s/ DAVID F. MCBRIDE
-------------------------------
Name: David F. McBride
Title: President
Dated: December 12, 1997
59
<PAGE>
IN WITNESS WHEREOF, pursuant to the authority of the General
Partner contained in Sections 2.2 and 14.2 hereof, the General Partner has
caused this Amended and Restated Agreement of Limited Partnership to be executed
as of the date and year first above written.
GENERAL PARTNER:
- ----------------
Keystone Property Trust
By:/s/ Stephen J. Butte
Name: Stephen J. Butte
Title: Vice-President
IN WITNESS WHEREOF, pursuant to Section 10.1 hereof, Keystone
Property Trust as the successor to all of the General Partner Interest of
American Real Estate Investment Corporation pursuant to Section 9.2 hereof,
hereby acknowledges, accepts and agrees to be bound by all of the terms and
conditions of this Agreement and such other documents or instruments as may be
required to effect the admission of Keystone Property Trust as the successor
General Partner.
Keystone Property Trust
By:/s/ Timothy A. Peterson
Name: Timothy A. Peterson
Title: Secretary
Dated: October 13, 1999
60
<PAGE>
EXHIBIT A
[To Follow]
A-1
<PAGE>
EXHIBIT B
FORM OF EXERCISE NOTICE
Pursuant to Article XII of the Agreement of Limited
Partnership of Keystone Operating Partnership, L.P., a Delaware limited
partnership (the "Partnership"), the undersigned hereby irrevocably elects to
exercise the right to sell to Keystone Property Trust, a Maryland real estate
investment trust and the general partner of the Partnership, _________ OP Units
of the Partnership (the "Offered Units") and requests that certificates for the
Purchase Price be issued in the name of _________________ (social security
number ___________).
All terms used herein not otherwise defined shall be defined
as set forth in the aforesaid Agreement of Limited Partnership.
Dated:
--------------------------------------
(Signature)
Signature Guaranteed:
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report dated February 7, 2000 included in this Form 10-K, into the
Company's previously filed: Form S-3 Registration Statements File Nos.
333-58971, 333-59251, 333-67637, 333-74277, 333-77627, 333-89095, 3333-92741,
333-31504 and Form S-8 Registration Statement File No. 333-70529.
/s/ Arthur Andersen LLP
Philadelphia, Pa.
March 28, 20000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000906113
<NAME> KEYSTONE PROPERTY TRUST
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 4,144
<SECURITIES> 0
<RECEIVABLES> 5966
<ALLOWANCES> 0<F1>
<INVENTORY> 23,556
<CURRENT-ASSETS> 3,470
<PP&E> 860,336
<DEPRECIATION> (22,396)
<TOTAL-ASSETS> 875,076
<CURRENT-LIABILITIES> 21,303
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145,931<F2>
3
<COMMON> 9
<OTHER-SE> 185,718
<TOTAL-LIABILITY-AND-EQUITY> 875,076
<SALES> 84,526
<TOTAL-REVENUES> 84,526
<CGS> 38,153
<TOTAL-COSTS> 38,153
<OTHER-EXPENSES> 5,654<F3>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 35,675<F4>
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,284<F5>
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,328
<EPS-BASIC> .83
<EPS-DILUTED> .80
<FN>
<F1>Deferred Items and Other Assets
<F2>Represents minority interest and convertible preferred units.
<F3>Represents loss from equity method investments and minority interest.
<F4>Represents interest expense and preferred dividends.
<F5>Represents gains on property sales.
</FN>
</TABLE>
