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UNITED STATES 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 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission File No. 1-12412
____EQK GREEN ACRES TRUST____
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C>
Delaware 23-2740383
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
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<S> <C>
Suite 800, One Tower Bridge, W. Conshohocken, PA 19428
(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code: _(215) 941-2992_
Securities registered pursuant to Section 12(b) of the Act:
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<S> <C>
Common Shares of Beneficial Interest New York Stock Exchange
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
</TABLE>
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by checkmark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
Indicate by checkmark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes ____X____ No ____________
The aggregate market value of Common Shares of Beneficial Interest held by
non-affiliates of the Registrant, based on the closing price of the Common
Shares of Beneficial Interest on March 23, 1994 on the New York Stock Exchange
of $10.25 per Share, is $93,901,300. As of March 23, 1994, 11,599,670 Common
Shares of Beneficial Interest were outstanding, which does not include 308,933
shares issuable to Equitable Realty Portfolio Management, Inc. (the 'Advisor')
on March 30, 1994. Officers and Managing
Trustees of EQK Green Acres Trust; The Equitable Life Assurance Society of the
United States and its affiliated entities; and executive officers of Compass
Retail, Inc. (and certain of their family members) are treated as affiliates for
the purposes of this computation, with no admission being made that such people
or entities are actually affiliates.
DOCUMENTS INCORPORATED BY REFERENCE
None.
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TABLE OF CONTENTS
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PAGE
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PART I
Item 1. Business....................................................................................... 2
Item 2. Properties..................................................................................... 4
Item 3. Legal Proceedings.............................................................................. 6
Item 4. Submission of Matters to a Vote of Security Holders............................................ 6
PART II
Item 5. Market for the Registrants' Common Equity and Related Stockholder Matters...................... 7
Item 6. Selected Financial Data........................................................................ 7
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.......... 8
Item 8. Financial Statements and Supplementary Data.................................................... 13
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure........... 13
PART III
Item 10. Directors and Executive Officers of the Registrant............................................. 14
Item 11. Executive Compensation......................................................................... 16
Item 12. Security Ownership of Certain Beneficial Owners and Management................................. 17
Item 13. Certain Relationships and Related Transactions................................................. 18
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K............................... 20
</TABLE>
1
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PART I
ITEM 1. BUSINESS.
General Development of Business
EQK Green Acres Trust (the 'Trust' or the 'Company'), a Delaware business
trust, was formed pursuant to a Certificate of Trust dated September 8, 1993.
The Trust has an indefinite life and intends to elect real estate investment
trust ('REIT') status under the Internal Revenue Code of 1986, as amended.
Under the Internal Revenue Code, a real estate investment trust that meets
applicable requirements is not subject to Federal income tax on that portion of
its taxable income that is distributed to its shareholders. The principal
executive offices of the Trust are located at Suite 800, One Tower Bridge, W.
Conshohocken, Pennsylvania 19428, and the telephone number is (215) 941-2933.
On February 28, 1994, EQK Green Acres, L.P. (the 'Partnership') merged with
and into Green Acres Mall Corp., a wholly-owned subsidiary of the Trust (the
'Merger'). Prior to February 28, 1994, the Trust did not have significant
operations.
The Partnership was a Delaware limited partnership formed pursuant to a
certificate of limited partnership dated June 30, 1986. Equitable Realty
Portfolio Management, Inc. ('ERPM', successor in interest to EQK Partners),
which is wholly owned by Equitable Real Estate Investment Management, Inc.
('Equitable Real Estate'), itself an indirect wholly owned subsidiary of The
Equitable Life Assurance Society of the United States ('Equitable'), acted as
the advisor (the 'Advisor') to the Partnership.
The Partnership had been formed to acquire and operate Green Acres Mall
(the 'Mall'), a regional shopping mall located in Nassau County, Long Island,
New York. In 1991, the Partnership completed the conversion of a leased
industrial building, located adjacent to the Property, into a convenience
shopping center known as the Plaza at Green Acres (the 'Plaza'). The Mall and
the Plaza are referred to collectively as the 'Property' and are described below
and under Item 2.
Pursuant to the Merger, Unitholders of the Partnership received 10,172,639
common shares of beneficial interest of the Trust (the 'Common Shares') on
account of their 98.98% percentage interest in the Partnership; the General
Partners of the Partnership received 104,830 Common Shares on account of their
1.02% percentage interest in the Partnership; and the Special General Partner of
the Partnership received 1,316,251 Common Shares in satisfaction of its residual
interest in the Partnership. Pursuant to the termination of the Partnership's
advisory agreement, the Advisor is entitled to receive 308,933 Common Shares on
March 30, 1994.
The Company's agreement with its primary mortgage lender, representing debt
outstanding of $117,891,000 at December 31, 1993, limits additional indebtedness
that may be incurred by Green Acres Mall Corp., but not by the Trust. Such debt,
along with a $3,400,000 line of credit facility, originated in connection with a
refinancing in August 1993 (see Items 7 and 8). The Trust intends to acquire
additional real estate investments, and may do so with the proceeds from future
debt and/or equity financings. Future real estate investments will be
subject to the percentage of ownership limitations and gross income tests
necessary for REIT qualification. The Company does not intend to invest in the
securities of any other issuer for the purpose of exercising control; however,
the Company may in the future acquire all or substantially all of the securities
or assets of other REITs or similar entities where such investments would be
consistent with the Company's investment policies. In any event, the Company
does not intend that its investments in securities will require it to register
as an 'investment company' under the Investment Company Act of 1940, and the
Company will divest securities before any such registration would be required.
The Company does not intend to engage in any activities or invest in any
securities which would violate the income or asset holding requirements for a
REIT. The Company's investment objectives
2
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and policies may be changed from time to time by the Board of Trustees without
shareholder approval. The Company has not yet entered into arrangements for the
acquisition of additional properties.
Because the initials "EQK" have no further relevance and the "Green Acres"
reference is more limiting than the Company's intended scope of operations,
Management has discussed with the Board of Trustees, and will shortly submit
to the Board, a proposed new name for the Company.
Narrative Description of Business
The Company, through its wholly-owned subsidiary, Green Acres Mall Corp.,
owns and operates the Mall, a 1.6 million square foot super-regional enclosed
shopping mall complex situated in southwestern Nassau County, Long Island, New
York. The Mall is anchored by four major department stores: Sears, Roebuck and
Co. ('Sears'), J.C. Penney Company, Inc., and Federated Department Stores, Inc.,
doing business as Stern's and Abraham & Straus ('A&S'). The complex also
includes the Plaza, a 170,000 square foot convenience center which is anchored
by Kmart and Waldbaums. In January 1993, the Company terminated its lease
with Pergament Home Centers, Inc. ('Pergament'), formerly a Plaza anchor
tenant, and entered into a new lease agreement covering Pergament's space and
all but one of the Plaza's small store spaces with Kmart Corporation.
Location and Area Overview. The Property is located partly in the Village
of Valley Stream and partly in the Town of Hempstead in southwestern Nassau
County, Long Island, New York less than one mile east of the Nassau
County/Queens County (New York City) border. It is situated on the southside of
Sunrise Highway (N.Y. State Route 27), a major east/west highway that extends
the length of Long Island and provides access to communities in eastern
Brooklyn, southeastern Queens and Nassau County. Sunrise Highway connects with
Belt Parkway about one and one-half miles west of the Property. The Belt Parkway
is a major limited access east/west highway which runs directly past John F.
Kennedy International Airport, which is approximately six miles west of the
Property. Merrick Road, a nearby four lane east/west artery provides access
from the east. The Southern State, Cross Island and Meadowbrook Parkways are
major nearby north/south thoroughfares providing access to the Property from
communities in northern Nassau County and Queens County.
The Property is also accessible by public transportation. The Rosedale and
Valley Stream stations of the Long Island Railroad provide commuter passenger
rail services to the area and are each located within approximately one-half
mile of the Property, in addition to local bus transportation.
An external research study commissioned by the Company in November 1991
estimates that the Property's trade area had a total population in 1990 of
approximately 1.3 million. Average household income of trade area residents in
1990 was $42,000, 15% above the average in the United States. The study
indicates that approximately 750,000 people live within five miles of the
Property.
Tenants. At December 31, 1993, the Property had 191 mall and outparcel
building tenants (excluding anchor store tenants) occupying 666,044 square feet
of gross leasable area, representing an occupancy rate at that date of 92.7% of
the Property (excluding anchor stores). No tenant (excluding anchor store
tenants) occupies more than five percent of the gross leasable area of the
Property.
Competition. Green Acres Mall is the dominant shopping destination in its
trade area by virtue of its excellent location, proximity to dense population
areas and targeted merchandising. The addition of the Plaza has further
strengthened the Mall's position. The primary trade area is comprised
principally of densely populated residential neighborhoods and is easily
accessed by local and arterial roads. The primary trade area is a mature area,
and is expected to experience low to moderate growth in population and
disposable income in the future. The closest regional mall to Green Acres is
Roosevelt Field which competes for the consumers to the north and east of the
Mall. Roosevelt Field recently completed an expansion which added additional
second level mall retail area and A&S as a replacement for Alexanders. Other
Long Island centers include Queens Center, Kings Plaza, Sunrise Mall and
Broadway Center. Some additional competition is also provided by freestanding
retailers in the nearby area.
3
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The following table provides selected information with respect to the
Property's primary existing competitors in its secondary trade area.
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APPROXIMATE
DISTANCE APPROXIMATE
FROM PROPERTY NUMBER OF
SHOPPING CENTER (MILES)(a) MALL STORES ANCHOR STORES
- -------------------------------- ----------------- --------------- ------------------------------------
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Roosevelt Field................. 7 155 Macy's
Sterns
J.C. Penney
Abraham & Straus
Queens Center................... 9 75 Abraham & Straus
J.C. Penney
Kings Plaza..................... 10 150 Macy's
</TABLE>
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(a) Driving distance is greater.
Adjacent to the Property on the north, but not owned by the Company, is a
free-standing building which formerly housed a multi-level Alexander's
department store and a parking structure. The Caldor Corporation ('Caldor')
recently acquired the leases to the structures. Caldor recently demolished the
former Alexander's building to enable it to construct a one-level Caldor store
expected to open in 1994. Because of its one-level modern structure, it
will significantly enhance the visibility and appearance of the entrance to
the Property.
Three additional commercial areas that compete with the Property are
downtown Garden City, Long Island, a commercial area six and one-half miles
northeast of the Property, containing free-standing department stores occupied
by Saks, Lord & Taylor, Bloomingdale's and A & S; 'The Miracle Mile', a
commercial stretch of Northern Boulevard in Manhasset, Long Island, ten miles
north of the Property, containing a Bloomingdale's Home Furnishings store and
Lord & Taylor and Bloomingdale's department stores; and, to a lesser extent,
the Borough of Manhattan with its numerous department stores and retail shops.
The Property has a strong competitive position in its primary and secondary
trade areas, due to the Property's size, location and tenant mix, and it should
be able to maintain such position since there are not any logical sites in the
Property's primary trade area which would permit the development of another
competitive regional shopping mall in the foreseeable future. It is anticipated
that the Property will continue to experience growth in sales and percentage
rents although the population in its primary trade area is expected to
experience only low to moderate growth in the future.
ITEM 2. PROPERTIES
General. Green Acres Mall is a one-level and two-level T-shaped enclosed
regional shopping mall, which together with 14 free-standing
outparcel buildings and a convenience center known as the Plaza at Green
Acres, is located on a site of approximately 100 acres. Adjacent to the Mall
parking area are parcels owned by unaffiliated parties consisting of soon-to-be
opened Home Depot and Caldor stores which are not part of the Property and in
which the Company has not acquired any interest.
4
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The total building area of the Property is allocated as shown in the table
below.
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NUMBER OF
STORES AT AREA % OF TOTAL OCCUPANCY AT
12/31/93 (SQ. FT.) BUILDING AREA 12/31/93
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Gross leasable area:
Anchor stores(a)(b)..................................... 4 770,689 41.9% 100.0%
Mall stores............................................. 175 512,191 27.8% 91.0%
Convenience center...................................... 3 169,584 9.2% 100.0%
Outparcel stores(c)..................................... 16 153,853 8.4% 98.4%
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Total gross leasable area................................. 198 1,606,317 87.3% 97.0%
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Common area............................................... 233,751 12.7%
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Total building area....................................... 1,840,068 100.0%
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</TABLE>
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(a) The improvements constituting the Sears department and auto accessory stores
(aggregating 144,537 gross leasable square feet) are owned by Sears pursuant
to ground leases of the land underlying such improvements. The Company has
acquired title to such land, but will not acquire title to such
improvements until such ground leases have terminated. Gross leasable area
information contained herein includes the gross leasable area of such
improvements.
(b) Anchor tenant square footage includes approximately 51,421 square feet of
separately leased storage space.
(c) Includes stores leased to Kids 'R' Us, The Wiz, Red Lobster and Home Federal
Savings Bank, among others. Does not include five outparcel buildings which
are owned by the respective tenants subject to ground leases from the
Company of the land underlying such stores.
The Company is a lessee in a long-term lease for a ten-acre site adjacent
to the Property on which there is situated a 170,000 square foot retail
facility. The lease provides for an initial term of 30 years with three six-year
option terms for a total term of up to 48 years. This building was converted in
1991 into the Plaza, a convenience center which initially contained a
supermarket (Waldbaum, Inc., a division of The Great Atlantic and Pacific Tea
Company, Inc.), a home improvement center (Pergament Home Improvement Center)
and several small retail shops. In January 1993, the Company terminated its
lease with Pergament and entered into a new lease agreement covering Pergament's
space and all but one of the Plaza's small store spaces with Kmart Corporation.
The convenience center began operations in September 1991.
In April 1993, the Company completed the acquisition of an adjacent
industrial tract (the 'Bulova Parcel') through a subsidiary partnership and
entered into a lease/purchase agreement for this real estate with Home Depot.
Pursuant to the lease/purchase agreement, Home Depot paid $9,500,000 to the
Company, a portion of which was used to complete the purchase of the Bulova
Parcel. As a result of the completion in 1993 of specified environmental work,
the lease/purchase agreement obligated Home Depot to take title to the Bulova
Parcel. In connection with this lease/purchase agreement, the Company recognized
a gain on sale of real estate of $440,000 during 1993.
During the first quarter of 1994, the Company completed the sale to Home
Depot of an approximate two acre parking lot tract adjacent to the Bulova
Parcel. The proceeds from the sale were $1,500,000, resulting in a 1994 gain on
sale of real estate of approximately $800,000.
Development History. The Property opened in 1958 as a single-level,
open-air mall. The Mall was enclosed and climate-controlled in 1970.
An extensive renovation, expansion and remerchandising program carried out
in 1982-1983 included the following: (i) the addition of the Sears store and
Auto Service Center, and a new two-level mall connecting the Sears store with
the existing one-level mall; (ii) construction of a new three-level parking
structure adjacent to the Sears store; and (iii) renovation of the existing
one-level mall area and the J.C. Penney store. The outparcel buildings were not
renovated in connection with this program.
5
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A renovation program for the interior of the Mall was completed during
1991-1992. The program included new tile flooring throughout the common areas,
intensified lighting, new seating areas, and decorative columns and other
features in a new color scheme. The food court was also renovated.
Management has not yet determined whether to proceed with a previously
planned expansion of the Mall that was suspended in 1992 for the lack of
financing. The expansion will be accomplished only if its net effect on
operations is expected to be positive and, in any event, actual construction
would not be expected to commence prior to 1997.
Remerchandising Program. In anticipation of the 1993-1996 lease
expirations, the Company has under way a remerchandising campaign, the primary
goal of which is to alter the tenant mix to appeal to a broader cross-section of
the market while achieving increased revenues. Management estimates that
approximately 95% of tenants whose leases expire between 1993 and 1996 are
paying below market rents. The Company is negotiating with a group of prominent
national retailers that Management believes will further enhance the overall
financial stability of the Mall while maintaining the Mall's distinctive
character associated with successful local and regional tenants.
Over 50% of the Mall (excluding department stores) is leased to national
retailers, including such major chains as The Limited (The Limited, Express,
Victoria's Secret, and Bath & Body Works), The Gap, Footlocker, Mothercare,
Edison Brothers (5-7-9, Coda, The Wild Pair), Melville (Kay-Bee Toy & Hobby,
Fan Club), Waldenbooks and Radio Shack. Several national retailers have
expressed interest in both expanding their current divisional presence as
well as bringing new divisions into the Mall. By developing a leasing plan
that takes advantage of upcoming lease rollovers, the Company expects to
accommodate the requests of the larger national retailers, while at the same
time meeting the space needs of smaller regional and local tenants. Management
believes the remerchandising program will address consumers' needs for a
diversified retail mix, thus strengthening the Mall's overall competitive
position. Management estimates that the program will be completed by early
1995 and that the cost of tenant allowances required for the program will
be approximately $3.5 million, approximately $1.8 million of which has already
been expended.
ITEM 3. LEGAL PROCEEDINGS.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On December 23, 1993, the Trust and the Partnership issued a written
Consent Solicitation Statement/Prospectus to the Partnership's Unitholders of
record as of December 6, 1993. The Prospectus solicited the consent of
Unitholders to a conversion of the Partnership with and into the Trust, a real
estate investment trust, pursuant to a merger of the Partnership into a
wholly-owned subsidiary of the Trust ('Proposal 1') and an amendment to the
Amended and Restated Agreement of Limited Partnership of EQK Green Acres, L.P.
(the 'Partnership Agreement') so as to permit the acquisition of additional real
estate investments ('Proposal 2') .
On February 28, 1994, the conversion of the Partnership with and into the
Trust and the amendment to the Partnership Agreement were approved by a majority
of the Partnership's Unitholders. The final tabulation of votes cast was as
follows:
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PROPOSAL 1 PROPOSAL 2
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UNITS %(1) UNITS %(1)
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<S> <C> <C> <C> <C>
For................................................... 5,420,478 79.0 5,432,119 79.2
Against............................................... 1,238,893 18.1 1,186,312 17.3
Abstain............................................... 201,508 2.9 242,448 3.5
</TABLE>
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(1) Represents the percentage of votes cast.
The total votes cast, 6,860,879, represents 67.4% of total Units
outstanding.
For a detailed description of this matter, reference is made to the
Registration Statement of the Partnership and the Trust on Form S-4
(Registration No. 33-68664), declared effective by the Securities and Exchange
Commission on December 17, 1993.
6
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Shares of Beneficial Interest are traded on the New
York Stock Exchange (symbol EGA). The Company is listed in the stock tables as
'EQK Green.' As of March 1, 1994, the record number of Common Shareholders was
1,663. Although the Company does not know the exact number of beneficial holders
the Company's Common Shares of Beneficial Interest, it believes the number
exceeds 5,900.
The Company's Common Shares of Beneficial Interest began trading on the New
York Stock Exchange on March 1, 1994. The following table presents cash
distributions and the high and low prices of the predecessor Partnership's Units
based on The New York Stock Exchange daily composite transactions.
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<CAPTION>
HIGH LOW DISTRIBUTION(a)
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<S> <C> <C> <C>
Year ended December 31, 1993:
First Quarter........................................... $ 11.875 $ 8.125 $ .2750
Second Quarter.......................................... 11.125 8.750 .2750
Third Quarter........................................... 12.250 10.000 .2750
Fourth Quarter.......................................... 12.375 10.750 .2750
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$ 1.1000
Year ended December 31, 1992:
First Quarter........................................... $ 12.250 $ 10.750 $ .3425
Second Quarter.......................................... 11.625 7.000 .2750
Third Quarter........................................... 9.875 6.625 .2750
Fourth Quarter.......................................... 9.375 7.625 .2750
-------------
$ 1.1675
</TABLE>
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(a) On January 25, 1994, a distribution of $.2750 per Common Share was declared
with a record date of March 31, 1994 and a payment date of May 15, 1994.
ITEM 6. SELECTED FINANCIAL DATA.
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<CAPTION>
AS OF AND FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------------------
1993 1992 1991 1990 1989
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(IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C>
Gross income from rental operations............................ $ 20,370 $ 20,476 $ 17,415 $ 16,866 $ 16,778
Income (loss) before extraordinary loss........................ 1,150 (163) 2,511 4,327 4,300
Extraordinary loss from early retirement of debt............... (6,373) -- -- -- --
Net income (loss).............................................. (5,223) (163) 2,511 4,327 4,300
Total assets................................................... 153,886 157,781 152,479 147,362 139,097
Long-term obligations:
Collateralized floating rate notes, net of unamortized
discount................................................... 117,891 -- -- -- --
Zero coupon mortgage note, net of unamortized discount....... -- 83,739 75,665 68,370 61,778
Obligation under capitalized lease........................... 6,971 6,959 7,062 6,642 --
Per Common Share data:
Net income (loss)............................................ $ (.51) $ (.02) $ .24 $ .42 $ .42
Distributions (a)............................................ 1.10 1.17 1.35 1.31 1.26
</TABLE>
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(a) The distribution for the first quarter of 1990 of $.3225 was declared on
December 8, 1989. Such amount was accrued as a distribution in the 1989
financial statements but is reflected as a 1990 distribution in the table
above.
7
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
This discussion should be read in conjunction with the Consolidated
Financial Statements and accompanying Notes to Consolidated Financial
Statements.
FINANCIAL CONDITION
MERGER TRANSACTION
On February 28, 1994, EQK Green Acres, L.P. (the 'Partnership') merged with
and into Green Acres Mall Corp., a wholly-owned subsidiary of EQK Green Acres
Trust (the 'Trust'). The Trust and the Partnership are collectively referred to
herein as the 'Company.' See Item 1 and Note 1 to the consolidated financial
statements for a discussion of the Company's common shares (the 'Common Shares')
issued in connection with this merger (the 'Merger').
The issuance of 10,277,469 Common Shares to the Unitholders and the General
Partners on account of their respective percentage interests in the Partnership
represents a reorganization of entities under common control and, accordingly,
was accounted for in a manner similar to a pooling of interests. The financial
statements of the Partnership and the Trust have been combined at historical
cost retroactive to January 1, 1991. The issuance of these Common Shares has
been reflected as of this date at the amount of the Unitholders' and General
Partners' original contributions to the Partnership.
The issuance of Common Shares to the Special General Partner on account of
its residual interest in the Partnership and to Equitable Realty Portfolio
Management, Inc. (the 'Advisor') will be reflected in the Company's consolidated
financial statements as of February 28, 1994 and March 30, 1994, respectively.
The issuance of Common Shares to the Special General Partner will increase the
Company's carrying value of land and buildings and improvements by $3,024,000
and $13,347,000, respectively, representing the value of the Special General
Partner's residual interest in accordance with the allocation methodology
utilized by the Partnership in connection with the Merger. Annual depreciation
expense will increase by approximately $342,000 as a result of the increase in
the basis of the Mall. The issuance of Common Shares to the Advisor will be
reflected as a charge to earnings during the first quarter of 1994 in the
approximate amount of $3,843,000.
In connection with the Merger, the Company recognized as an expense
nonrecurring legal, accounting, and printing costs aggregating approximately
$1,250,000.
CASH FLOWS FROM OPERATING, INVESTING, AND FINANCING ACTIVITIES
Cash flows from operating activities for 1993 and 1992 were $6,649,000 and
$13,719,000, respectively. The 1993 results, and the related decline from 1992,
are principally attributable to payments in 1993 of $1,951,000 and $2,684,000
for 1992 real estate taxes and deferred advisory and property management fees,
respectively, and the payments of $1,123,000 for interest on the collateralized
floating rate notes (the 'Floating Rate Notes'), $686,000 for deferred leasing
costs, and $382,000 for Merger costs.
During 1992, the Company's net cash provided by operating activities
decreased by $1,131,000 compared to 1991. The primary cause of this decrease was
the payment of $2,203,000 in 1992 for certain advisory and property management
fees attributable to 1991. In 1991, the payment of these fees had been deferred,
resulting in a nonrecurring cash flow benefit in that year. Offsetting this
benefit in 1991 was the nonrecurrence of certain real estate taxes collected in
1990 attributable to the one-time acceleration of the billing of such taxes to
tenants, and higher interest costs.
Cash flows from investing activities increased by $6,713,000 in 1993 over
the prior year, primarily due to the receipt of proceeds from the April 1993
transfer of an adjacent industrial tract (the 'Bulova Parcel') to Home Depot.
Pursuant to a lease/purchase agreement, Home Depot paid
8
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$9,500,000 to the Company, a portion of which was used to complete the purchase
of the Bulova Parcel. In connection with this lease/purchase agreement, the
Company recognized a gain on sale of real estate of $440,000 during 1993.
Subsequent to December 31, 1993, the Company's restricted cash balance of
$500,000 was released from escrow.
During 1992, net cash used in investing activities by the Company increased
$193,000 compared to 1991. The Company's capital expenditures for 1992 included
payments of $1,884,000 related to the acquisition of the Bulova Parcel,
predevelopment costs of $1,110,000 related to the deferred mall expansion
project and tenant allowance and other capital items. In 1991, the Company
completed a $2,700,000 interior renovation, and spent an additional $2,100,000
in developing the Plaza.
Cash flows used in financing activities for 1993 and 1992 were $8,753,000
and $8,220,000, respectively. The increase in cash used in financing activities
is primarily attributable to the refinancing activities in August 1993 in which
the net proceeds from the issuance of the Floating Rate Notes were used to
purchase a zero coupon mortgage note (the 'Zero Note') and to repay $16,500,000
in second mortgage financing.
During 1992, the Company's net cash used in financing activities increased
$300,000 compared to 1991. The increase was due to a decline in net additional
borrowings substantially offset by lower distributions paid to Common
Shareholders.
The Company believes that Funds from Operations represents an indicator of
its ability to make cash distributions. Funds from Operations is defined as net
income before depreciation, amortization of financing and other deferred
expenses, and gains or losses on sales of assets. Management believes that Funds
from Operations is the most significant factor in determining the amount of cash
distributions, although Funds from Operations does not represent net income or
cash flows from operating activities as defined by generally accepted accounting
principles and is not necessarily indicative of cash available to fund all cash
flow needs. Furthermore, Funds from Operations should not be considered as an
alternative to net income as an indicator of the Company's operating performance
or to cash flows from operating activities as a measure of liquidity.
As indicated in the Consolidated Statements of Cash Flows, the Company
experienced an unfavorable trend in cash provided by operating activities over
the periods presented. However, the trend in Funds from Operations, which is not
affected by temporary changes in working capital, has not been as unfavorable.
The following table sets forth Funds from Operations and cash provided by
operating activities of the Company for the periods indicated:
<TABLE>
<CAPTION>
CASH PROVIDED
FUNDS FROM BY OPERATING
OPERATIONS ACTIVITIES
-------------- --------------
<S> <C> <C>
Year ended December 31, 1991....................................... $ 13,451,000 $ 14,850,000
Year ended December 31, 1992....................................... 11,972,000 13,719,000
Year ended December 31, 1993....................................... 10,820,000 6,649,000
</TABLE>
The decrease of $1,152,000 in Funds from Operations for 1993 compared to
1992 is attributable to the 1993 incurrence of currently payable interest
expense on the Floating Rate Notes and payments of Merger expenses of
$1,824,000 and $1,250,000, respectively, offset by the nonrecurrence of a
$1,439,000 write-off of capitalized predevelopment costs in 1992. The decline
of $1,479,000 in Funds from Operations for 1992 compared to 1991 is also
attributable to this 1992 write-off.
DEBT REFINANCING
On August 19, 1993, the Company, through a wholly-owned subsidiary,
issued the Floating Rate Notes in an aggregate principal amount of $118,000,000.
The Floating Rate Notes are secured by a first mortgage on substantially all of
the real property comprising Green Acres Mall and a first leasehold mortgage on
the Plaza. The early extinguishment of the Zero Note, as described above,
resulted in an extraordinary charge of $6,373,000. The remainder of the proceeds
from the Floating Rate Notes was used to purchase an interest rate cap and to
pay mortgage recording taxes and other
9
<PAGE>
costs incurred in connection with the refinancing. The entire principal amount
of the Floating Rate Notes is due on their maturity date, August 19, 1998. The
Floating Rate Notes have a floating interest rate equal to 78 basis points in
excess of the three-month LIBOR. The interest rate on this debt, which is
subject to quarterly reset, was 4.28% at December 31, 1993. Payments of interest
expense will be funded from cash flows from operations supplemented, as
necessary, by borrowings under the revolving credit facility described below.
Amortization of the deferred financing costs, approximating $1,161,000 per
annum, will result in an additional charge (non-cash) to interest expense. As a
result of an interest rate cap agreement also entered into on August 19, 1993,
the effective interest rate of the Floating Rate Notes will not exceed 9% per
annum. The mortgage and indenture relating to the Floating Rate Notes limit
additional indebtedness that may be incurred by Green Acres Mall Corp., but not
by the Trust. Those agreements also contain certain other covenants which, among
other matters, effectively subordinate distributions from Green Acres Mall Corp.
to the debt service requirements of the Floating Rate Notes. On August 19, 1993,
the Partnership also obtained an 18 month unsecured revolving credit facility in
the amount of $3,400,000 which bears interest at 1% over the lender's prime rate
(effective interest rate of 7.00% at December 31, 1993). At December 31, 1993,
$1,800,000 was outstanding. The Floating Rate Notes' mortgage agreement places
certain limitations on the Company's ability to borrow under the line of credit
agreement. At December 31, 1993, limitations related to future capital
expenditures reduced the Company's available borrowing capacity to approximately
$1,150,000. In February 1994, the Company borrowed an additional $900,000 under
this credit facility.
The Company anticipates that it will refinance the revolving credit
facility prior to the expiration of such facility. The Company also anticipates
that it will refinance the Floating Rate Notes at maturity in August 1998.
Given the substantial equity the Partnership has in the Property (the principal
amount of the Floating Rate Notes represents less than 50% of the Property's
estimated fair value at December 31, 1993), Management anticipates that it will
have considerable flexibility in obtaining such refinancing. However, at this
time, Management has not identified any specific sources of such refinancing.
In connection with the issuance of the Floating Rate Notes, interest
expense is expected to decline significantly after 1993. Although the
refinancing program will result in substantial interest savings, interest will
be payable currently rather than accrued and, as a result, cash flow available
for distributions will be reflective of such expenditures.
DIVIDENDS
The Company's current quarterly dividend rate of $.275 per Common Share
represents an annual dividend rate of $1.10 per Common Share. The issuance of
Common Shares to the Special General Partner and the Advisor will reduce the
cash available per Common Share for distribution to the former Unitholders of
the Partnership. However, the Special General Partner and the Advisor have
agreed that all distributions received by them prior to May 1995 on account of
the Common Shares issued in respect of the Special General Partner's residual
interest in the Partnership and the termination of the agreement with the
Advisor will be reinvested through a distribution reinvestment plan in newly
issued Common Shares. As a result, the issuance of such Common Shares to the
Special General Partner and Advisor will not affect cash flow available for
distribution to the former Unitholders of the Partnership until after May 1995.
Management anticipates that annual distributions on account of 1994
operations will be $1.10 per Common Share. The Company expects that an increase
in Funds from Operations (before interest) will offset the effect of paying
interest on the Floating Rate Notes on a current basis in 1994 and through
maturity. The anticipated growth in Funds from Operations in 1994 reflects cost
reductions resulting from the termination of the Advisory Agreement, net of
costs associated with the Company's planned acquisitions program, and an
increase in rental revenues. The Company also received, during the first
quarter of 1994, $1,500,000 from the sale of two acres of property to Home
Depot, which supplements Funds from Operations available for distribution.
During 1994, the Company anticipates that its capital expenditures will be
approximately $2,900,000 which it intends to fund from borrowings. The Company
is currently pursuing an extension of its existing line of credit, although
there can be no assurance that it will receive such an extension. Should it be
unable to fund capital expenditures from borrowings, or should there be a
shortfall in budgeted revenue growth or an unanticipated increase in interest
expense, the Company's ability to maintain distributions at $1.10 per Common
Share could be adversely affected.
10
<PAGE>
Commencing in May 1995, the Special General Partner and the Advisor will be
entitled to receive cash distributions on their Common Shares. Consequently, in
addition to the aforementioned growth in Funds from Operations required in 1994,
Funds from Operations in 1995 must increase an additional $1,950,000 to maintain
the current distribution rate of $1.10 per Common Share for 1995 and future
years. Based on the information presently available, Management believes that
stipulated rent increases from existing tenants, additional income from new
tenants, renewal of expiring leases at higher market rents and increases in
percentage rents will increase Funds from Operations by an amount sufficient to
sustain the current dividend level in 1995, although there is no assurance as to
this. Further, it is anticipated that capital expenditure requirements will
decline significantly in 1995 due to the completion of the remerchandising
program and the resulting reduction in future tenant allowances.
The Company intends to acquire additional real estate investments.
Financing for any such investments would be sought through any combination of
public or private debt and/or equity financing (including possibly financing
provided in whole or in part by sellers) determined by the Company to be
advisable at the time. It is premature to seek such financing and there can
be no assurance that any such financing could be obtained on favorable terms
or at all.
RESULTS OF OPERATIONS
COMPARISON OF 1993, 1992, AND 1991
The Company reported a net loss of $5,223,000 ($.51 per Common Share) in
1993, compared with a net loss of $163,000 ($.02 per Common Share) in 1992 and
net income of $2,511,000 ($.24 per Common Share) in 1991.
The 1993 results were impacted by the recognition of an extraordinary loss
of $6,373,000 ($.62 per Common Share) from the early retirement of the Zero
Note. The extraordinary loss was comprised principally of prepayment penalties
and the write-off of deferred financing costs. Earnings in 1993 also declined
as a result of the recognition of $1,250,000 of Merger costs. The earnings
decline in 1993 was partially offset by the $440,000 gain on sale of real
estate and a decrease in interest expense from 1992.
The 1992 results were impacted by the writeoff of predevelopment costs. In
June 1992, the Company announced its decision to defer a planned expansion of
the Mall due to its inability to secure financing for this project. It is
uncertain when, or if, the expansion program will be resumed. Accordingly,
capitalized costs related to the predevelopment phase of the expansion, totaling
$1,439,000, were written off. The earnings decline in 1992 over 1991 was also
affected by higher interest expense in 1992, partially offset by an increase in
revenues from rental operations. The trend in earnings is more fully described
in the discussion of revenues and expenses that follows.
Revenues from rental operations in 1993 decreased modestly from the prior
year. The decline in 1993 revenues of $106,000 was attributable to a
$334,000 decline in Plaza revenues, primarily related to the buildout of the new
Kmart discount store, partially offset by higher Mall revenues attributable to
specialty leasing of space to temporary tenants.
In January 1993, the Company replaced Pergament Home Improvement Center,
Inc. ('Pergament'), one of the Plaza's anchor tenants, and all but one of the
Plaza's small store spaces, with a new Kmart discount store. In connection with
the lease termination, the Partnership paid $450,000 to Pergament on July 1,
1993. The Company also paid a $150,000 fee to the Advisor in connection with the
securing of Kmart as a new anchor tenant. This change in Plaza tenants is
expected
11
<PAGE>
to generate an additional $350,000 of income from rental operations on an
annualized basis compared to the income generated from the Plaza in 1992.
Revenues from rental operations in 1992 increased from 1991 by $3,061,000
or 18%. Approximately one-half of the revenue increase was attributable to the
operation of the Plaza, which was open for its first full year of business in
1992. In addition, the 1992 minimum rent from mall tenants increased due to
improved occupancy, percentage rents increased due to higher tenant sales levels
and other income increased due to an expanded temporary leasing program.
Net operating expenses increased in 1993 to $2,059,000 from $1,779,000 in
1992 and $195,000 in 1991. This $280,000 increase in 1993 is primarily
attributable to increases in net real estate taxes and food court costs of
$147,000 and $119,000, respectively. The increase in net operating expenses in
1992 over 1991 is due to an increase in the expenses of the Plaza, which was in
its first full year of operations, and increases in net operating expenses
associated with common area maintenance and real estate taxes of $485,000 and
$522,000, respectively.
Included in net operating expenses are property management fees of
$786,000, $785,000, and $697,000 for 1993, 1992, and 1991, respectively,
attributable to the related agreement with Compass Retail, Inc. ("Compass"). In
connection with the Merger, the agreement with Compass was amended and restated
to extend its termination date by two years to August 31, 1998, and to limit
Compass' scope of responsibilities primarily to accounting and financial
services currently provided in connection with the operations of the Property.
Compass' compensation will be reduced from 4% to 2% of net rental and service
income collected from tenants.
Operating expense increases attributable to inflation generally do not have
a significant effect on the Company's income from rental operations as
substantially all operating expenses are reimbursed by tenants in accordance
with the terms of their leases.
Advisory fees have declined to $1,625,000 in 1993 from $1,709,000 in 1992
and $1,931,000 in 1991. The advisory fee was comprised of an annual base fee of
$250,000 and an annual subordinated incentive advisory fee of $1,250,000 which
increased in proportion to the amount by which aggregate distributions of
operating cash flow to Unitholders exceed a ten percent return on the
Unitholder's Adjusted Capital Contributions (as defined in the Partnership
Agreement). Decreases in operating cash flows over the three year period account
for the reductions in the advisory fees. The advisory agreement will terminate
on March 30, 1994, upon the expiration of a 30-day transition period agreement.
The provision for doubtful accounts was $424,000 in 1993, $809,000 in 1992
and $505,000 in 1991. The 1992 provision was attributable to anticipated losses
associated with certain delinquent tenants whose leases were subsequently
terminated. Such tenants were symptomatic of credit risk found in the retail
industry, particularly among smaller local and regional tenants. Due to the
absence of significant credit losses and due to certain recoveries of
receivables previously written off, the Company experienced an improvement
in its provision for doubtful accounts in 1993.
Interest expense was $9,834,000, $10,787,000, and $8,401,000 for 1993,
1992, and 1991, respectively. The decrease in interest expense in 1993 over 1992
is due to the August 19, 1993 debt refinancing. The Zero Note, with an effective
interest rate of 10.4% per annum, and the $16,500,000 in second mortgage
financing, bearing interest at rates between 6% and 7% per annum, were replaced
with Floating Rates Notes that had an initial interest rate of 4.03% that was
reset to 4.28% on November 12, 1993. Interest expense increased in 1992 over
1991 due to the amortization of the discount on the Zero Note. In addition,
1992 interest expense increased due to a full year of interest recognized on
the capitalized portion of the Plaza lease, higher interest cost on the line of
credit and interest payable on the deferred advisory and property management
fees.
Other expenses consist primarily of the administrative costs of running the
Company. There were no significant fluctuations in these costs during the
three-year period ended December 31, 1993.
12
<PAGE>
Distributions to security holders were $11,305,000 ($1.10 per Common Share)
in 1993, $11,999,000 ($1.168 per Common Share) in 1992, and $13,823,000 ($1.345
per Common Share) in 1991. The Company has paid out substantially all of its net
cash flow since inception. Taking into account the anticipated impact on net
cash flow of the previously discussed refinancing, distributions were reduced to
an annual rate of $1.10 in June 1992.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Registrant's consolidated financial statements and supplementary data
listed in Item 14(a) appear immediately following the signature pages.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
13
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The Company is managed by members of a Board of Trustees (the 'Managing
Trustees') initially comprised of the directors of the Partnership's former
managing general partner. It is anticipated that the Board of Trustees will be
expanded in 1994 to include additional independent trustees. The Managing
Trustees are divided into three classes as nearly equal in number as possible,
with the term of office of one class expiring in each year. After expiration of
the initial terms as set forth in the following table, trustees will serve for
three-year terms. The Managing Trustees will be responsible for electing the
Company's executive officers, who will serve at the discretion of the Board of
Trustees. Myles H. Tanenbaum will serve as the Company's President and as
Chairman of the Company's Board of Trustees. In addition to Mr. Tanenbaum, the
Company's executive officers will include Randall C. Stein, who will serve as
Senior Vice President; Kimli Cross Smith, who will serve as Vice
President-Leasing; Richard P. Ferrell, who will serve as Vice
President-Management; and Dennis Harkins, who will serve as Treasurer and
Controller. By mid-1994, the Company intends to retain an Assistant Vice
President-Construction. Brief summaries of Mr. Tanenbaum's and the
other Managing Trustees' and executive officers' business experience and certain
other information are set forth following the table.
<TABLE>
<CAPTION>
YEAR
NAME TERM EXPIRES POSITION
- ------------------------------------------ --------------- ------------------------------------------------------
<S> <C> <C>
Myles H. Tanenbaum (1).................... 1994 Managing Trustee and President
(Principal Executive and Financial Officer)
Sylvan M. Cohen(1)(2)..................... 1995 Managing Trustee
Alton G. Marshall(2)(3)................... 1996 Managing Trustee
George R. Peacock(1)(3)................... 1996 Managing Trustee
Phillip E. Stephens(3).................... 1994 Managing Trustee
Randall C. Stein.......................... N/A Senior Vice President
Kimli Cross Smith......................... N/A Vice President -- Leasing Secretary
Richard P. Ferrell........................ N/A Vice President -- Management
Dennis Harkins............................ N/A Treasurer and Controller (Principal Accounting Officer)
</TABLE>
- ------------------
(1) Member of the nominating committee.
(2) Member of the audit committee.
(3) Member of the compensation committee.
Myles H. Tanenbaum, age 63, is a Managing Trustee and President of the
Company and Chairman of Arbor Enterprises, an investment and holding company,
and formerly a consultant to Equitable Real Estate, of which the former
Advisor to the Partnership is a wholly-owned subsidiary. He was formerly the
President of EQK Partners (formerly the Partnership's advisor) from its
inception in September 1983 until October 1987 and was Chairman until December
1989. Prior to that time, from 1970 he served as Executive Vice President and
the Chairman of the Executive Committee of Kravco, Inc. Mr. Tanenbaum is also
managing partner of the Partnership's former special general partner, a
general partnership which is the sole shareholder of the Partnership's former
managing general partner. Prior to joining Kravco, Inc. in 1970, Mr. Tanenbaum
had been a partner in the law firm of Wolf, Block, Schorr and Solis-Cohen,
Philadelphia, Pennsylvania. He is also a certified public accountant. Mr.
Tanenbaum is currently a director of Universal Health Realty Trust, a New York
Stock Exchange ('NYSE')-listed real estate investment trust which owns
hospitals, and of The Pep Boys--Manny, Moe & Jack, Inc., an NYSE-listed company
engaged in the retail sale of automotive parts and accessories, and the
provision of automotive services.
Sylvan M. Cohen, age 79, has been President and Trustee of Pennsylvania
Real Estate Investment Trust, an American Stock Exchange-listed real estate
investment trust since its inception in 1960. Mr.
14
<PAGE>
Cohen is also a partner in the Philadelphia law firm of Cohen, Shapiro,
Polisher, Shiekman and Cohen. Mr. Cohen is a former director of Fidelity Bank,
Philadelphia, Pennsylvania, and is a director of FPA Corporation, an American
Stock Exchange-listed real estate development company, and a trustee of EQK
Realty Investors I, a NYSE-listed real estate investment trust. He formerly
served as President of the National Association of Real Estate Investment Trusts
and the International Council of Shopping Centers.
Alton G. Marshall, age 72, is President of Alton G. Marshall Associates,
Inc., a New York City real estate investment firm since 1971. He has been
Senior Fellow of the Nelson A. Rockefeller Institute of Government in Albany,
New York since January 1, 1991. He was Chairman of the Board and Chief
Executive Officer of The Lincoln Savings Bank, FSB, from March 1984 through
December 1990, and remains a Director and Chairman of the Bank's Executive
Committee. From 1971 to 1981, he was President of the Rockefeller Center, Inc.,
a real estate, manufacturing and entertainment company. Mr. Marshall is
currently a director of the Hudson River Trust, and New York State Electric &
Gas Corp., and a trustee of EQK Realty Investors I. He is an independent
partner of Alliance Capital and Alliance Capital Retirement Fund.
George R. Peacock, age 70, retired in August 1988 after serving as Chairman
and Chief Executive Officer of Equitable Real Estate, parent of the
Partnership's former Advisor which is a wholly-owned subsidiary of Equitable.
Mr. Peacock is a past member of Equitable's Investment Policy Committee.
Prior to his retirement he was also a Senior Vice President of parent Equitable
for approximately twelve years. Mr. Peacock is a former director of Equitable
Real Estate and remains a trustee of EQK Realty Investors I.
Phillip E. Stephens, age 46, has been President of Compass Retail, the
Partnership's former property manager and a subsidiary of Equitable Real Estate,
since January 1992 and was Executive Vice President of the Compass Retail
division of Equitable Real Estate from January 1990 to December 1991. He has
also served as President of ERPM, the Partnership's former Advisor and a
wholly-owned subsidiary of Equitable Real Estate, since December 1989. From
October 1987 to December 1989, he was President of EQK Partners (formerly the
Partnership's Advisor), the predecessor in interest to ERPM. From its inception
in September 1983 to October 1987, he was Senior Vice President of EQK Partners.
He is also President and a trustee of EQK Realty Investors I.
Randall C. Stein, age 35, has been Senior Vice President of the Trust since
March 1994. From February 1992 to January 1994, Mr. Stein was Senior Vice
President of Dusco Inc., New York, New York, a company engaged in the fund
management of a portfolio of regional malls for institutional investors. Prior
to that, from January 1984 to February 1992, Mr. Stein was Director of
Development and Acquisitions for Strouse, Greenberg & Co., Philadelphia,
Pennsylvania, a company engaged in real estate investment, management, leasing
and development. Prior to that, from June 1981, Mr. Stein was Senior Tax
Advisor at Laventhol & Horwath, Philadelphia, Pennsylvania.
Kimli Cross Smith, age 31, has been a leasing representative for Compass
Retail, the Partnership's former property manager and a subsidiary of Equitable
Real Estate since November 1990. From March 1988 until she joined Compass
Retail, Ms. Smith was a leasing representative for Strouse, Greenberg & Co.,
Inc., Philadelphia, Pennsylvania.
Richard P. Ferrell, age 36, has been Vice President -- Management of the
Trust since March 1994. Prior to that, from December 1992, Mr. Ferrell was Vice
President of the Partnership's former managing general partner and the Manager
of Green Acres Mall. From December 1991 to December 1992 Mr. Ferrell worked for
the Rouse Company as Vice President and General Manager of the Citadel, an
enclosed mall located in Colorado Springs, Colorado. Prior to that, from
February 1989 to December 1991, Mr. Ferrell was employed by the Rouse Company
as Manager of Retail Operations for the Cherry Hill Mall in Cherry Hill, New
Jersey.
Dennis Harkins, age 31, has been the Controller of Green Acres Mall since
June 1993. Prior to that, from August 1990 Mr. Harkins was Controller for Hayim
and Co., Hempstead, New York, a company engaged in the importation and
distribution of rugs. Prior to that, from January 1990 Mr. Harkins was Assistant
Controller of the Yarmouth Group, New York, New York, a real estate
15
<PAGE>
investment company. From June 1987 until January 1990, Mr. Harkins was an
accounting manager for Angeles Corp., Los Angeles, California, a real estate
investment company.
Pursuant to the Delaware Business Trust Act, the Company is required to
have as a trustee a person or entity that is a resident of or has its principal
place of business in the State of Delaware. The Delaware resident trustee
is Wilmington Trust Company (the 'Resident Trustee'). The Declaration
of Trust provides that the management of the Company is vested exclusively in
the Managing Trustees who make up the Board of Trustees of the Company and that
the Resident Trustee will not participate in the management of the Company
except as directed by the Board of Trustees and consented to by the Resident
Trustee. The principal offices of the Resident Trustee are located at 1100 N.
Market Street, Rodney Square North, Wilmington, Delaware 19890-0001.
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and trustees and persons who own more than ten percent of a registered
class of the Company's equity securities, along with the predecessor
Partnership's officers and directors and persons who owned more than ten percent
of a registered class of the Partnership's equity securities (collectively, the
'Reporting Persons') to file reports of ownership and changes in ownership with
the Securities and Exchange Commission and to furnish the Company with copies of
these reports.
Based on the Company's review of the copies of these reports received by
it, and written representations received from Reporting Persons, the Company
believes that all filings required to be made by the Reporting Persons during
1993 were made on a timely basis.
ITEM 11. EXECUTIVE COMPENSATION.
EXECUTIVE COMPENSATION
Until the conversion to a REIT on February 28, 1994, the Company was not
internally managed, and therefore was not responsible for executive
compensation.
During 1993, the Partnership reimbursed its managing general partner for
the $10,000 annual fees and the $1,000 per meeting fees payable to each of the
managing general partner's independent directors, Messrs. Cohen and Marshall.
Messrs. Cohen and Marshall also received $25,000 each for services rendered as
members of a special committee in connection with their determination of
desirability of the proposed conversion of the Partnership into a real estate
investment trust and their recommendations with respect to the related terms and
conditions. Except for such fees, the directors, officers and employees of the
former managing general partner did not receive any salaries or other
compensation from the Partnership. The former Advisor received an annual fee of
$250,000 and a subordinated incentive advisory fee of $1,375,000 with respect to
the year ended December 31, 1993
With respect to the Company, except for those trustees who are also
employees of the Company (initially Mr. Tanenbaum), trustees will receive annual
fees of $15,000 in connection with their services as trustees of the Company,
plus $1,000 for each board meeting and committee meeting they participate in.
The Resident Trustee will receive annual fees of $2,500.
In connection with Mr. Tanenbaum's service as President and Chief Executive
Officer of the Company, Mr. Tanenbaum is expected to receive base salary at the
annual rate of $175,000, subject to increases at the discretion of the Company's
Board of Trustees. In addition to his base salary, Mr. Tanenbaum is expected to
be eligible to receive an annual incentive bonus based upon individual and
Company performance. In addition to his cash compensation, Mr. Tanenbaum was
granted options in January 1994 to purchase up to 750,000 Common Shares at an
exercise price of $10 per Common Share, equal to the market price of the shares
on the date of grant. Such options vest at the rate of 20% per year commencing
one year after the grant date, or January 25, 1995.
The Company estimates that aggregate cash compensation for 1994 payable to
the current executive officers listed in Item 10 (other than Mr. Tanenbaum) will
be approximately $500,000. Additionally, it is anticipated that an Assistant
Vice President-Construction will be retained and will receive aggregate cash
compensation of less than $100,000.
16
<PAGE>
On January 25, 1994, the Board of Trustees adopted an Incentive Share Plan
(the 'Plan'), which provides for the issuance of up to 1,500,000 Common Shares
to outside Trustees and officers and key executives of the Company through
options to purchase Common Shares, share appreciation rights, and restricted
share grants. Common Share options may be options that are intended to qualify
as incentive share options under the Internal Revenue Code of 1986, as amended,
or options which are not intended to so qualify. Options will be granted at an
exercise price that approximates the fair value of Common Shares on the grant
date.
Concurrent with the adoption of this Plan, the Company granted options
to purchase 7,500 Common Shares to each of its four eligible trustees and
options to purchase an aggregate of 875,000 Common Shares to certain officers
(including options to purchase 750,000 Common Shares granted to Mr. Tanenbaum
as described above). Certain officers also received an aggregate of 5,950
restricted Common Shares. All such options have an exercise price of $10 per
Common Share and vest ratably commencing one year from the grant date, or
January 25, 1995, in equal annual increments over three and five years for the
Trustee and Officer options, respectively. The restricted shares become
unrestricted in equal annual increments over three years commencing one year
from the grant date, or January 25, 1995.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table shows the beneficial holdings of Common Shares as of
March 1, 1994 of all persons known by the Company, based upon filings with the
Securities and Exchange Commission, to be beneficial owners of more than 5% of
its outstanding Common Shares, of all Trustees of EQK Green Acres Trust
individually, and of all Trustees and Officers of EQK Green Acres Trust as a
group.
<TABLE>
<CAPTION>
NUMBER OF % OF
NAME ADDRESS OUTSTANDING SHARES SHARES (1)
- -------------------------------------- --------------------------------------- ------------------ -------------
<S> <C> <C> <C>
Equitable 787 7th Avenue 1,281,454.0(1)(2) 10.8%
New York, NY 10019
Sylvan M. Cohen 12 S. 12th Street -- --
Philadelphia, PA 19107
Alton G. Marshall 20 W. 48th Street -- --
New York, NY 10036
George R. Peacock Monarch Plaza 10,105.1(3) (4)
3414 Peachtree Road
Suite 1450
Atlanta, GA 30326
Phillip E. Stephens 5775 Peachtree Dunwoody 102,189.0(2) (4)
Suite 200D
Atlanta, GA 30342
Myles H. Tanenbaum One Tower Bridge 1,036,763.0(2)(5)(6) 8.7%
Suite 800
W. Conshohocken, PA 19428
All Directors and Officers 1,155,807.1(7) 9.7%
as a Group (9 persons)
</TABLE>
- ------------------
(1) The 308,933 Common Shares issuable to the Advisor on March 30, 1993
pursuant to the termination of the advisory agreement are considered
outstanding for the purposes of this computation.
(2) Includes the estimated allocation of Common Shares issued to the former
general partners of EQK Green Acres, L.P., although a final allocation
has not yet been completed. Until the Common Shares are distributed,
voting of the shares will be controlled by Mr. Tanenbaum.
(3) Includes 1,000 Common Shares owned by Mr. Peacock's wife, of which Mr.
Peacock disclaims beneficial ownership.
(4) The number of Common Shares represents less than 1% of the outstanding
Common Shares.
(5) Includes 12,700 Common Shares owned by Mr. Tanenbaum's wife and 10,000
Common Shares owned by a trust of which he is a trustee. Excludes 107,609
Common Shares owned by Mr.
17
<PAGE>
Tanenbaum's adult children, of which Mr. Tanenbaum disclaims beneficial
ownership. Also excludes 750,000 Common Shares issuable upon exercise
of options which were issued to Mr. Tanenbaum and which vest at the rate
of 20% per year commencing one year after the January 25, 1994 grant date.
(6) Includes Mr. Tanenbaum's share of Common Shares issued to the General
Partners pursuant to the Merger.
(7) Includes 5,950 restricted Common Shares that will become unrestricted
in equal annual increments over three years commencing one year from the
grant date, or January 25, 1995. Excludes executive officer options to
purchase 875,000 Common Shares (inclusive of Mr. Tanenbaum's options to
purchase 750,000 Common Shares) that vest at the annual rate of 20%
commencing one year from the grant date, or January 25, 1995, and Trustee
options for 30,000 Common Shares that vest in equal annual increments
over three years commencing one year from the grant date, or January 25,
1995.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Property was acquired by the Partnership on August 27, 1986 at a
purchase price of $135,859,782 from Green Acres Associates, a general
partnership among Equitable, Sunrise Associates and the General Partners of the
Partnership. Sunrise Associates, a limited partnership, is an affiliate of the
General Partners of the Partnership.
On December 1, 1989, a wholly owned subsidiary of Equitable Real Estate
acquired the 50% interest in EQK Partners (former advisor to the Partnership)
owned by Kravco Partners, Ltd., bringing to 100% Equitable Real Estate's
ownership interest in EQK Partners. Mr. Tanenbaum and Mr. Stephens owned,
directly or indirectly, 25.2% and 14.4%, respectively, of Kravco Partners, Ltd.
Subsequently, ERMP, a wholly owned subsidiary of Equitable Real Estate, became
Advisor to the Partnership as the successor in interest to EQK Partners.
As Advisor, ERPM received an annual base advisory fee of $250,000 for the
years ended December 31, 1993, 1992, and 1991. ERPM also earned a subordinated
incentive advisory fee of $1,375,000, $1,459,000, and $1,681,000, respectively,
for the years ended December 31, 1993, 1992, and 1991. In addition, ERMP has
earned fees of $40,000 in each of 1993, 1992 and 1991 for tax reporting
services. Compass will receive a fee of $40,000 for tax reporting services in
1994.
In December 1992, the Partnership entered into an agreement with ERPM
pursuant to which ERPM provided development services in conjunction with the
termination of its lease with Pergament, a former anchor tenant at the Plaza,
and the procurement of a new lease with Kmart. The fee for these services was
$150,000.
Upon sale of all or any portion of any real estate investment of the
Partnership, the Advisor was entitled to receive a disposition fee equal to 2%
of the gross sale price (including outstanding indebtedness taken subject to or
assumed by the buyer and any purchase money indebtedness taken back by the
Partnership). The disposition fee was to be reduced by the amount of any
brokerage commissions and legal expenses incurred by the Partnership in
connection with such sales. Pursuant to this agreement with the Advisor, the
Company paid a $290,000 fee to the Advisor during 1993 relating to services
rendered in connection with the acquisition and development of the Bulova Parcel
and its ultimate transfer to Home Depot (see Items 1,7 and 8).
Pursuant to the Merger discussed in Item 4, upon the expiration of a 30 day
transition period agreement commencing March 1, 1994, the agreement with the
Advisor will be terminated.
The Partnership had entered into a property management agreement with
Compass, a subsidiary of Equitable Real Estate, effective January 1, 1991.
Pursuant to this agreement, property management fees were based on 4% of net
rental and service income collected from tenants. In connection with the Merger
discussed in Items 1 and 4, the agreement with Compass was amended and restated
to extend its termination date by two years to August 31, 1998, and to limit
18
<PAGE>
Compass' scope of responsibilities primarily to accounting and financial
services currently provided in connection with the operations of the Property.
Compass' compensation will be reduced from 4% to 2% of net rental and service
income collected from tenants. For the years ended December 31, 1993, 1992 and
1991, management fees earned by Compass were $786,000, $785,000, and $697,000,
respectively.
In 1992, the Partnership agreed to pay interest to both the Advisor and
Compass as consideration for their willingness to defer the payment of fees
which were otherwise due and payable. The Advisor and Compass deferred such fees
as an accommodation to the Company in connection with its refinancing efforts as
described in Items 7 and 8. For the years ended December 31, 1993 and 1992, the
Partnership recorded interest expense on deferred fees of $249,000 and $223,000,
respectively, representing an interest rate of 7.31% through April 1, 1993 and
8.5% thereafter applied to the cumulative unpaid fee balance. Such fees and the
interest thereon were paid in full from the proceeds from the August 19, 1993
issuance of collateralized floating rate notes (see Items 7 and 8). Pursuant to
an agreement with the Advisor to provide services in connection with such
debt refinancing, the Advisor received a fee of $300,000 in 1993.
The Company's executive offices will be located at One Tower Bridge, W.
Conshohocken, PA 19428. These offices, including furniture, telephones, and
certain ofice services and equipment, will be furnished for a period of between
four and seven months at a monthly rate of approximately $11,500 from a
partnership owned by Mr. Tanenbaum and his sons. Such terms have been approved
by the Board of Trustees, with the abstention of Mr. Tanenbaum, based upon a
conclusion that the terms of the lease are as favorable to the Company as those
generally available from unaffiliated third parties.
For a description of Common Shares issued to the Advisor pursuant to the
Merger in connection with the termination of the advisory agreement and of
Common Shares issued to the General Partners, see Items 1, 7 and 8.
19
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
PAGE
NUMBER
<S> <C> <C> <C> <C>
(a) The following documents are filed as part of this report:
1. Consolidated Financial Statements
Independent Auditors' Report 25
Consolidated Balance Sheets at December 31, 1993 and 1992 26
Consolidated Statements of Operations for the years ended December 31, 1993, 1992 and 1991 27
Consolidated Statements of Shareholders' Equity for the years ended December 31, 1993, 1992 and 1991 28
Consolidated Statements of Cash Flows for the years ended December 31, 1993, 1992 and 1991 29
Notes to consolidated financial statements, including supplementary data 30
2. Financial Statement Schedules
Schedule VIII: Valuation and Qualifying Accounts 38
Schedule IX: Short-term Borrowings 38
Schedule X: Supplementary Income Statement Information 38
Schedule XI: Real Estate and Accumulated Depreciation 38
All other schedules are omitted as the required information is inapplicable or the information is
presented in the consolidated financial statements, or the related notes thereto.
3. Exhibits
(2) Form of Agreement and Plan of Merger by and among the Partnership, the General
Partners, the Company and Green Acres Mall Corp. (7)
(3) (a) Amended and Restated Declaration of Trust of the Company
(b) Certificate of Trust of the Company (7)
(c) Form of By-laws of the Company (7)
(4) Specimen of Common Share Certificate (7)
(9) None
(10) (a) Agreement regarding post-closing obligations. (1)
(b) Modification and restatement of Lease between Green Acres Associates and Gimbels
Valley Stream, Inc. dated August 6, 1986. (1)
(c) Rent credit agreement dated August 6, 1986 between Green Acres Associates and
Federated Department Stores, Inc. (1)
(d) Agreement dated August 6, 1986 among Green Acres Associates, Gimbels Valley
Stream, Inc. and Federated Department Stores, Inc. (1)
(e) Lease dated February 6, 1981 between the Equitable Life Assurance Society of the
United States and Allied Stores of New York, Inc. (1)
(f) Lease dated December 15, 1954 by and between Sterling Estates, Inc. and JC
Penney Company, as amended. (1)
(g) Lease dated February 22, 1989 by and between Blumfold Corporation and the
Partnership. (2)
20
<PAGE>
(h) First Amendment to Advisory Agreement dated as of December 15, 1989 between the
Partnership and EQK Partners. (3)
(i) Amendment to Lease between Blumfold Corporation and the Partnership dated June
22, 1990. (4)
(j) Amendment to Lease between Blumfold Corporation and the Partnership dated August
13, 1990. (4)
(k) Amendment to Amended and Restated Limited Partnership Agreement of the
Partnership dated December 17, 1990. (4)
(l) Acquisition Agreement between Bulova Corporation and the Partnership dated
September 23, 1991. (5)
(m) Agreement of Lease between Home Depot USA, Inc. and the Partnership dated March
2, 1993. (6)
(n) Lease Agreement between Kmart Corporation and the Partnership dated March 8,
1993. (6)
(o) Form of Advisory Services Termination Agreement by and between the Company and
Equitable Realty Portfolio Management, Inc. (7)
(p) Form of Amended and Restated Property Management Agreement by and between the
Company and Compass Retail, Inc. (7)
(q) Consolidated and Restated Mortgage, Security Agreement, Assignment of Leases and
Rents and Fixture Filing, dated as of August 19, 1993, by and between the
Partnership and EQK Green Acres Funding Corp. (7)
(r) Note due August 19, 1998 in the principal amount of $118,000 from the
Partnership to EQK Green Acres Funding Corp. (7)
(s) Form of Collateralized Floating Rate Note due August 19, 1998 from EQK Green
Acres Funding Corp. (7)
(t) Interest Rate and Currency Exchange Agreement, dated as of August 12, 1993, by
and between AIG Financial Products Corp. and EQK Green Acres Funding Corp., as
agent for the Partnership. (7)
(u) Indenture, dated as of August 19, 1993, by and between EQK Green Acres Funding
Corp. and Bankers Trust Company. (7)
(v) Agreement between the Partnership and PNC Bank dated August 19, 1993. (7)
(w) Form of Agreement Relating to New York State Real Property Transfer Gains Tax by
and among Equitable Life Assurance Society of the United States, Equitable
Realty Portfolio Management, Inc., the Company and the other signatories
thereto. (7)
(x) Loan Extension Agreement between PNC Bank and the Registrant dated March 30,
1993 (6)
(y) EQK Green Acres Trust Incentive Share Plan.
(11) See Note 2 to the Consolidated Financial Statements.
(12) Inapplicable.
(13) Inapplicable.
(16) None.
(18) None.
(21) Subsidiaries of the Registrant schedule (7)
(22) Inapplicable.
(23) None.
(24) None.
21
<PAGE>
(28) None.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the fourth quarter of 1993.
The Registrant filed a Report on Form 8-K dated February 28, 1994 with respect to matters discussed in Item 4.
(c) See paragraph (a) 3. above
(d) See paragraph (a) 2. above
</TABLE>
- ------------------
(1) Incorporated herein by reference to exhibit filed with Registrant's
Registration Statement on Form S-11, File No. 33-6992.
(2) Incorporated herein by reference to exhibit filed with Registrant's Form
10-K for the fiscal year ended December 31, 1988.
(3) Incorporated herein by reference to exhibit filed with Registrant's Form
10-K for the fiscal year ended December 31, 1989.
(4) Incorporated herein by reference to exhibit filed with Registrant's Form
10-K for the fiscal year ended December 31, 1990.
(5) Incorporated herein by reference to exhibit filed with Registrant's Form
10-K for the fiscal year ended December 31, 1991.
(6) Incorporated herein by reference to exhibit filed with Registrant's Form
10-K for the fiscal year ended December 31, 1992.
(7) Incorporated herein by reference to exhibit filed with Registrant's
Registration Statement on Form S-4, File No. 38-68664.
22
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 29th day of
March, 1994.
EQK Green Acres Trust
By:/s/ Myles H. Tanenbaum
Myles H. Tanenbaum,
Chairman of the Board
of Trustees, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed on March 29, 1994 by the following persons on behalf of
the Registrant and in the capacities indicated.
<TABLE>
<S> <C>
SIGNATURES TITLE
- ----------------------------------------------------- -----------------------------------------------------
/s/ Myles H. Tanenbaum Managing Trustee and President
Myles H. Tanenbaum (Principal Executive and Financial Officer)
/s/ Phillip E. Stephens Managing Trustee
Phillip E. Stephens
/s/ Sylvan M. Cohen Managing Trustee
Sylvan M. Cohen
/s/ Alton G. Marshall Managing Trustee
Alton G. Marshall
/s/ George R. Peacock Managing Trustee
George R. Peacock
/s/ Dennis Harkins Treasurer and Controller (Principal Accounting
Dennis Harkins Officer)
</TABLE>
23
<PAGE>
EQK GREEN ACRES TRUST
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
EQK GREEN ACRES TRUST
Independent Auditors' Report.............................................................................. 25
Consolidated Balance Sheets as of December 31, 1993 and 1992.............................................. 26
Consolidated Statements of Operations for the years ended December 31, 1993, 1992, and 1991............... 27
Consolidated Statements of Shareholders' Equity for the years ended December 31, 1993, 1992, and 1991..... 28
Consolidated Statements of Cash Flows for the years ended December 31, 1993, 1992, and 1991............... 29
Notes to Consolidated Financial Statements................................................................ 30
PAGE
-----
CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
Schedule VIII -- Valuation and Qualifying Accounts........................................................ 38
Schedule IX -- Short-term Borrowings...................................................................... 38
Schedule X -- Supplementary Income Statement Information.................................................. 38
Schedule XI -- Real Estate and Accumulated Depreciation................................................... 38
</TABLE>
24
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees and
Shareholders of EQK Green Acres Trust:
We have audited the accompanying consolidated balance sheets of EQK Green Acres
Trust (a Delaware business trust) as of December 31, 1993 and 1992, and the
related consolidated statements of operations, shareholders' equity, and cash
flows for each of the three years in the period ended December 31, 1993.
These consolidated financial statements and the consolidated financial
statement schedules discussed below are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the 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, such consolidated financial statements present fairly, in all
material respects, the financial position of EQK Green Acres Trust as of
December 31, 1993 and 1992, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1993 in conformity
with generally accepted accounting principles.
Our audits also comprehended the consolidated financial statement schedules of
EQK Green Acres Trust as of December 31, 1993 and 1992, and for each of the
three years in the period ended December 31, 1993. In our opinion, such
consolidated financial statement schedules, when considered in relation to the
basic consolidated financial statements, present fairly in all material
respects the information shown therein.
Deloitte & Touche
Atlanta, Georgia
March 10, 1994
25
<PAGE>
EQK GREEN ACRES TRUST
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT COMMON SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1993 1992
----------- -----------
<S> <C> <C>
ASSETS
Investments in Green Acres Mall, at cost:
Land.................................................................................. $ 27,865 $ 27,865
Buildings and improvements............................................................ 124,287 122,417
Capitalized lease..................................................................... 7,125 7,125
Personal property..................................................................... 1,075 1,045
Construction in progress.............................................................. 239 208
----------- -----------
160,591 158,660
Less accumulated depreciation......................................................... 22,674 18,964
----------- -----------
137,917 139,696
Restricted cash......................................................................... 500 --
Cash and short-term investments......................................................... 885 1,929
Property under contract................................................................. -- 8,084
Accounts receivable (net of allowances for doubtful accounts of $723 and $994).......... 7,510 6,115
Other assets............................................................................ 7,074 1,957
----------- -----------
TOTAL ASSETS............................................................................ $ 153,886 $ 157,781
----------- -----------
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Collateralized floating rate notes (net of unamortized discount of $109).............. $ 117,891 --
Zero coupon mortgage note, net of unamortized discount of $20,426).................... -- $ 83,739
Distributions payable................................................................. 2,826 2,826
Obligation under capital lease........................................................ 6,971 6,959
Note payable to bank.................................................................. 1,800 16,500
Accounts payable and other liabilities................................................ 3,513 7,763
Due to affiliates..................................................................... 519 3,100
----------- -----------
133,520 120,887
----------- -----------
Shareholders' Equity:
Shares of beneficial interest, without par value:
Authorized: 5,000,000 preferred shares, 45,000,000 common shares, and 50,000,000
excess shares;
Issued and outstanding: 10,277,469 common shares................................... 95,500 95,500
Distributions in excess of accumulated earnings....................................... (75,134) (58,606)
----------- -----------
20,366 36,894
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.............................................. $ 153,886 $ 157,781
----------- -----------
----------- -----------
</TABLE>
See accompanying Notes to Consolidated Financial Statements
26
<PAGE>
EQK GREEN ACRES TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT COMMON SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1993 1992 1991
--------- --------- ---------
<S> <C> <C> <C>
Revenues from rental operations................................................ $ 20,370 $ 20,476 $ 17,415
Operating expenses, net of tenant reimbursements (includes fees to affiliate of
$786, $785 and $697)......................................................... 2,059 1,779 195
Advisory fees payable to affiliate............................................. 1,625 1,709 1,931
Provision for doubtful accounts................................................ 424 809 505
Depreciation and amortization.................................................. 3,969 3,574 3,359
Write-off of capitalized predevelopment costs.................................. -- 1,439 --
--------- --------- ---------
Income from rental operations.................................................. 12,293 11,166 11,425
Interest expense (includes interest expense to affiliate of $249; $223 and
$0).......................................................................... 9,834 10,787 8,401
Merger expenses................................................................ 1,250 -- --
Other expenses, net of interest income......................................... 499 542 513
--------- --------- ---------
Income (loss) before gain on sale of real estate and extraordinary loss........ 710 (163) 2,511
Gain on sale of real estate.................................................... 440 -- --
--------- --------- ---------
Income (loss) before extraordinary loss........................................ 1,150 (163) 2,511
Extraordinary loss from early retirement of debt............................... (6,373) -- --
--------- --------- ---------
Net income (loss).............................................................. ($ 5,223) ($ 163) $ 2,511
--------- --------- ---------
--------- --------- ---------
Income (loss) per share:
Income (loss) before gain on sale of real estate and extraordinary loss........ $ 0.07 ($ 0.02) $ 0.24
Gain on sale of real estate.................................................... 0.04 -- --
--------- --------- ---------
Income (loss) before extraordinary loss........................................ 0.11 (0.02) 0.24
Extraordinary loss from early retirement of debt............................... (0.62) -- --
--------- --------- ---------
Net income (loss).............................................................. ($ 0.51) ($ 0.02) $ 0.24
--------- --------- ---------
--------- --------- ---------
</TABLE>
See accompanying Notes to Consolidated Financial Statements
27
<PAGE>
EQK GREEN ACRES TRUST
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
DISTRIBUTIONS
IN
SHARES OF EXCESS OF
BENEFICIAL ACCUMULATED
INTEREST EARNINGS TOTAL
--------- -------------- ---------
<S> <C> <C> <C>
Balance, January 1, 1991.................................................. $ 95,500 ($ 35,132) $ 60,368
Net income for the year ended December 31, 1991........................... 2,511 2,511
Distributions ($1.35 per Common Share).................................... (13,823) (13,823)
--------- -------------- ---------
Balance, December 31, 1991................................................ 95,500 (46,444) 49,056
Net (loss) for the year ended December 31, 1992........................... (163) (163)
Distributions ($1.17 per Common Share).................................... (11,999) (11,999)
--------- -------------- ---------
Balance, December 31, 1992................................................ 95,500 (58,606) 36,894
Net (loss) for the year ended December 31, 1993........................... (5,223) (5,223)
Distributions ($1.10 per Common Share).................................... (11,305) (11,305)
--------- -------------- ---------
Balance, December 31, 1993................................................ $ 95,500 ($ 75,134) $ 20,366
--------- -------------- ---------
--------- -------------- ---------
</TABLE>
See accompanying Notes to Consolidated Financial Statements
28
<PAGE>
EQK GREEN ACRES TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1993 1992 1991
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)............................................................ ($ 5,223) ($ 163) $ 2,511
Adjustments to reconcile net income (loss) to net cash provided by operating
activities:
Extraordinary loss from early retirement of debt.......................... 6,373 -- --
Provision for losses on accounts receivable............................... 424 809 505
Depreciation and amortization............................................. 3,969 3,574 3,359
Amortization of deferred financing costs.................................. 582 487 286
Amortization of zero coupon mortgage note discount........................ 5,558 8,074 7,295
Amortization of collateralized floating rate note discount................ 9 -- --
Gain on sale of real estate............................................... (440) -- --
Capitalized lease interest................................................ -- -- 146
Write-off of capitalized predevelopment costs............................. -- 1,439 --
Changes in assets and liabilities:
(Increase) in accounts receivable and other assets..................... (2,503) (1,262) (2,834)
Increase (decrease) in accounts payable and other liabilities.......... (2,100) 761 3,582
--------- --------- ---------
Net cash provided by operating activities.................................... 6,649 13,719 14,850
--------- --------- ---------
Cash flows from investing activities:
Proceeds from sale of real estate, net....................................... 9,377 -- --
Additions to buildings and improvements and personal property................ (2,114) (1,413) (2,066)
Additions to property under contract......................................... (5,703) (3,234) --
Construction and development costs, net of tenant reimbursements............. -- (1,006) (3,394)
Increase in restricted cash.................................................. (500) -- --
--------- --------- ---------
Net cash provided by (used in) investing activities.......................... 1,060 (5,653) (5,460)
--------- --------- ---------
Cash flows from financing activities:
Distributions paid........................................................... (11,305) (12,667) (13,720)
Retirement of zero coupon mortgage note...................................... (95,399) -- --
Payments under capital lease................................................. -- (103) --
Proceeds from issuance of collateralized floating rate notes................. 117,882 -- --
Payment of deferred financing costs.......................................... (5,231) -- --
Borrowings under (repayment of) bank line of credit.......................... (14,700) 4,550 5,800
--------- --------- ---------
Net cash (used in) financing activities...................................... (8,753) (8,220) (7,920)
--------- --------- ---------
Increase (decrease) in cash and short-term investments......................... (1,044) (154) 1,470
Cash and short-term investments, beginning of year............................. 1,929 2,083 613
--------- --------- ---------
Cash and short-term investments, end of year................................... $ 885 $ 1,929 $ 2,083
--------- --------- ---------
--------- --------- ---------
</TABLE>
See accompanying Notes to Consolidated Financial Statements
29
<PAGE>
EQK GREEN ACRES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: MERGER TRANSACTION AND BASIS OF PRESENTATION
EQK Green Acres Trust (the 'Trust'), formed on September 8, 1993 as a
Delaware business trust, has an indefinite life and intends to elect real estate
investment trust ('REIT') status under the Internal Revenue Code of 1986, as
amended. On February 28, 1994, EQK Green Acres, L.P. (the 'Partnership') merged
with and into Green Acres Mall Corp., a wholly-owned subsidiary of the Trust.
Prior to February 28, 1994, the Trust did not have significant operations. The
Trust and the Partnership are collectively referred to herein as the 'Company'.
The Partnership had been formed pursuant to an Agreement of Limited
Partnership dated as of June 30, 1986 (and amended and restated as of August 27,
1986) to acquire and operate Green Acres Mall (the 'Property' or the 'Mall'), a
regional shopping mall located in Nassau County, Long Island, New York. In 1991,
the Partnership completed the conversion of a leased industrial building,
located adjacent to the Property, into a convenience shopping center known as
the Plaza at Green Acres (the 'Plaza').
Pursuant to the merger, Unitholders of the Partnership received 10,172,639
common shares of the Trust (the 'Common Shares') on account of their 98.98%
percentage interest in the Partnership; the General Partners of the Partnership
received 104,830 Common Shares on account of their 1.02% percentage interest in
the Partnership; and the Special General Partner of the Partnership received
1,316,251 Common Shares in satisfaction of its residual interest in the
Partnership. Pursuant to the termination of the Partnership's advisory agreement
(see Note 5), the Advisor is entitled to receive 308,933 Common Shares on March
30, 1994.
The issuance of 10,277,469 Common Shares to the Unitholders and the General
Partners on account of their respective interests in the Partnership represents
a reorganization of entities under common control and, accordingly, was
accounted for in a manner similar to a pooling of interests. The financial
statements of the Trust and the Partnership have been combined at historical
cost retroactive to January 1, 1991. The issuance of these Common Shares has
been reflected as of January 1, 1991 at an amount that equals the Unitholders'
and General Partners' original contribution to the Partnership.
The issuances of Common Shares to the Special General Partner and the
Advisor will be reflected in the Company's financial statements as of February
28, 1994 and March 30, 1994, respectively. The issuance of such Common Shares to
the Special General Partner will increase the Trust's carrying value of land and
buildings and improvements by $3,024,000 and $13,347,000, respectively,
representing the agreed-upon value of the Special General Partner's residual
interest in accordance with the allocation methodology utilized by the
Partnership in connection with the Merger. Had this Common Share issuance been
recorded on January 1, 1991, depreciation expenses would have increased by
approximately $342,000 in each of the three years ended December 31, 1993
($.03 per Common Share outstanding). The issuance of Common Shares to the
Advisor will be reflected as a charge to earnings during the first quarter of
1994 in the approximate amount of $3,843,000.
In connection with the merger, the Company recorded as expense in 1993
nonrecurring legal, accounting, and printing costs aggregating approximately
$1,250,000 ($.12 per Common Share).
30
<PAGE>
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
Minimum rents are recognized on a straight-line basis over the terms of the
related leases. Percentage rents are recognized on an accrual basis.
CAPITALIZATION, DEPRECIATION AND AMORTIZATION
Investments in the Property are recorded at cost. Costs directly associated
with major renovations and improvements to mall property and to leased property
are capitalized until the related project is substantially complete and ready
for its intended use. In 1991, capitalized improvements and additions included
$867,000 of interest on funds borrowed to finance construction. No interest was
capitalized in 1993 and 1992. Capitalized leases are recorded at the lower of
fair market value or the present value of future lease payments.
Depreciation of the Property is provided on a straight-line basis over the
estimated useful lives of the related assets, ranging generally from 10 to 40
years. Capitalized lease assets are amortized over the lease term. Intangible
assets are amortized on a straight-line basis over their estimated useful lives.
DEFERRED LEASING COSTS
Costs incurred in connection with the execution of a new lease, including
leasing commissions, costs associated with the acquisition or buyout of existing
leases and legal fees, are deferred and amortized over the term of the new
lease.
NET INCOME (LOSS) AND DISTRIBUTIONS PER COMMON SHARE
Net income (loss) and distributions per Common Share for the years ended
December 31, 1993, 1992, and 1991 have been computed based on the 10,277,469
Common Shares outstanding during the periods.
INCOME TAXES
No provision has been made in the accompanying consolidated financial
statements for income tax liabilities since the Unitholders and General Partners
of the Partnership were required to include their respective share of profits
and losses in their individual tax returns.
The ongoing operations of the Company generally will not be subject to
Federal income taxes as long as the Company qualifies as a REIT. In order to
qualify as a REIT, the Company will be required to distribute at least 95% of
its taxable income to the shareholders and to meet certain asset and income
tests, as well as certain other requirements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash equivalents include short-term investments with an original maturity
of three months or less.
Included in the consolidated statements of cash flows are cash payments for
interest (net of amount capitalized) of $3,334,000, $1,986,000 and $789,000 for
the years ended December 31, 1993, 1992, and 1991, respectively.
At December 31, 1993, accrued refinancing costs amounted to $131,000.
In 1992, the Company capitalized $8,084,000 representing the purchase
price, plus related expenditures for interest, taxes, insurance and
predevelopment costs of the adjacent industrial tract which it had committed to
purchase (see Note 6). The corresponding obligation for the unpaid balance
31
<PAGE>
of the purchase contract at December 31, 1992, amounting to $4,850,000, was
reflected in other liabilities. Such amount was paid in 1993.
In 1991, cash used in investing activities included $771,000 of
expenditures accrued at December 31, 1990.
FINANCIAL INSTRUMENTS
Management has reviewed the various assets and liabilities of the Company
at December 31, 1993 and 1992 in accordance with Statement of Financial
Accounting Standards No. 107, 'Disclosure about Fair Value of Financial
Instruments' (which is not applicable to real estate assets). Management has
concluded that all of the Company's financial instruments, except for the zero
coupon mortgage note outstanding at December 31, 1992, have terms such that
their book value approximates fair value. At December 31, 1992 and continuing
into 1993, there was no readily available source of zero coupon mortgage
financing and, therefore, management determined that the estimation of a fair
value of the zero coupon mortgage note was not practicable. On August 19, 1993,
the Company retired the zero coupon mortgage note with the proceeds from the
issuance of its collateralized floating rate notes (see Note 4).
RECLASSIFICATIONS
Certain reclassifications have been made to the prior years' consolidated
financial statements in order to conform their presentation to that used in the
current year.
NOTE 3: LEASING ARRANGEMENTS
THE COMPANY AS LESSOR
The Company leases shopping center space to approximately 200 tenants,
generally under non-cancelable operating leases. The leases generally provide
for minimum rentals, plus percentage rentals based upon the retail stores' sales
volume.
Percentage rentals amounted to $2,563,000, $2,621,000 and $2,306,000 for
the years ended December 31, 1993, 1992, and 1991, respectively. In addition,
the tenants pay certain utility charges to the Company and, in most leases,
reimburse their proportionate share of real estate taxes and common area
expenses.
The Company leases space to national, regional, and local tenants.
Diversity in the tenant mix minimizes exposure to credit risk from geographic
concentration. However, regional and local tenants
32
<PAGE>
may represent a higher level of credit risk. In certain instances, the Company
obtains security deposits to mitigate risk from less creditworthy tenants.
Future minimum rentals under existing leases at December 31, 1993 are as
follows:
<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31, AMOUNT
- -------------------------------------------------------------------------- ----------------
<S> <C>
1994...................................................................... $ 15,919,000
1995...................................................................... 15,534,000
1996...................................................................... 14,571,000
1997...................................................................... 14,272,000
1998...................................................................... 13,910,000
Thereafter................................................................ 95,043,000
----------------
$ 169,249,000
----------------
----------------
</TABLE>
THE COMPANY AS LESSEE
In 1990, the Company entered into a 30-year lease, with three, six-year
renewal options, on the Plaza, an adjacent 9-acre site on which there is
situated an industrial building that has been renovated and converted into
retail shopping space. The Plaza opened for business in September 1991. In
addition to specified rents, the Plaza lease requires the Company to pay
property taxes, insurance, operating expenses and additional rentals based on a
percentage of revenues generated by the operations of the Plaza. No such
additional rentals were paid in 1993, 1992 or 1991. In accordance with
applicable accounting standards, the portion of the lease related to the
building is accounted for as a capital lease while the portion related to the
land is accounted for as an operating lease.
The following is a schedule of future minimum lease payments under the
lease as of December 31, 1993:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASE LEASE
COMPONENT COMPONENT
-------------- --------------
<S> <C> <C>
1994............................................................... $ 678,000 $ 762,000
1995............................................................... 678,000 762,000
1996............................................................... 678,000 762,000
1997............................................................... 702,000 788,000
1998............................................................... 707,000 793,000
Thereafter......................................................... 28,731,000 32,269,000
-------------- --------------
Minimum Lease Payments............................................. 32,174,000 $ 36,136,000
--------------
--------------
Less Amount Representing Interest.................................. (25,203,000)
--------------
Present Value of Minimum Lease Payments............................ $ 6,971,000
--------------
--------------
</TABLE>
For the years ended December 31, 1993, 1992, and 1991, total rental expense
under the operating lease portion of this lease was $734,000, $709,000 and
$329,000, respectively, all of which represented minimum lease payments.
As of December 31, 1993, the Company has signed sublease agreements with
certain tenants of the Plaza, which agreements generally provide for rentals
based on a percentage of tenant sales in addition to base rental. Sublease
income of $42,953,000 will be received over the remaining terms of the
respective leases. Such income is included in the future minimum rentals table
presented above.
33
<PAGE>
Sublease income totalled $2,189,000, $2,523,000, and $765,000
for the years ended December 31, 1993, 1992, and 1991, respectively.
In January 1993, the Partnership terminated its lease with Pergament Home
Improvement Center ('Pergament'), one of the anchor tenants at the Plaza, and
entered into a new lease agreement covering Pergament's space and all but one of
the Plaza's small store spaces with Kmart Corporation. In connection with the
lease termination, the Company paid Pergament $450,000.
NOTE 4: DEBT FINANCING
On August 19, 1993, the Company completed a comprehensive refinancing by
issuing collateralized floating rate notes ('floating rate notes') in the
aggregate principal amount of $118,000,000. The proceeds from the sale of the
floating rate notes were used, in part, to pay the approximate $95,399,000
purchase price for the zero coupon first mortgage note previously outstanding
and retire a $16,500,000 term loan note at face value. The proceeds from the
issuance of the floating rate notes were also used to purchase an interest rate
cap for $1,023,000 and to pay mortgage recording taxes and other costs incurred
in connection with this refinancing. The floating rate notes were recorded net
of a $118,000 discount. In connection with the early extinguishment of the zero
coupon first mortgage note, the Company recognized an extraordinary charge to
earnings of $6,373,000.
The floating rate notes are due August 19, 1998 and are collateralized by a
first mortgage on substantially all of the real property comprising Green Acres
Mall and a first leasehold mortgage on the Plaza. The floating rate notes bear
interest at a rate equal to 78 basis points in excess of the three-month LIBOR,
which is payable on a quarterly basis commencing November 12, 1993. The interest
rate is subject to reset on such interest payment dates. The initial interest
rate, 4.03%, was effective for the period August 19, 1993 to November 11, 1993.
On November 12, 1993, the interest rate was reset to 4.28%. The interest rate
cap provides that the effective interest rate applicable to the $118,000,000
face value of the notes will not exceed 9% per annum through their maturity
date. Should such debt's interest rate rise above 9%, the Company would record
amounts receivable from the counter-party as a reduction to interest expense.
The Company is exposed to certain losses in the event of non-performance
by the counter-party to this agreement. The mortgage and indenture agreement
relating to the floating rate notes limit additional indebtedness that may be
incurred by Green Acres Mall Corp.. Those agreements also contain certain other
covenants which, among other matters, effectively subordinate distributions from
Green Acres Mall Corp. to debt service requirements of the floating rate notes.
As part of its comprehensive debt restructuring, the Company also obtained
a $3,400,000 unsecured line of credit facility from a bank. The line of credit
agreement bears interest at 1% above the bank's prime rate and will mature in
February 1995, unless extended. The line of credit agreement also contains
certain covenants which, among other matters, limit the amount of the
Company's annual dividend to an amount that does not exceed operating cash
flow (as defined), and require the Company to maintain a quarterly debt service
coverage ratio (as defined). At December 31, 1993, the Company had borrowed
$1,800,000 under this credit facility. The floating rate notes' mortgage
agreement places certain limitations on Green Acres Mall Corp.'s ability to
borrow under the line of credit agreement. At December 31, 1993, limitations
related to future capital expenditures reduced the Company's available
borrowing capacity to approximately $1,150,000. Subsequent to year end, the
Company borrowed an additional $900,000 under this credit facility.
The Partnership had issued the previously outstanding zero coupon mortgage
note on August 27, 1986 in connection with its financing of the acquisition of
the Property. The zero coupon mortgage note, which was secured by substantially
all of the real property comprising Green Acres Mall, had an effective annual
interest rate of 10.4% compounded semi-annually.
34
<PAGE>
The $16,500,000 term loan note retired on August 19, 1993 originated on
June 30, 1993 upon the conversion of a matured line of credit. This line of
credit, along with predecessor facilities, bore interest at rates ranging from
the bank's prime rate to such prime rate plus 1%. In connection with a renewal
and the conversion of the line of credit facility to a term loan in 1993, the
Company paid fees to the bank of approximately $125,000. Borrowings under these
facilities were secured by a second mortgage on substantially all of the real
property comprising Green Acres Mall and a first leasehold mortgage on the
Plaza.
NOTE 5: ADVISORY AND MANAGEMENT AGREEMENTS
Prior to the termination of its advisory agreement as discussed below,
Equitable Realty Portfolio Management, Inc., a wholly owned subsidiary of
Equitable Real Estate Investment Management, Inc. ('Equitable Real Estate'),
acted as 'Advisor' to the Partnership. The Advisor made recommendations to the
Managing General Partner concerning investments, administration and day-to-day
operations. For performing these services, the Advisor received an annual base
advisory fee of $250,000. The Advisor also received an annual subordinated
incentive advisory fee of $1,250,000 which increased in proportion to the
amount by which aggregate distributions of operating cash flow to Unitholders
exceeded a 10% return on the Unitholders' Adjusted Capital Contributions (as
defined in the Partnership Agreement). Payment of this fee was subordinated
to a minimum annual distribution equal to a 10% return to Unitholders. Portions
of the fee not paid in any year because of such subordination were to be
deferred and paid from future operating cash flow on a subordinated basis. For
the years ended December 31, 1993, 1992, and 1991, the subordinated incentive
advisory fee was $1,375,000, $1,459,000, and $1,681,000, respectively. As of
December 31, 1992 and 1991, $1,459,000 and $1,264,000, respectively, were
reflected as obligations on the Company's consolidated balance sheets.
Upon sale of all or any portion of any real estate investment of the
Partnership, the Advisor was entitled to receive a disposition fee equal to 2%
of the gross sale price (including outstanding indebtedness taken subject to or
assumed by the buyer and any purchase money indebtedness taken back by the
Partnership). The disposition fee was to be reduced by the amount of any
brokerage commissions and legal expenses incurred by the Partnership in
connection with such sales. Pursuant to this agreement with the Advisor, the
Company paid a $290,000 fee to the Advisor during 1993 relating to services
rendered in connection with the acquisition and development of the Bulova Parcel
and its ultimate transfer to Home Depot (see Note 6). Such fees paid to the
Advisor reduced the amount of the gain recognized from this transaction.
Pursuant to an agreement with the Advisor to provide services in connection
with the refinancing of the Company's debt as described in Note 4, the Advisor
was paid a $300,000 fee in 1993.
In December 1992, the Partnership entered into an agreement with the
Advisor pursuant to which the Advisor provided development services in
conjunction with the termination of its lease with Pergament and the procurement
of a new lease with Kmart Corporation (see Note 3). The fee for these services
was $150,000, which was paid in 1993.
Pursuant to the merger discussed in Note 1, upon the expiration of a 30 day
transition period agreement commencing March 1, 1994, the agreement with the
Advisor will be terminated.
The Partnership had entered into a property management agreement with
Compass Retail, Inc. ('Compass'), a subsidiary of Equitable Real Estate,
effective January 1, 1991. Pursuant to this agreement, property management fees
were based on 4% of net rental and service income collected from tenants. In
connection with the merger discussed in Note 1, the agreement with Compass was
35
<PAGE>
amended and restated to extend its termination date by two years to August 31,
1998, and to limit Compass' scope of responsibilities primarily to accounting
and financial services currently provided in connection with the operations of
the Property. Compass' compensation will be reduced from 4% to 2% of net rental
and service income collected from tenants. For the years ended December 31,
1993, 1992 and 1991, management fees earned by Compass were $786,000, $785,000,
and $697,000, respectively.
In 1992, the Partnership agreed to pay interest to both the Advisor and
Compass as consideration for their willingness to defer the payment of fees
which were otherwise due and payable. The Advisor and Compass deferred such fees
as an accommodation to the Partnership in connection with its refinancing effort
(see Note 4). For the years ended December 31, 1993 and 1992, the Company
recorded interest expense on deferred fees of $249,000 and $223,000
respectively, representing interest rates of 7.31% through April 1, 1993 and
8.5% thereafter applied to the cumulative unpaid fee balances.
NOTE 6: DEVELOPMENT ACTIVITIES
In January 1992, the Company announced plans for a major expansion of the
Mall. The Company filed the required zoning and other related applications
necessary for the commencement of such expansion. In June 1992, the Company
announced its decision to defer the planned expansion of the Mall due to its
inability to secure financing for this project. It is uncertain when, or if, the
expansion program will be resumed. Accordingly, capitalized costs related to the
predevelopment phase of the expansion were written-off.
In April 1993, the Company completed the acquisition of an adjacent
industrial tract (the 'Bulova Parcel') through a subsidiary partnership and
entered into a lease/purchase agreement for this real estate with Home Depot.
Pursuant to the lease/purchase agreement, Home Depot paid $9,500,000 to the
Company, a portion of which was used to complete the purchase of the Bulova
Parcel. As a result of the completion in 1993 of specified environmental work,
the lease/purchase agreement obligated Home Depot to take title to the Bulova
Parcel. In connection with this lease/purchase agreement, the Company recognized
a gain on sale of real estate of $440,000 during 1993. Subsequent to December
31, 1993, the Company's restricted cash balance of $500,000 was released from
escrow.
During the first quarter of 1994, the Company completed the sale to Home
Depot of an approximate two acre parking lot tract adjacent to the Bulova
Parcel. The proceeds for the sale were $1,500,000, resulting in a 1994 gain on
sale of real estate of approximately $800,000.
NOTE 7: COMMITMENTS AND CONTINGENCIES
Pursuant to the terms of the Plaza lease, the Company was required to
provide, or cause a third party lender to provide, mortgage financing of
$4,800,000 to the lessor.
In January 1992, the Company arranged such financing from a third party
lender for a term of five years at an interest rate of 10.25%. The Company has
an option to extend the financing for an additional five years at a variable
rate of interest. This financing replaced an existing mortgage, and is secured
by the Plaza property, but is non-recourse to the lessor. The Company is
required to make all debt service payments on behalf of the lessor and will
receive an annual offset to its minimum rent equal to 12% of the total financing
provided to the lessor.
36
<PAGE>
NOTE 8: SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a summary of selected quarterly financial data for the
years ended December 31, 1993 and 1992. Such data include certain
reclassifications to accounts presented in quarterly reports on Form 10-Q in
order to conform their presentation to that used in the consolidated statements
of operations presented herein.
<TABLE>
<CAPTION>
(IN THOUSANDS EXCEPT PER COMMON SHARE AMOUNTS)
QUARTER ENDED
---------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
----------- --------- ------------- ------------
<S> <C> <C> <C> <C>
1993
Revenues from rental operations................................ $ 4,975 $ 5,037 $ 5,010 $ 5,348
Income from rental operations.................................. 3,201 3,314 3,022 2,756
Income before extraordinary loss............................... 146 753 622 (371)
Extraordinary loss from early retirement of debt............... -- -- (6,373) --
Net income (loss).............................................. 146 753 (5,751) (371)
Income before extraordinary loss per Common Share.............. .01 .08 .06 (.04)
Extraordinary loss from early retirement of debt per Common
Share........................................................ -- -- (.62) --
Net income (loss) per Common Share............................. $ .01 $ .08 $ (.56) $ (.04)
1992
Revenues from rental operations................................ $ 4,850 $ 5,100 $ 4,984 $ 5,542
Income from rental operations.................................. 3,389 1,693 3,018 3,066
Net income (loss).............................................. 662 (1,170) 361 (16)
Net income (loss) per Common Share............................. $ .06 $ (.11) $ .04 $ (.01)
</TABLE>
In connection with the merger discussed in Note 1, the Company recorded as
expense in the fourth quarter of 1993 nonrecurring legal, accounting, and
printing costs aggregating $1,250,000 ($.12 per Common Share).
As discussed in Note 6, during the second quarter of 1992, the Company
wrote-off $1,439,000 of capitalized costs related to the predevelopment phase of
a mall expansion project that was deferred ($.14 per Common Share).
NOTE 9: SUBSEQUENT EVENTS
On January 25, 1994, the Board of Trustees adopted an Incentive Share Plan
(the 'Plan'), which provides for the issuance of up to 1,500,000 Common Shares
to outside Trustees, officers and key executives of the Company through
options to purchase Common Shares, share appreciation rights, and restricted
share grants. Common Share options may be options that are intended to qualify
as incentive options under the Internal Revenue Code of 1986, as amended,
or options which are not intended to so qualify. Options will be granted with
an exercise price that approximates the fair value of the Common Shares on the
grant date.
Concurrent with the adoption of this Plan, the Company granted options to
purchase 7,500 Common Shares to each of its four eligible trustees and options
to purchase an aggregate of 875,000 Common Shares to certain officers. Certain
officers also received in aggregate 5,950 restricted Common Shares. All such
options have an exercise price of $10 per Common Share and vest ratably
commencing one year from the grant date in equal annual increments over
three and five years for the Trustee and officer options, respectively.
The restricted shares become unrestricted in equal annual increments over
three years commencing one year from the grant date.
37
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL STATEMENT SCHEDULES
DECEMBER 31, 1993
(IN THOUSANDS)
- --------------------------------------------------------------------------------
SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ADDITIONS
----------------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS(1) PERIOD
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts:
1993 $ 994 $ 424 -- $ 695 $ 723
1992 $ 648 $ 809 -- $ 463 $ 994
1991 $ 264 $ 505 -- $ 121 $ 648
</TABLE>
- --------------------------------------------------------------------------------
(1) Write-offs of accounts receivable
- --------------------------------------------------------------------------------
SCHEDULE IX -- SHORT-TERM BORROWINGS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAXIMUM AVERAGE
WEIGHTED AMOUNT AMOUNT WEIGHTED
CATEGORY OF BALANCE AT AVERAGE OUTSTANDING OUTSTANDING AVERAGE
AGGREGATE SHORT-TERM END INTEREST DURING DURING DURING THE
BORROWINGS OF PERIOD RATE PERIOD PERIOD(1) PERIOD (2)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revolving credit line payable to bank:
1993 $ 1,800 7.0% $ 16,500 $ 9,925 7.4%
1992 $ 16,500 6.4% $ 16,500 $ 15,850 6.7%
1991 $ 11,950 6.7% $ 11,950 $ 10,492 8.4%
- ---------------------------------------------------------------------------------------------------
</TABLE>
(1) Average of month-end balances outstanding during the period.
(2) Year-to-date interest expense divided by average of month-end balances
outstanding during the period.
- --------------------------------------------------------------------------------
SCHEDULE X -- SUPPLEMENTARY INCOME STATEMENT INFORMATION
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CHARGED TO COSTS AND EXPENSES
YEARS ENDED DECEMBER 31,
-------------------------------
ITEM 1993 1992 1991
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Maintenance and repairs (1) $ 2,063 $ 1,755 $ 1,759
2. Depreciation and amortization of intangible assets, preoperating
costs and similar deferrals (2) $ 658 $ 512 $ 354
3. Taxes, other than payroll and income taxes (1) $ 7,613 $ 7,015 $ 6,493
- --------------------------------------------------------------------------------------------------------
</TABLE>
(1) Substantially all such costs are recovered from tenants based on the
provisions of the tenants' leases.
(2) Principally represents amortization of deferred financing costs, which is
classified as interest expense.
- --------------------------------------------------------------------------------
SCHEDULE XI -- REAL ESTATE AND ACCUMULATED DEPRECIATION
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COST GROSS AMOUNT
CAPITALIZED AT WHICH CARRIED
SUBSEQUENT AT CLOSE OF
INITIAL COST(3) TO PERIOD(5)
-------------------- ACQUISITION ---------------------------
BLDG & ----------- BLDG & ACCUM. DATE OF
DESCRIPTION ENCUMBRANCE LAND IMPROVE. IMPROVEMENTS LAND IMPROVE. TOTAL DEPREC. CONSTRUCTION
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Green Acres Mall $ 117,891(1) $ 27,865 $ 108,895 $ 12,725 $ 27,865 $ 121,620 $ 149,485 $ 22,147 1955(4)
Plaza at Green
Acres 117,891(2) -- 6,913 3,954 -- 10,867 10,867 527 1991
6,971(2)
Miscellaneous -- -- -- 239 -- 239 239 -- N/A
- -----------------------------------------------------------------------------------------------------------------------------
Totals $ 124,862 $ 27,865 $ 115,808 $ 16,918 $ 27,865 $ 132,726 $ 160,591 $ 22,674
- -----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
LIFE ON WHICH
DEPRECIATION IN
LATEST INCOME STMT.
DATE IS
DESCRIPTION ACQUIRED COMPUTED
- --------------------------------------------------
<S> <C> <C>
Green Acres Mall 8/27/86 40 yrs.
Plaza at Green
Acres 8/13/90 40-48 yrs.
Miscellaneous Various N/A
- --------------------------------------------------
Totals
- --------------------------------------------------
<CAPTION>
IN
</TABLE>
(1) Encumbrance is a floating rate note constituting a first lien on the real
estate.
(2) The Plaza at Green Acres is a leased asset. Encumbrances constitute a first
leasehold mortgage collateralizing the floating rate notes ($117,891) and
the obligation under the capitalized lease ($6,971).
(3) Includes $10,175 representing the deemed value of units issued to affiliates
of the former owners of Green Acres Mall and the General Partnership
interest ($2,075 in Land, $8,100 in Buildings and Improvements).
(4) Original construction was completed in 1955; mall was expanded/renovated in
1982-83 and renovated again in 1990-91.
(5) The aggregate tax basis of the Partnership's property is $143,829 as of
December 31, 1993.
<TABLE>
<CAPTION>
RECONCILIATION OF GROSS CARRYING AMOUNT OF REAL ESTATE: RECONCILIATION OF ACCUMULATED DEPRECIATION:
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, December 31, 1990 $151,207 Balance, December 31, 1990 $12,164
Improvements and Additions, 1991 6,473 Depreciation expense, 1991 3,252
--------- ---------
Balance, December 31, 1991 $157,680 Balance, December 31, 1991 $15,416
Improvements and Additions, 1992 980 Depreciation expense, 1992 3,548
--------- ---------
Balance, December 31, 1992 $158,660 Balance, December 31, 1992 $18,964
Improvements and Additions, 1993 2,114 Depreciation expense, 1993 3,893
Write-off of fully depreciated assets (183) Write-off of fully depreciated assets (183)
--------- ---------
Balance, December 31, 1993 $160,591 Balance, December 31, 1993 $22,674
--------- ---------
--------- ---------
</TABLE>
38
<PAGE>
EQK GREEN ACRES TRUST
AMENDED AND RESTATED
DECLARATION OF TRUST
This AMENDED AND RESTATED DECLARATION OF TRUST ('Declaration of Trust' or
'Declaration') is made and entered into as of February 24, 1994 by the
undersigned Trustees.
WHEREAS, EQK Green Acres Trust (the 'Trust') was formed on September 8,
1993 pursuant to the execution by the undersigned Trustees of an Agreement of
Trust dated September 8, 1993 (the 'Initial Agreement') and the execution and
filing on September 8, 1993 of a Certificate of Trust in the Office of the
Secretary of State of the State of Delaware in accordance with applicable
provisions of the Delaware Business Trust Act, 12 Del. Co. Section 3801 et
seq., as amended (the 'Trust Act');
WHEREAS, the Trustees (as hereinafter defined) desire that the Trust
qualify as a 'real estate investment trust' under the Internal Revenue Code of
1986, as amended (the 'Code'), so long as such qualification, in the opinion of
the Trustees, is advantageous to the Shareholders; and
WHEREAS, the Initial Agreement was amended and restated as of January 25,
1994 and the Trustees desire to amend and restate the Declaration of Trust on
the terms set forth below.
NOW, THEREFORE, the Trustees hereby declare that they will hold in trust
all property contributed to or otherwise owned or held by or on behalf of the
Trust, together with the proceeds thereof, and manage the Trust Property for the
benefit of the Shareholders as provided by this Declaration of Trust.
ARTICLE I
THE TRUST; DEFINITIONS
SECTION 1.1 Name.
(a) The name of the Trust is 'EQK Green Acres Trust.' To the extent
practicable, the Trustees shall conduct the Trust's activities, execute all
documents and cause the Trust to sue or be sued under the foregoing name, which
name (and the word 'Trust' wherever used in this Declaration of Trust, except
where the context otherwise requires) shall refer to the business trust created
under the Initial Agreement and continued hereby, or the Trustees acting on
behalf of the Trust as trustees, and not individually, and shall not refer to
the officers, agents, employees or Shareholders of the Trust.
<PAGE>
(b) Under circumstances in which the Trustees determine that the use of the
name 'EQK Green Acres Trust' is not practicable or desirable, they may change
the name and use any other designation or name for the Trust.
SECTION 1.2 Registered Office; Registered Agent; Business Offices.
(a) The Trustees hereby designate (i) the Resident Trustee, located at
Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890, Attn:
Corporate Trust Administration, as the registered agent of the Trust in the
State of Delaware to receive service of process on the Trust and (ii) the
Resident Trustee at the above-referenced address, to be a registered office of
the Trust in the State of Delaware, with the intent that the Trust may be
subject to legal proceedings in the State of Delaware in its name by service of
process on the Trust's registered agent at such registered office. In the event
that the Resident Trustee is no longer Wilmington Trust Company, the registered
agent shall be changed to and be the new Resident Trustee and the registered
office shall be the principal office address of the successor Resident Trustee.
(b) The principal office of the Trust, and such additional offices as the
Managing Trustees may determine to establish, shall be located at such place or
places inside or outside the State of Delaware as the Managing Trustees may
designate from time to time.
SECTION 1.3 Nature of Trust. The Trust is a business trust within the
meaning of the Trust Act. The Trust shall not be deemed to be a general
partnership, limited partnership, joint venture, joint shares company or a
corporation (but nothing herein shall preclude the Trust from being treated for
tax purposes as an association under the Code).
SECTION 1.4 Purposes and Powers. The purposes of the Trust shall be (a) to
invest in, acquire, own, hold, manage, maintain, operate, finance, refinance,
lease, sub-lease, improve, reconstruct, sell, exchange and otherwise dispose of
real property, whether directly or indirectly; (b) to enter into any lawful
transaction and engage in any lawful activities in furtherance of or incidental
to the foregoing purposes; and (c) as determined from time to time by the
Managing Trustees, to engage in any other lawful business or activity for which
a business trust may be organized under the Trust Act.
SECTION 1.5 Definitions. As used in this Declaration of Trust, the
following terms shall have the following meanings unless the context otherwise
requires:
'Affiliate' or 'Affiliated' means, as to any corporation, partnership,
trust or other association (other than the Trust), any Person (i) that holds
beneficially, directly or indirectly, 5% or more of the outstanding shares or
equity interests thereof or (ii) who is an officer, director, partner or trustee
thereof or of any Person which controls, is controlled by, or under common
control with, such corporation, partnership, trust or other association or (iii)
which controls, is controlled by, or under common control with, such
corporation, partnership, trust or other association.
<PAGE>
'Bylaws' means the Bylaws of the Trust as adopted, and as amended or
restated from time to time, by the Trustees pursuant to Section 3.2(x), which
Bylaws are incorporated herein by reference and shall form a part of the
governing instrument of the Trust.
'Managing Trustees' or 'Board of Trustees' means, collectively, the
individuals named in Section 2.1(b) of this Declaration of Trust as Managing
Trustees so long as they continue in office and all other individuals who have
been duly elected and qualify as trustees of the Trust hereunder, but shall not
include the Resident Trustee. Reference herein to a Managing Trustee or to the
Managing Trustees shall refer to the individuals serving as Managing Trustees in
their capacity as trustees hereunder.
'Mortgages' means mortgages, deeds of trust or other security interests on
or applicable to Real Property.
'Person' means an individual, corporation, partnership, estate, trust
(including a trust qualified under Section 401(a) or 501(c)(17) of the Code), a
portion of a trust permanently set aside for or to be used exclusively for the
purposes described in Section 642(c) of the Code, association, private
foundation within the meaning of Section 509(a) of the Code, joint shares
company or other entity, or any government or agency or political subdivision
thereof, and also includes a group as that term is used for purposes of Section
13(d)(3) of the Securities Exchange Act of 1934, as amended.
'Real Property' or 'Real Estate' means land, rights in land (including
leasehold interests), and any buildings, structures, improvements, furnishings,
fixtures and equipment located on or used in connection with land and rights or
interest in land.
'Resident Trustee' means Wilmington Trust Company, a Delaware bank and
trust company, in its capacity as a trustee hereunder, and any successor thereto
appointed pursuant to Section 2.2 or Section 3.2(l) hereof.
'REIT Provisions of the Code' means Sections 856 through 860 of the Code
and any successor or other provisions of the Code relating to real estate
investment trusts (including provisions as to the attribution of ownership of
beneficial interests therein) and the regulations promulgated thereunder.
'Securities' means Shares, any stock, shares or other evidences of equity
or beneficial or other interests, voting trust certificates, bonds, debentures,
notes or other evidences of indebtedness, secured or unsecured, convertible,
subordinated or otherwise, or in general any instruments commonly known as
'securities' or any certificates of interest, shares or participations in,
temporary or interim certificates for, receipts for, guarantees of, warrants,
options or rights to subscribe to, purchase or acquire, any of the foregoing.
'Securities of the Trust' means any Securities issued by the Trust.
'Shareholders' means holders of record of outstanding Shares.
<PAGE>
'Shares' means Preferred Shares, Common Shares or Excess Shares (all as
defined in Section 5.1).
'Trustee(s)' means any or all of the Managing Trustees and the Resident
Trustee.
'Trust Property' means any and all property, real, personal or otherwise,
tangible or intangible, which is transferred or conveyed to the Trust or the
Trustees (including all rents, income, profits and gains therefrom), which is
owned or held by, or for the account of, the Trust or the Trustees.
ARTICLE II
TRUSTEES
SECTION 2.1 Managing Trustees
(a) Number; Classes. The number of Managing Trustees initially shall be
five, which number may thereafter be increased or decreased by the Managing
Trustees then in office from time to time; however, the total number of Managing
Trustees shall be not less than three nor more than nine. The Managing Trustees
shall be divided into three classes, as nearly equal in number as possible, with
the term of office of one class expiring at each annual meeting of Shareholders
as described more fully in Section 2.1(b) hereof. No reduction in the number of
Managing Trustees shall cause the removal of any Managing Trustee from office
prior to the expiration of his term.
(b) Initial Board; Term. The names of the Managing Trustees who shall serve
on the initial Board of Trustees and their respective classes shall be:
<TABLE>
<CAPTION>
CLASS I CLASS II CLASS III
- ------------------------------------ ------------------------------------ ------------------------------------
<S> <C> <C>
Myles H. Tanenbaum Sylvan M. Cohen Alton G. Marshall
Phillip E. Stephens George R. Peacock
</TABLE>
The Trustees in Class I shall hold office initially for a term expiring at
the first annual meeting of Shareholders, the Trustees in Class II shall hold
office initially for a term expiring at the second annual meeting of
Shareholders and the Trustees in Class III shall hold office initially for a
term expiring at the third annual meeting of Shareholders. Beginning with the
first annual meeting of Shareholders and at each succeeding annual meeting of
Shareholders, the Managing Trustees of the class of Trustees whose term expires
at such meeting will be elected to hold office for a term expiring at the third
succeeding annual meeting. Each Managing Trustee will hold office for the term
for which he is elected and until his successor is duly elected and qualified.
<PAGE>
SECTION 2.2 Resident Trustee.
(a) Initial Trustee; Term. The Resident Trustee shall serve until such time
as a successor is appointed by the Managing Trustees in accordance with the
terms of Section 3.2(l) hereof. Notwithstanding the foregoing, the Resident
Trustee may resign at any time upon the giving of at least sixty (60) days
advance written notice to the Trust; provided, that such resignation shall not
become effective unless and until a successor Resident Trustee shall have been
appointed by the Managing Trustees. If the Managing Trustees do not act within
such sixty (60) day period, the Resident Trustee may apply to the Court of
Chancery of the State of Delaware for the appointment of a successor Resident
Trustee.
(b) Powers. The Resident Trustee shall constitute the Trustee required
pursuant to Section 3807(a) of the Trust Act, shall perform the registered agent
and registered office functions set forth in Section 1.2, shall have only the
rights, obligations and liabilities specifically provided for herein and in the
Trust Act and shall have no implied rights, obligations and liabilities with
respect to the affairs of the Trust. Notwithstanding any other provision
contained herein, unless specifically directed by the Managing Trustees and
consented to by the Resident Trustee, the Resident Trustee shall not participate
in any decisions relating to, or possess any authority independently to manage
or control, the business of the Trust. In no event shall the Resident Trustee
have any liability for the acts or omissions of the Managing Trustees. The
Resident Trustee shall have the power and authority to execute, deliver,
acknowledge and file all necessary documents and to maintain all necessary
records of the Trust as required by the Trust Act. The Resident Trustee shall
provide prompt notice to the Managing Trustees of its performance of any of the
foregoing. The Managing Trustees shall reasonably keep the Resident Trustee
informed of any actions taken by the Managing Trustees with respect to the Trust
that affect the rights, obligations or liabilities of the Resident Trustee
hereunder or under the Trust Act.
(c) Compensation and Expenses of Resident Trustee. The Resident Trustee
shall be entitled to receive from the Trust reasonable compensation for its
services hereunder and shall be entitled to be reimbursed by the Trust for
reasonable out-of-pocket expenses incurred by it in the performance of its
duties hereunder.
SECTION 2.3 Resignation, Removal or Death. Any Managing Trustee may resign
by written notice to the remaining Managing Trustees, effective upon execution
and delivery to the Trust of such written notice or upon any future date
specified in the notice. A Managing Trustee may be removed, for cause only, at a
meeting of the Shareholders called for that purpose, by the affirmative vote of
the holders of not less than two-thirds of the Shares then outstanding and
entitled to vote in the election of Managing Trustees. Upon the resignation or
removal of any Managing Trustee, or his otherwise ceasing to be a Managing
Trustee, he shall automatically cease to have any right, title or interest in
and to the Trust Property held in his name, which property shall automatically
vest in the remaining Managing Trustees; provided that any Managing Trustee
ceasing to be such shall account to the remaining Managing Trustees as they
require for all property that he formerly held as Managing Trustee. Upon the
incapacity or death of any Managing Trustee, his legal representative shall
perform those acts.
<PAGE>
SECTION 2.4 Legal Title. Legal title to all Trust Property shall be vested
in the Trust, except that the Managing Trustees may cause legal title to any
Trust Property to be held by or in the name of any Managing Trustee or any other
Person as nominee. The right, title and interest of the Managing Trustees in and
to the Trust Property shall automatically vest in successor and additional
Managing Trustees upon their qualification and acceptance of election or
appointment as Managing Trustees, and they shall thereupon have all the rights
and obligations of Managing Trustees, whether or not conveyancing documents have
been executed and delivered pursuant to Section 2.3 or otherwise. Written
evidence of the qualification and acceptance of election or appointment of
successor and additional Managing Trustees may be filed with the records of the
Trust and in such other offices, agencies or places as the Managing Trustees may
deem necessary or desirable. No Shareholder shall be deemed to have a severable
ownership interest in any individual asset of the Trust or any right of
partition or possession thereof.
ARTICLE III
POWERS OF TRUSTEES
SECTION 3.1 General. Subject to the express limitations herein or in the
Bylaws, (1) the business and affairs of the Trust shall be managed by or under
the direction of the Board of Trustees and (2) the Managing Trustees shall have
full, exclusive and absolute power, control and authority over the Trust
Property and over the business of the Trust. The Managing Trustees may take any
actions as in their sole judgment and discretion are necessary or desirable to
conduct the business of the Trust. This Declaration of Trust shall be construed
with a presumption in favor of the grant of power and authority to the Managing
Trustees. Any construction of this Declaration of Trust or determination made in
good faith by the Managing Trustees concerning their powers and authority
hereunder shall be conclusive. The enumeration and definition of particular
powers of the Managing Trustees included in this Article III shall in no way be
limited or restricted by reference to or inference from the terms of this or any
other provision of this Declaration of Trust or construed or deemed by inference
or otherwise in any manner to exclude or limit the powers conferred upon the
Managing Trustees under the general laws of the State of Delaware as now or
hereafter in force.
SECTION 3.2 Specific Powers and Authority. Subject only to the express
limitations herein, and in addition to all other powers and authority conferred
by this Declaration or by law, the Managing Trustees, without any vote, action
or consent by the Shareholders, shall have and may exercise, at any time or
times, in the name of the Trust or on its behalf the following powers and
authorities:
(a) Investments. To invest in, purchase or otherwise acquire and to hold
real, personal or mixed, tangible or intangible, property of any kind wherever
located, or rights or interests therein or in connection therewith, all without
regard to whether such property, interests or rights are authorized by law for
the investment of funds held by trustees or other fiduciaries, or whether
obligations the Trust acquires have a term greater or lesser than the term of
office of the Trustees or the possible termination of the Trust, for such
consideration as the Managing Trustees may deem proper (including cash, property
of any kind or Securities of the Trust).
<PAGE>
(b) Sale, Disposition and Use of Property. Subject to Article V and Section
8.3, to sell, rent, lease, hire, release, partition, assign, mortgage, grant
security interests in, encumber, negotiate, dedicate, grant easements in and
options with respect to, convey, transfer (including transfers to entities
wholly or partially owned by the Trust or the Managing Trustees) or otherwise
dispose of any or all of the Trust Property by deeds (including deeds in lieu of
foreclosure with or without consideration), 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 Managing Trustees by one or more of the Trustees or
by a one or more duly authorized officers, employees, agents or nominees of the
Trust, on such terms as they deem appropriate; to give consents and make
contracts relating to the Trust Property and its use or other matters; to
develop, improve, manage, use, alter and otherwise deal with the Trust Property;
and to rent, lease or hire from other property of any kind; provided, however,
that the Trust may not use or apply land for any purposes not permitted by
applicable law.
(c) Financing. To borrow or in any other manner raise money for the
purposes and on the terms they determine, and to evidence the same by issuance
of Securities of the Trust, which may have such provisions as the Managing
Trustees determine; to reacquire such Securities of the Trust; to enter into
other contracts or obligations on behalf of the Trust; to guarantee, indemnify
or act as surety with respect to payment or performance of obligations of any
Person; to mortgage, pledge, assign, grant security interests in or otherwise
encumber the Trust Property to secure any such Securities of the Trust,
contracts or obligations (including guarantees, indemnifications and
suretyships); and 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.
(d) Loans. To lend money or other Trust Property on such terms, for such
purposes and to such Persons as they may determine.
(e) Issuance of Securities. To create and authorize the issuance, in
shares, units or amounts of one or more types, series or classes, of Securities
of the Trust, which may have such voting rights, dividend or interest rates,
preferences, subordinations, conversion or redemption prices or rights, maturity
dates, distribution, exchange, or liquidation rights or other rights as the
Managing Trustees may determine, without vote of or other action by the
Shareholders; to issue any type of Securities of the Trust, and any options,
warrants, or rights to subscribe therefor, all without vote of or other action
by the Shareholders, to such Persons for such consideration (or without
consideration), at such time or times and in such manner and on such terms and
the Trustees determine; to list any of the Securities of the Trust on any
securities exchange; and to purchase, redeem or otherwise acquire, hold, cancel,
reissue, sell and transfer any Securities of the Trust. Notwithstanding the
foregoing, Shares, which collectively constitute all of the units into which the
beneficial interests in the Trust are divided, shall be issuable only up to the
number of authorized Common Shares, Preferred Shares and Excess Shares,
respectively, as set forth in Section 5.1, as such section may be amended from
time to time. All Common Shares shall have the same rights and attributes and no
Common Shares shall have any preference over any other Common Shares. Preferred
Shares may be issued in such classes or
<PAGE>
series, having such relative rights and preferences, and other attributes as
shall be established by resolution of the Board of Trustees pursuant to this
Section 3.2(e) and Section 5.3.
(f) Expense and Taxes. To pay any charges, expenses or liabilities
necessary or desirable, in the sole discretion of the Managing Trustees, for
carrying out the purposes of this Declaration of Trust and conduct of the
business of the Trust, including without limitation compensation or fees to
Trustees, officers, employees and agents of the Trust, and to Persons
contracting with the Trust, and any taxes, levies, charges and assessments of
any kind imposed upon or chargeable against the Trust, the Trust Property, or
the Trustees in connection therewith; and to prepare and file any tax returns,
reports or other documents and take any other appropriate action relating to the
payment of any such charges, expenses or liabilities.
(g) Collection and Enforcement. To collect, sue for and receive money or
other property due to the Trust; to consent to extensions of the time for
payment, or to the renewal, of any Securities or obligations; to engage or to
intervene in, prosecute, defend, compound, enforce, compromise, release, abandon
or adjust any actions, suits, proceedings, disputes, claims, demands, security
interests, or matters relating to the Trust, the Trust Property, or the Trust's
affairs; to exercise any rights and enter into any agreements, and take any
other action necessary or desirable in connection with the foregoing.
(h) Deposits. To deposit funds or Securities constituting part of the Trust
Property in banks, trust companies, savings and loan associations, financial
institutions and other depositories, whether or not such deposits will draw
interest, subject to withdrawal on such terms and in such manner as the Managing
Trustees determine.
(i) Allocation; Accounts. To determine whether moneys, profits or other
assets of the Trust shall be charged or credited to, or allocated between,
income and capital, including whether or not to amortize any premium or discount
and to determine in what manner any expenses or disbursements are to be borne as
between income and capital (regardless of how such items would normally or
otherwise be charged to or allocated between income and capital without such
determination); to treat any dividend or other distribution on any investment
as, or apportion it between, income and capital; in their discretion to provide
reserves for depreciation, amortization, obsolescence or other purposes in
respect of any Trust Property in such amounts and any such methods as they
determine; to determine what constitutes net earnings, profits or surplus; to
determine the method or form in which the accounts and records of the Trust
shall be maintained; and to allocate to the Shareholders' equity account less
than all of the consideration paid for Shares and to allocate the balance to
paid-in capital or capital surplus.
(j) Valuation of Property. To determine the value of all or any part of the
Trust Property and of any services, Securities, property or other consideration
to be furnished to or acquired by the Trust, and to revalue all or any part of
the Trust Property, all in accordance with such appraisals or other information
as are reasonable, in their sole judgment.
(k) Ownership and Voting Powers. To exercise all of the rights, powers,
options and privileges pertaining to the ownership of any Mortgages, Securities,
Real Estate and other Trust
<PAGE>
Property to the same extent that an individual owner might, including without
limitation to vote or give any consent, request, or notice or waive any notice,
either in person or by proxy or power of attorney, which proxies and powers of
attorney may be for any general or special meetings or actions, and may include
the exercise of discretionary powers.
(l) Officers, Etc.; Resident Trustee; Delegation of Powers. To elect,
appoint or employ such officers for the Trust and such committees of the Board
of Trustees with such power and duties as the Managing Trustees may determine or
the Trust's Bylaws provide; to engage, employ or contract with and pay
compensation to any Person (including any Trustee and any Person who is an
Affiliate of any Trustee) as agent, representative, adviser, member of an
advisory board, employee or independent contractor (including advisers,
consultants, transfer agents, registrars, underwriters, accountants, attorneys
at law, real estate agents, property and other managers, appraisers, brokers,
architects, engineers, construction managers, general contractors or otherwise)
in one or more capacities, to perform such services on such terms as the
Managing Trustees may determine; to appoint, remove or replace the Resident
Trustee as defined in Section 1.5 hereof and any successor thereto; to delegate
to one or more Managing Trustees, committees of Managing Trustees, officers or
other Persons engaged or employed as aforesaid, the performance of acts or other
things (including granting of consents and the power to sub-delegate), the
making of decisions and the execution of such deeds, contracts or other
instruments, either in the names of the Trust, the Managing Trustees or as their
attorneys or otherwise, as the Managing Trustees may determine; and to establish
such committees as they deem appropriate.
(m) Associations. To cause the Trust to enter into joint ventures, general
or limited partnerships, participation or agency arrangements or any other
lawful combinations, relationships, or associations of any kind.
(n) Reorganizations, Etc. Subject to Sections 8.2 and 8.3, to cause to be
organized or assist in organizing any Person under the laws of any jurisdiction
to acquire all or any part of the Trust Property or carry on any business in
which the Trust shall have an interest; to merge or consolidate the Trust with
any Person; to sell, rent, lease, hire, convey, negotiate, assign exchange or
transfer all or any part of the Trust Property to or with any Person in exchange
for Securities of such Person or otherwise; and to lend money to, subscribe for
and purchase 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
interests.
(o) Insurance. To purchase and pay for out of the Trust Property insurance
policies insuring the Trust and the Trust Property against any and all risks,
and insuring the Shareholders, Trustees, officers, employees and agents of the
Trust individually against all claims and liabilities of any nature arising by
reason of holding or having held any such status, office or position or by
reason of any action alleged to have been taken or omitted (including those
alleged to constitute misconduct, gross negligence, reckless disregard of duty
or bad faith) by any such Person in such capacity, whether or not the Trust
would have the power to indemnify such person against such claim or liability.
<PAGE>
(p) Executive Compensation, Pension and Other Plans. To adopt and implement
executive compensation, pension, profit sharing, shares option, shares bonus,
shares purchase, shares appreciation rights, savings, thrift, dividend
reinvestment, retirement, incentive or benefit plans, trusts or provisions,
applicable to any or all Trustees, officers, employees, agents or Shareholders
of the Trust, or to other Persons who have benefited the Trust, all on such
terms and for such purposes as the Managing Trustees may determine.
(q) Distributions. To declare and pay dividends or other distributions to
Shareholders, subject to the provisions of Section 5.4.
(r) Indemnification. In addition to the indemnification provided for in
Section 7.4, to indemnify any Person, including any adviser or independent
contractor, with whom the Trust has dealings.
(s) Charitable Contributions. To make donations for the public welfare or
for community, charitable, religious, educational scientific, civic or similar
purposes, regardless of any direct benefit to the Trust.
(t) Discontinue Operations; Bankruptcy. To discontinue the operations of
the Trust (subject to Section 9.2); to petition or apply for relief under any
provision of federal or state bankruptcy, insolvency or reorganization laws or
similar laws for the relief of debtors; to permit any Trust Property to be
foreclosed upon with or without raising any legal or equitable defenses that may
be available to the Trust or the Managing Trustees or otherwise defending or
responding to such foreclosure; to confess judgment against the Trust; or to
take such other action with respect to indebtedness or other obligations of the
Managing Trustees, in such capacity, the Trust Property or the Trust as the
Managing Trustees in their discretion may determine.
(u) Termination of Status. To terminate the status of the Trust as a real
estate investment trust under the REIT Provisions of the Code.
(v) Fiscal Year. Subject to the Code, to adopt, and from time to time
change, a fiscal year for the Trust.
(w) Seal. 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.
(x) Bylaws. To adopt, implement and from time to time amend Bylaws of the
Trust relating to the business and organization of the Trust which are not
inconsistent with the provisions of this Declaration of Trust.
(y) Voting Trust. To participate in, and accept Securities issued under or
subject to, any voting trust.
(z) Proxies. To solicit proxies of the Shareholders at the expense of the
Trust.
<PAGE>
(aa) Name. To change the name of the Trust or adopt any other name or
designation for the Trust.
(bb) Further Powers. To do all other actions and things and execute and
deliver all instruments incident to the foregoing powers, and to exercise all
powers which they deem necessary, useful or desirable to carry on the business
of the Trust or to carry out the provisions of this Declaration of Trust, even
if such powers are not specifically provided herein.
SECTION 3.3 EQK Green Acres, L.P. Transactions. The Managing Trustees,
acting for and on behalf of the Trust and in coordination with EQK Green Acres,
L.P., a Delaware limited partnership (the 'Partnership'), shall have the power
and authority to cause approximately twelve million (12,000,000) Common Shares
of the Trust to be registered under the Securities Act of 1933, all as
contemplated by the Registration Statement on Form S-4, Registration No.
33-68664, heretofore filed by the Trust, together with the Partnership, as joint
registrants, and thereafter to take all steps that may be necessary, appropriate
or convenient to carry out the transactions contemplated by such Registration
Statement, including the merger of the Partnership with and into Green Acres
Mall Corp., a Delaware corporation and a wholly owned subsidiary of the Trust
(the 'Company') and, in connection with the merger, to cause Common Shares of
the Trust to be issued as contemplated by the Agreement and Plan of Merger by
and among the Partnership, the Trust, the Company, EQK Green Acres Corp. and EQK
Green Acres Associates.
ARTICLE IV
INVESTMENT POLICY
The fundamental investment policy of the Trust is to make investments in
such a manner as to comply with the REIT Provisions of the Code. Subject to
Section 3.2(u), the Managing Trustees will use their best efforts to carry out
this fundamental investment policy and to conduct the affairs of the Trust in
such a manner as to continue to qualify the Trust for the tax treatment provided
in the REIT Provisions of the Code; however, no Trustee, officer, employee or
agent of the Trust shall be liable for any act or omission resulting in the loss
of tax benefits under the Code, except to the extent provided in Section 7.2.
The Managing Trustees may establish or change from time to time, by resolution
or in the Bylaws of the Trust, such investment policies as they determine to be
in the best interests of the Trust, including prohibitions or restrictions upon
certain types of investments.
ARTICLE V
SHARES
SECTION 5.1 General.
(a) The total number of shares of beneficial interest which the Trust is
authorized to issue is 100,000,000 Shares, of which 5,000,000 Shares shall be
preferred shares, without par value ('Preferred Shares'), 45,000,000 Shares
shall be common shares, without par value ('Common Shares'), and 50,000,000
Shares shall be excess shares, without par value ('Excess Shares').
<PAGE>
(b) All Shares issued hereunder, including without limitation, Shares
issued in connection with a dividend in Shares or a split or reverse split of
Shares, shall be fully paid and nonassessable.
(c) Every Shareholder, by virtue of having purchased or otherwise acquired
a Share, shall be deemed to have expressly consented and agreed to be bound by
the terms of this Declaration.
SECTION 5.2 Common Shares.
(a) Dividend Rights. Subject to the preferential dividend rights of the
Preferred Shares, if any, as may be determined by the Board of Trustees pursuant
to Section 5.3, the holders of Common Shares shall be entitled to receive such
dividends or other distributions as may be declared by the Managing Trustees
pursuant to Section 5.4.
(b) Rights Upon Liquidation. Subject to the preferential rights of the
Preferred Shares, if any, as may be determined by the Managing Trustees pursuant
to Section 5.3 and the preferential rights of the Excess Preferred Shares (as
defined in Section 5.6(a)), if any, in the event of any voluntary or involuntary
liquidation, dissolution or winding up of, or any distribution of the assets of,
the Trust, each holder of Common Shares shall be entitled to receive, ratably
with each other holder of Common Shares and Excess Common Shares (as defined in
Section 5.6(a)), that portion of the assets of the Trust available for
distribution to the holders of Common Shares or Excess Common Shares that bears
the same relation to the total amount of such assets of the Trust as the number
of Common Shares held by such holder bears to the total number of Common Shares
and Excess Common Shares then outstanding.
(c) Voting Rights. The holders of Common Shares shall be entitled to vote
on all matters submitted to a vote of Shareholders at all meetings of the
Shareholders of the Trust, and shall be entitled to one vote for each Common
Share entitled to vote at such meeting, voting together with the holders of the
Preferred Shares who are entitled to vote (except as otherwise may be determined
by the Managing Trustees pursuant to Section 5.3).
SECTION 5.3 Preferred Shares. With respect to the Preferred Shares, the
Managing Trustees shall have the power from time to time to classify or
reclassify, in one or more classes or series, any unissued Preferred Shares by
setting or changing the number of shares constituting such class or series and
the designation, preferences, conversion or other rights, voting powers,
restrictions, limitations as to distributions, qualifications and terms and
conditions of redemption of such Shares.
SECTION 5.4 Dividends or Distributions. The Managing Trustees may from time
to time declare and pay to Shareholders such dividends or distributions in cash,
property or other assets of the Trust or in Securities of the Trust or from any
other source as the Managing Trustees in their discretion shall determine.
Subject to the provisions of Section 3.2(u), the Managing Trustees shall
endeavor to declare and pay such dividends and distributions as shall be
necessary for the Trust to qualify as a real estate investment trust under the
REIT Provisions of the Code and to avoid the imposition of federal income and
excise taxes applicable to qualified real estate investment trusts; however,
Shareholders shall have no right to any dividend or distribution
<PAGE>
unless and until declared by the Managing Trustees. The exercise of the powers
and rights of the Managing Trustees pursuant to this Section shall be subject
to the provisions of any class or series of Shares at the time outstanding.
The receipt by any Person in whose name any Shares are registered on the
records of the Trust or by his duly authorized agent shall be a sufficient
discharge for all dividends or distributions payable or deliverable in respect
of such Shares and from all liability to see to the application thereof.
SECTION 5.5 General Nature of Shares. All Shares shall be personal property
entitling the Shareholders only to those rights provided in this Declaration or
in the resolution creating any class or series of Preferred Shares. The legal
ownership of the Trust Property is vested exclusively in the Trust and the
Trustees (or other nominees) as herein provided; and the Shareholders shall have
no interest therein other than beneficial interest in the Trust conferred by
their Shares and shall have no right to compel any partition, division, dividend
or distribution of the Trust or any of the Trust Property. The death of a
Shareholder shall not terminate the Trust or give his legal representative any
rights against other Shareholders, the Trustees or the Trust Property, except
the right, exercised in accordance with applicable provisions of the Bylaws, to
receive a new certificate for Shares in exchange for the certificate held by the
deceased Shareholder. Holders of Shares shall not have any preemptive right to
subscribe to any Securities of the Trust. The Managing Trustees shall have
exclusive and absolute control over the Trust Property and the conduct of the
business of the Trust (with such powers of delegation as are permitted by this
Declaration and the Bylaws), and the Shareholders, by reason of their status as
such, shall have no right to participate in or direct the management or control
of the business of the Trust or to act for or bind the Trust or any Trustee or
otherwise to transact any business on behalf of the Trust, except that the
Shareholders shall have the right to vote on the matters specifically provided
for herein or in the Bylaws.
SECTION 5.6 Restrictions on Ownership and Transfer; Exchange For Excess
Shares.
(a) Definitions. For the purposes of Sections 5.6, 5.7, 5.8 and 5.9, the
following terms shall have the following meanings:
'Adoption Date' shall mean the effective date of the merger of EQK Green
Acres, L.P. into Green Acres Mall Corp.
'Beneficial Ownership' shall mean ownership of Shares either directly or
constructively 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.
'Beneficiary' shall mean a beneficiary of the Special Trust as determined
pursuant to Section 5.8(e).
'Common Equity Shares' shall mean outstanding Shares that are either Common
Shares or Excess Common Shares.
<PAGE>
'Constructive Ownership' shall mean ownership of Shares either directly or
constructively 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.
'Constructive Ownership Limit' shall mean 9.9% of the outstanding Equity
Shares of any class.
'Equity Shares' shall mean outstanding Shares that are either Common Equity
Shares or Preferred Equity Shares. Equity Shares of any particular class shall
mean Common or Preferred Shares of that class and Excess Common Shares or Excess
Preferred Shares that would, under Section 5.8(e)(1), automatically be exchanged
for Common Shares or Preferred Shares of that class in the event of a transfer
of an interest in the Special Trust in which such Excess Shares are held.
'Excess Common Shares' shall mean Excess Shares that would, under Section
5.8(e)(1), automatically be exchanged for Common Shares in the event of a
transfer of an interest in the Special Trust in which such Excess Shares are
held.
'Excess Preferred Shares' shall mean Excess Shares that would, under
Section 5.8(e)(1), automatically be exchanged for Preferred Shares in the event
of a transfer of an interest in the Special Trust in which such Excess Shares
are held.
'Existing Constructive Holder' shall mean any Person who (i) is the
Constructive Owner of Shares in excess of the Constructive Ownership Limit on
the Adoption Date after giving effect to Shares issued as of such date, so long
as, but only so long as, such Person (x) provides the certification requested by
the Board of Trustees as to such Person's status as a Tenant of the Trust or an
owner, directly or indirectly, of a Tenant of the Trust and such certification
is and remains true, (y) Constructively Owns Shares in excess of the
Constructive Ownership Limit and (z) is not a Disqualified Constructive Holder
(as defined in Section 5.9(e)), or (ii) is designated by the Managing Trustees
as an Existing Constructive Holder pursuant to the provisions of Section
5.6(l)(2), so long as, but only so long as, such Person (x) complies with any
conditions or restrictions associated with such designation, (y) Constructively
Owns Shares in excess of the Constructive Ownership Limit, and (z) is not a
Disqualified Constructive Holder.
'Existing Holder' shall mean (i) any Person who is the Beneficial Owner of
Common Shares in excess of the Ownership Limit on the Adoption Date after giving
effect to Shares issued as of such date and has either (a) filed a Schedule 13D
or 13G prior to October 15, 1993 disclosing his ownership of in excess of 5.0%
of the outstanding Units which were exchanged for Common Shares in the Merger
and has not disclosed orally or in writing to the Partnership or the Company
that he no longer holds such Units; or (b) has received a majority of the Common
Shares that he owns immediately after the Conversion on account of his direct or
indirect ownership in EQK Green Acres Corp., EQK Green Acres Associates or
Equitable Realty Portfolio Management, Inc., and (ii) any Person (other than
another Existing Holder) to whom an Existing Holder Transfers Beneficial
Ownership of Common Shares causing such transferee to Beneficially Own Common
Shares in excess of the Ownership Limit but not in excess of such
<PAGE>
Person's Existing Holder Limit and (iii) any Person who, because of the
application of the constructive ownership provisions of Section 544 of the Code,
as modified by Section 856(h)(1)(B) of the Code, Beneficially Owns Common Shares
in excess of the Ownership Limit where some or all of such Common Shares also
are Beneficially Owned by a Person who is an Existing Holder under clause (i) or
(ii) of this sentence.
'Existing Holder Limit' shall mean, initially, 11.0% of the outstanding
Common Equity Shares, and after any adjustment pursuant to Section 5.6(i), shall
mean the percentage of the outstanding Common Equity Shares as so adjusted,
provided that such Person's Existing Holder Limit shall be the lower of the
foregoing percentage and the highest percentage of Common Equity Shares that
could be Beneficially Owned by such Person without resulting in the five largest
then-existing Existing Holder Limits exceeding 49.9% of the Common Shares (or,
if there are fewer than five then-existing Existing Holders, without resulting
in (i) all then-existing Existing Holder Limits plus (ii) the product of (x) the
Ownership Limit and (y) five less the number of then-existing Existing Holders
exceeding 49.9% of the Common Shares) and, after any adjustment pursuant to
Section 5.6(i), shall mean such percentage of the outstanding Common Equity
Shares as so adjusted. For purposes of making the determination required by the
preceding sentence as to whether an Existing Holder's Existing Holder Limit
shall be lower than 11.0%, the principles of Section 542(a)(2) of the Code shall
apply, so that, to the extent possible without causing the Trust to be 'closely
held' within the meaning of Sections 856(a)(6) and 856(h), (i) an Existing
Holder that is not treated as an individual for purposes of Section 542(a)(2) of
the Code will be treated as Beneficially Owning Common Shares otherwise
Beneficially Owned by it hereunder only to the extent that such Common Shares
are also Beneficially Owned by any Person (x) that is treated as an individual
for purposes of Section 542(a)(2) of the Code and (y) that either is an Existing
Holder or Beneficially Owns Common Shares in excess of the Ownership Limit; and
(ii) Common Shares Beneficially Owned by more than one Existing Holder shall be
taken into account only once and shall be treated as Beneficially Owned only by
the Existing Holder whose Beneficial Ownership of such Common Shares would
(under the REIT provisions of the Code) result in the highest total percentage
of Beneficial Ownership of Common Shares by five or fewer Persons who are
treated as individuals for purposes of Section 542(a)(2) of the Code. From the
Adoption Date and prior to the Ownership Limitation Termination Date, the
secretary of the Trust shall maintain and upon request, make available to each
Existing Holder a schedule which sets forth the then current Existing Holder
Limit for such Existing Holder.
'Interest Rate' shall mean the prime rate as announced from time to time by
PNC Bank, National Association, Pittsburgh, Pennsylvania, plus two (2.0%)
percent.
'Market Price' shall mean the last reported sales price reported on the New
York Stock Exchange of Shares of the relevant class on the trading day
immediately preceding the relevant date, or, if the Shares of the relevant class
are not then traded on the New York Stock Exchange, the last reported sales
price of Shares of the relevant class on the trading day immediately preceding
the relevant date as reported on any exchange or quotation system over which the
Shares of the relevant class may be traded, or, if the Shares of the relevant
class are not then traded over any exchange or quotation system or if any such
exchange or quotation
<PAGE>
system does not report the last sales price of Shares, then the closing market
price of the Shares of the relevant class on the relevant date as determined in
good faith by the Board of Trustees.
'Ownership Limit,' with respect to Common Shares, shall mean 5.0% of the
outstanding Common Equity Shares, and, with respect to any class of Preferred
Shares shall mean 5.0% of the outstanding Preferred Equity Shares of such class
and after an adjustment as set forth in Section 5.6(j), shall mean such greater
percentage (but not more than 9.9%) as so adjusted.
'Ownership Limitation Termination Date' shall mean the first day after the
date as of which the Board of Trustees determines that it is no longer in the
best interests of the Trust to attempt to, or continue to, qualify as a REIT.
'Preferred Equity Shares' shall mean either outstanding Preferred Shares or
Excess Preferred Shares. Preferred Equity Shares of any particular class shall
mean Preferred Shares of that class and Excess Preferred Shares that would,
under Section 5.8(e)(1), automatically be exchanged for Preferred Shares of that
class in the event of a transfer of an interest in the Special Trust in which
such Excess Preferred Shares is held.
'Purported Beneficial Holder' shall mean, with respect to any event other
than a purported Transfer which results in Excess Shares, the person for whom
the Purported Record Holder of the Shares that were, pursuant to Section 5.6(c),
automatically exchanged for Excess Shares upon the occurrence of such event held
such Shares.
'Purported Beneficial Transferee' shall mean, with respect to any purported
Transfer which results in Excess Shares, the purported beneficial transferee for
whom the Purported Record Transferee would have acquired Shares, if such
Transfer had been valid under Section 5.6(b).
'Purported Record Holder' shall mean, with respect to any event other than
a purported Transfer which results in Excess Shares, the record holder of the
Shares that were, pursuant to Section 5.6(c), automatically exchanged for Excess
Shares upon the occurrence of such event.
'Purported Record Transferee' shall mean, with respect to any purported
Transfer which results in Excess Shares, the record holder of the Shares if such
Transfer had been valid under Section 5.6(b).
'REIT' shall mean a real estate investment trust under Section 856 of the
Code.
'Special Trust' shall mean the trust created pursuant to Section 5.8(a).
'Tenant' shall mean any person that leases (or subleases) real property of
the Trust.
'Transfer' shall mean any sale, transfer, gift, assignment, devise or other
disposition of Shares (including (i) the granting of any option or entering into
any agreement for the sale, transfer or other disposition of Shares or (ii) the
sale, transfer, assignment or other disposition of any securities or rights
convertible into or exchangeable for Shares), whether of record or beneficially
and whether by operation of law or otherwise.
<PAGE>
'Trustee' shall mean, for purposes of Article V only, the Trust as trustee
for the Special Trust, and any successor trustee appointed by the Trust.
(b) Restrictions on Ownership and Transfer.
(1) Except as provided in Section 5.6(l), from the Adoption Date and
prior to the Ownership Limitation Termination Date, no Person (other than, in
the case of Common Shares, an Existing Holder) shall Beneficially Own Shares of
any class in excess of the Ownership Limit for such class of Shares and no
Person (other than an Existing Constructive Holder) shall Constructively Own
Shares in excess of the Constructive Ownership Limit. In addition, except as
provided in Section 5.6(1), from the Adoption Date and prior to the Ownership
Limitation Termination Date, no Existing Holder shall Beneficially Own Common
Shares in excess of the Existing Holder Limit for such Existing Holder.
(2) Except as provided in Section 5.6(l), from the Adoption Date and
prior to the Ownership Limitation Termination Date, any Transfer that, if
effective, would result in any Person (other than, in the case of a Transfer of
Common Shares, an Existing Holder) Beneficially Owning Shares of any class in
excess of the Ownership Limit with respect to Shares of such class shall be void
ab initio as to the Transfer of such Shares which would be otherwise
Beneficially Owned by such Person in excess of such Ownership Limit; and the
intended transferee shall acquire no rights to such Shares.
(3) Except as provided in Section 5.6(l), from the Adoption Date and
prior to the Ownership Limitation Termination Date, any Transfer that, if
effective, would result in any Existing Holder Beneficially Owning Common Shares
in excess of the applicable Existing Holder Limit shall be void ab initio as to
the Transfer of such shares of Common Shares which would be otherwise
Beneficially Owned by such Existing Holder in excess of the applicable Existing
Holder Limit; and such Existing Holder shall acquire no rights to such shares of
Common Shares.
(4) From the Adoption Date and prior to the Ownership Limitation
Termination Date, any Transfer that, if effective, would result in any Person
(other than an Existing Constructive Holder) Constructively Owning Shares in
excess of the Constructive Ownership Limit shall be void ab initio as to the
Transfer of such Shares which would be otherwise Constructively Owned by such
Person in excess of such Constructive Ownership Limit; and the intended
transferee shall acquire no rights in such Shares.
(5) From the Adoption Date and prior to the Ownership Limitation
Termination Date, any Transfer that, if effective, would result in Shares being
beneficially owned by less than 100 Persons (determined without reference to any
rules of attribution) shall be void ab initio as to the Transfer of such Shares
which would be otherwise beneficially owned by the transferee; and the intended
transferee shall acquire no rights in such Shares.
(6) From the Adoption Date and prior to the Ownership Limitation
Termination Date, any Transfer that, if effective, would result in the Trust
being 'closely held' within the meaning of Sections 856(a)(6) and 856(h) of the
Code shall be void ab initio as to the Transfer of the
<PAGE>
Shares which would cause the Trust to be 'closely held' within the meaning of
Sections 856(a)(6) and 856(h) of the Code; and the intended transferee shall
acquire no rights in such Shares.
(c) Exchange For Excess Shares.
(1) If, notwithstanding the other provisions contained in this Article
V, at any time from the Adoption Date and prior to the Ownership Limitation
Termination Date, there is a purported Transfer such that any Person (other
than, in the case of Common Shares, an Existing Holder) would Beneficially Own a
number of Shares of any class in excess of the applicable Ownership Limit with
respect to such class, then, except as otherwise provided in Section 5.6(l)(1),
such number of Shares in excess of such Ownership Limit (rounded up to the
nearest whole Share) shall be automatically exchanged for an equal number of
Excess Shares. Such exchange shall be effective as of the close of business on
the business day prior to the date of the Transfer.
(2) If, notwithstanding the other provisions contained in this Article
V, at any time from the Adoption Date and prior to the Ownership Limitation
Termination Date, there is a purported Transfer such that an Existing Holder
would Beneficially Own a number of Common Shares in excess of the applicable
Existing Holder Limit, then, except as otherwise provided in Section 5.6(l)(1),
such number of shares of Common Shares in excess of such Existing Holder Limit
(rounded up to the nearest whole Share) shall be automatically exchanged for an
equal number of Excess Shares. Such exchange shall be effective as of the close
of business on the business day prior to the date of the Transfer.
(3) If, notwithstanding the other provisions contained in this Article
V, at any time from the Adoption Date and prior to the Ownership Limitation
Termination Date, there is a purported Transfer such that any Person (other than
an Existing Constructive Holder) Constructively Owns a number of Shares in
excess of the Constructive Ownership Limit, then such number of Shares in excess
of such limit (rounded up to the nearest whole Share) shall be automatically
exchanged for an equal number of Excess Shares. Such exchange shall be effective
as of the close of business on the business day prior to the date of the
Transfer.
(4) If, notwithstanding the other provisions contained in this Article
V, at any time from the Adoption Date and prior to the Ownership Limitation
Termination Date, there is a purported Transfer which, if effective, would cause
the Trust to become 'closely held' within the meaning of section 856(h) of the
Code, then the Shares being Transferred which would cause the Trust to be
'closely held' within the meaning of Section 856(h) of the Code (rounded up to
the nearest whole Share) shall be automatically exchanged for an equal number of
Excess Shares. Such exchange shall be effective as of the close of business on
the business day prior to the date of the Transfer.
(5) If, notwithstanding the other provisions contained in this Article
V, at any time from the Adoption Date and prior to the Ownership Limitation
Termination Date, any Person other than, with respect to Common Shares, an
Existing Holder (the 'Purchaser') purchases or otherwise acquires an interest in
a Person which Beneficially Owns Shares (the 'Purchase') and, as a result, the
Purchaser would Beneficially Own Shares of any class in excess of the applicable
<PAGE>
Ownership Limit with respect to such class, then, except as provided in Section
5.6(l)(1), such number of Shares in excess of such Ownership Limit (rounded up
to the nearest whole Share) shall be automatically exchanged for an equal number
of Excess Shares. Such exchange shall be effective as of the close of business
on the business day prior to the date of the Purchase. In determining which
Shares are exchanged, Shares of the relevant class Beneficially Owned by the
Purchaser prior to the Purchase shall be treated as exchanged before any Shares
Beneficially Owned by the Person an interest in which is being so purchased or
acquired are so treated.
(6) If, notwithstanding the other provisions contained in this Article
V, at any time from the Adoption Date and prior to the Ownership Limitation
Termination Date, an Existing Holder purchases or otherwise acquires an interest
in a Person which Beneficially Owns Shares (the 'Purchase') and, as a result,
such Existing Holder would Beneficially Own Common Shares in excess of the
applicable Existing Holder Limit, then, except as provided in Section 5.6(l)(1),
such number of Common Shares in excess of such Existing Holder Limit (rounded up
to the nearest whole Share) shall be automatically exchanged for an equal number
of Excess Shares. Such exchange shall be effective as of the close of business
on the business day prior to the date of the Purchase. In determining which
Common Shares are exchanged, Common Shares Beneficially Owned by the purchasing
Existing Holder prior to the Purchase shall be treated as exchanged before any
Common Shares Beneficially Owned by the Person an interest in which is being so
purchased or acquired are so treated.
(7) If, notwithstanding the other provisions contained in this Article
V, at any time from the Adoption Date and prior to the Ownership Limitation
Termination Date, any Person, other than an Existing Constructive Holder (the
'Purchaser'), purchases or otherwise acquires an interest in a Person which
Constructively Owns Shares (the 'Purchase') and, as a result, the Purchaser
would Constructively Own Shares in excess of the Constructive Ownership Limit,
then such number of Shares in excess of the Constructive Ownership Limit
(rounded up to the nearest whole Share) shall be automatically exchanged for an
equal number of Excess Shares. Such exchange shall be effective as of the close
of business on the business day prior to the date of the Purchase. In
determining which Shares are exchanged, Shares Constructively Owned by the
Purchaser prior to the Purchase shall be treated as exchanged before any Shares
Constructively Owned by the Person an interest in which is being so purchased or
acquired are so treated.
(8) If, notwithstanding the other provisions contained in this Article
V, at any time from the Adoption Date and prior to the Ownership Limitation
Termination Date, there is a redemption, repurchase, restructuring or similar
transaction with respect to a Person that Beneficially Owns Shares (the
'Entity') and, as a result, a Person (other than, in the case of Common Shares,
an Existing Holder) holding an interest in the Entity would Beneficially Own
Shares in excess of the applicable Ownership Limit with respect to such class,
then, except as provided in Section 5.6(l)(1), such number of Shares in excess
of such Ownership Limit (rounded up to the nearest whole Share) shall be
automatically exchanged for an equal number of Excess Shares. Such exchange
shall be effective as of the close of business on the business day prior to the
date of the redemption, repurchase, restructuring or similar transaction. In
determining which Shares are exchanged, Shares of the relevant class
Beneficially Owned by the Entity shall be treated as exchanged before any Shares
Beneficially Owned by the Person holding an interest in the Entity
(independently of such Person's interest in the Entity) are so treated.
<PAGE>
(9) If, notwithstanding the other provisions contained in this Article
V, at any time from the Adoption Date and prior to the Ownership Limitation
Termination Date, there is a redemption, repurchase, restructuring or similar
transaction with respect to a Person that Beneficially Owns Common Shares (the
'Entity') and, as a result, an Existing Holder would Beneficially Own Common
Shares in excess of the applicable Existing Holder Limit, then, except as
provided in Section 5.6(l)(1), such number of Common Shares in excess of such
Existing Holder Limit (rounded up to the nearest whole Share) shall be
automatically exchanged for an equal number of Excess Shares. Such exchange
shall be effective as of the close of business on the business day prior to the
date of the transfer. In determining which Common Shares are exchanged, Common
Shares Beneficially Owned by the Entity shall be treated as exchanged before any
Common Shares Beneficially Owned by the Existing Holder (independently of such
Existing Holder's interest in the Entity) are so treated.
(10) If, notwithstanding the other provisions contained in this
Article V, at any time from the Adoption Date and prior to the Ownership
Limitation Termination Date, there is a redemption, repurchase, restructuring or
similar transaction with respect to a Person that Constructively Owns Shares
(the 'Entity') and, as a result, a Person (other than an Existing Constructive
Holder) holding an interest in the Entity would Constructively Own Shares of any
class in excess of the Constructive Ownership Limit, then such number of Shares
in excess of the Constructive Ownership Limit (rounded up to the nearest whole
Share) shall be automatically exchanged for an equal number of Excess Shares.
Such exchange shall be effective as of the close of business on the business day
prior to the date of the relevant transaction. In determining which Shares are
exchanged, Shares Constructively Owned by the Entity shall be treated as
exchanged before any Shares Constructively Owned by the Person holding an
interests in the Entity (independently of such Person's interest in the Entity)
are so treated.
(11) If, notwithstanding the other provisions contained in this
Article V, at any time from the Adoption Date and prior to the Ownership
Limitation Termination Date, an event (including the inaccuracy of any
representation of fact by any Person), other than an event described in Sections
5.6(c)(1) through (10), occurs which would, if effective, either (i) result in
any Person (other than an Existing Constructive Holder) Constructively Owning
Shares in excess of the Constructive Ownership Limit or (ii) result in a
purported Existing Constructive Holder becoming a Disqualified Constructive
Holder or failing to comply with any conditions, restrictions, or undertakings
imposed by the Board of Trustees or this Article V in connection with such
person's qualification as an Existing Constructive Holder, then the smallest
number of Shares Constructively Owned by such Person which, if exchanged for
Excess Shares, would result in such Person's Constructive Ownership of Shares
not being in excess of the Constructive Ownership Limit, shall be automatically
exchanged for an equal number of Excess Shares. Such exchange shall be effective
as of the close of business on the business day prior to the date on which the
relevant event would otherwise have resulted in the consequence described in
clause (i) or (ii) of this sentence.
(12) If, notwithstanding the other provisions contained in this
Article V, at any time from the Adoption Date and prior to the Ownership
Limitation Termination Date, an event, other than an event described in Sections
5.6(c)(1) through (10), occurs which would, if effective, result in any Person
(other than, in the case of Common Shares, an Existing Holder) Beneficially
<PAGE>
Owning Shares in excess of the applicable Ownership Limit, then, except as
provided in Section 5.6(l)(1), the smallest number of Shares Beneficially Owned
by such Person which, if exchanged for Excess Shares, would result in such
Person's Beneficial Ownership of Shares not being in excess of such Ownership
Limit, shall be automatically exchanged for an equal number of Excess Shares.
Such exchange shall be effective as of the close of business on the business day
prior to the date of the relevant event.
(13) Subject to the provisions of Section 5.6(c)(14), if,
notwithstanding the other provisions contained in this Article V, at any time
from the Adoption Date and prior to the Ownership Limitation Termination Date,
an event, other than an event described in Section 5.6(c)(1) through (10),
occurs which would, if effective, result in any Existing Holder Beneficially
Owning Common Shares in excess of the applicable Existing Holder Limit, then,
except as provided in Section 5.6(l)(1), the smallest number of Common Shares
Beneficially Owned by such Existing Holder which, if exchanged for Excess
Shares, would result in such Existing Holder's Beneficial Ownership of Common
Shares not being in excess of the such Existing Holder Limit, shall be
automatically exchanged for an equal number of Excess Shares. Such exchange
shall be effective as of the close of business on the business day prior to the
date of the relevant event.
(14) If a Person (the 'nonreporting Person') who Beneficially Owns
more than 5.0% of the outstanding Common Shares on the Adoption Date does not
provide all of the information required by Section 5.6(f)(2) hereof and, as a
result, five or fewer Persons would, but for the exchange required by this
paragraph, Beneficially Own, in the aggregate, more than 49.9% of the
outstanding Common Shares, then, as of the day prior to the date on which such
aggregate ownership would have come to exceed 49.9%, Common Shares Beneficially
Owned by such nonreporting Person in excess of 5.0% of the outstanding Common
Equity Shares, to the extent not described on the written notice, if any,
provided by such nonreporting Person pursuant to Section 5.6(f)(2) hereof, shall
be automatically exchanged for Excess Common Shares to the extent necessary to
prevent such aggregate Beneficial Ownership from exceeding 49.9%.
(d) Remedies For Breach. If the Board of Trustees or its designees shall at
any time determine in good faith that a Transfer has taken place in violation of
Section 5.6(b) or that a Person intends to acquire or has attempted to acquire
beneficial ownership (determined without reference to any rules of attribution),
Beneficial Ownership or Constructive Ownership of any Shares in violation of
Section 5.6(b), the Board of Trustees or its designees shall take such action as
it deems advisable to refuse to give effect or to prevent such Transfer (or any
Transfer related to such intent), including, but not limited to, refusing to
give effect to such Transfer on the books of the Trust or instituting
proceedings to enjoin such Transfer, provided, however, that any Transfers or
attempted Transfers in violation of Sections 5.6(b)(2) through (4) or Section
5.6(b)(6) shall automatically result in the exchange described in Section
5.6(c), irrespective of any action (or non-action) by the Board or Trustees.
(e) Notice of Ownership or Attempted Ownership in Violation of Section
5.6(b). Any Person who acquires or attempts to acquire Beneficial Ownership or
Constructive Ownership of Shares in violation of Section 5.6(b) shall
immediately give written notice to the Trust of such event and shall provide to
the Trust such other information as the Trust may request in order
<PAGE>
to determine the effect, if any, of such acquisition or attempted acquisition on
the Trust's status as a REIT.
(f) Owners Required to Provide Information.
(1) From the Adoption Date and prior to the Ownership Limitation
Termination Date:
(a) every Beneficial Owner of more than 5.0% of the outstanding Equity
Shares of any class shall, within 30 days after January 1 of each year,
give written notice to the Trust stating the name and address of such
Beneficial Owner, the number of Shares Beneficially Owned, and a
description of how such Shares are held. Each such Beneficial Owner shall
provide to the Trust such additional information as the Trust may request
in order to determine the effect, if any, of such Beneficial Ownership on
the Trust's status as a REIT; and
(b) each Person who is a Beneficial Owner or Constructive Owner of
Shares and each Person (including the shareholder of record) who is holding
Shares for a Beneficial Owner or Constructive Owner shall provide to the
Trust such information as the Trust may request, in good faith, in order to
determine the Trust's status as a REIT or to comply with regulations
promulgated under the REIT Provisions of the Code.
(2) Every Beneficial Owner of more than 5.0% of the outstanding shares
of Common Shares on the Adoption Date shall, with 60 days of the Adoption Date,
give written notice, a form for which will be made available by the Trust to
those Persons that are Shareholders as of the Adoption Date, to the Trust
stating the name and address of such Beneficial Owner, the number of Common
Shares Beneficially Owned, and a description of how such Common Shares are held.
(g) Remedies Not Limited. Subject to the provisions of Section 5.11 hereof,
nothing contained in this Article V shall limit the authority of the Board of
Trustees to take such other action as it deems necessary or advisable to protect
the Trust and the interests of its Shareholders by preservation of the Trust's
status as a REIT.
(h) Ambiguity. In the case of an ambiguity in the application of any of the
provisions of this Article V, including any definition contained in Section
5.6(a) and any ambiguity with respect to which Shares are to be exchanged for
Excess Shares in a given situation, the Board of Trustees shall have the power
to determine the application of the provisions of this Article V with respect to
any situation based on the facts known to it consistent with the intention to
prevent (i) any violation of the 'closely held' prohibition set forth in Section
856(a)(6) of the Code, (ii) any rent from any Tenant failing to qualify as
'rents from real property' under Section 856(c)(2)(C) or 856(c)(3)(A) of the
Code as a result of the limitation set forth in Section 856(d)(2)(B) of the
Code, except to the extent (if any) permitted pursuant to Section 5.9(e), and
(iii) the Shares being Beneficially Owned by fewer than 100 persons within the
meaning of Section 856(a)(5) of the Code.
<PAGE>
(i) Modification of Existing Holder Limits. The Existing Holder Limits may
be modified as follows:
(1) Subject to the limitations provided in Section 5.6(k), any
Existing Holder may Transfer Common Shares to a Person who is already an
Existing Holder up to the number of Common Shares Beneficially Owned by such
transferor Existing Holder in excess of the Ownership Limit with respect to
Common Shares. Any such Transfer will decrease the Existing Holder Limit for
such transferor Existing Holder and increase the Existing Holder Limit for such
transferee Existing Holder by the percentage of the outstanding Common Equity
Shares so Transferred. The transferor Existing Holder shall give the Board of
Trustees of the Trust prior written notice of any such Transfer. This paragraph
shall apply only if and to the extent the Transfer does not result in a net
increase in the percentage of Common Shares Beneficially Owned by all Existing
Holders.
(2) Subject to the limitations provided in Section 5.6(k), the Board
of Trustees may grant share options which result in Beneficial Ownership of
Common Shares by an Existing Holder or other Person pursuant to a share option
plan approved by the Shareholders. Any such grant shall increase the Existing
Holder Limit for the affected Existing Holder, or the Ownership Limit for such
other Person (as applicable), to the maximum extent possible under Section
5.6(k) to permit the Beneficial Ownership of the Common Shares issuable upon the
exercise of such share options.
(3) The Board of Trustees may reduce the Existing Holder Limit for any
Existing Holder, with the written consent of such Existing Holder, after any
Transfer permitted in this Section 5.6 by such Existing Holder to a Person other
than an Existing Holder, and may reverse an increase pursuant to Section
5.6(i)(2) in an optionee's Existing Holder Limit or Ownership Limit to the
extent appropriate to reflect the lapse (without exercise) of a share option
described in Section 5.6(i)(2).
(4) Subject to the limitations set forth in Section 5.6(k), upon the
divorce of an Existing Holder, the Existing Holder Limits of the divorced couple
shall be adjusted to reflect their Beneficial Ownership of Common Shares after
such divorce.
(5) Subject to the limitations provided in Section 5.6(k), any Person
that is not treated as an individual for purposes of Section 542(a)(2) of the
Code (a 'Non-Individual') shall be permitted to Beneficially Own Shares in
excess of such Person's Ownership Limit or Existing Holder Limit if and to the
extent such Non-Individual delivers to the Board of Trustees such opinions of
counsel, representations and undertakings as the Board of Trustees determines
are reasonably necessary to assure that such excess Shares will not be or become
Beneficially Owned by any Person (including any Existing Holder) who (i) is
treated as an individual for purposes of Section 542(a)(2) of the Code and (ii)
would consequently Beneficially Own Shares in excess of such individual Person's
Ownership Limit or Existing Holder Limit.
(j) Modifications of Ownership Limit. Subject to the limitations provided
in Section 5.6(k), the Board of Trustees may from time to time increase the
Ownership Limit with respect to a class of Shares.
<PAGE>
(k) Limitations on Modification.
(1) Neither the Ownership Limit with respect to a class of Shares nor
any Existing Holder Limit may be increased (nor may any additional Existing
Holder Limit be created) if, after giving effect to such increase (or creation),
any five Beneficial Owners of Shares who are treated as individuals for purposes
of Section 542(a)(2) of the Code (including some or all of the then-existing
Existing Holders) could Beneficially Own, in the aggregate, more than 49.9% of
the outstanding Equity Shares of the class of Shares to which such Ownership
Limit or Existing Holder Limit relates. For purposes of making the determination
required by the preceding sentence, the principles of Section 542(a)(2) of the
Code shall apply, so that, to the extent possible without causing the Trust to
be 'closely held' within the meaning of Sections 856(a)(6) and 856(h), (i) an
Existing Holder that is not treated as an individual for purposes of Section
542(a)(2) of the Code will be treated as Beneficially Owning Common Shares
otherwise Beneficially Owned by it hereunder only to the extent that such Common
Shares are also Beneficially Owned by any Person (x) that is treated as an
individual for purposes of Section 542(a)(2) of the Code and (y) that either is
an Existing Holder or Beneficially Owns Common Shares in excess of the Ownership
Limit; and (ii) Common Shares Beneficially Owned by more than one Existing
Holder shall be taken into account only once and shall be treated as
Beneficially Owned only by the Existing Holder whose Beneficial Ownership of
such Common Shares would (under the REIT provisions of the Code) result in the
highest total percentage of Beneficial Ownership of Common Shares by five or
fewer Persons who are treated as individuals for purposes of Section 542(a)(2)
of the Code.
(2) Prior to the modifications of any Existing Holder Limit or
Ownership Limit pursuant to Section 5.6(i) or Section 5.6(j), the Board of
Trustees 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 a REIT.
(3) Subject to Section 5.6(k)(1), no Existing Holder Limit shall be
reduced to a percentage which is less than the Ownership Limit for Common
Shares.
(4) The Ownership Limit with respect to a class of Shares may not
be increased to a percentage which is greater than 9.9%.
(l) Exceptions
(1) The Board of Trustees may exempt a Person from the Ownership Limit
with respect to a class of Shares or an Existing Holder Limit, as the case may
be, if such Person is not an individual for purposes of Section 542(a)(2) of the
Code and the Board of Trustees obtains such opinions of counsel, representations
and undertakings from such Person as the Board of Trustees determines are
reasonably necessary or appropriate under the circumstances. The Board of
Trustees shall (subject to the receipt of such opinions of counsel,
representations, undertakings or agreements as it may deem necessary or
advisable in order to ensure the Trust's status as a REIT or to facilitate the
possible future issuance of Shares to one or more Persons in connection with the
acquisition of property or the raising of capital by the Trust) establish one or
more special Ownership Limits or Existing Holder Limits for any Person or
Persons (including
<PAGE>
without limitation a Person or Persons to whom the Board of Trustees determines
to issue Shares in connection with the acquisition of property by the Trust)
whose Beneficial Ownership of any class of Shares would otherwise exceed the
Ownership Limit or Existing Holder Limit with respect to such class of Shares;
in such event, in order to ensure the Trust's status as a REIT, limitations
comparable to those applicable to Existing Holders under this Section 5.6 shall
apply to any purported or attempted Transfer or other transaction that would
have the effect of increasing the Beneficial Ownership of Shares by any such
Person above the special Ownership Limit or Existing Holder Limit so established
for such Person.
(2) The Board of Trustees may designate a Person as an Existing
Constructive Holder, if (i) such Person does not and represents that it will not
own, directly or constructively (by virtue of the application of Section 318(a)
of the Code, as modified by Section 856(d)(5) of the Code), more than a 9.9%
interest (as set forth in Section 856(d)(2)(B) of the Code) in a Tenant (or such
smaller interest as would, in conjunction with the direct or constructive
holdings of the Trust and the Existing Constructive Holders, cause the aggregate
interest held by the Trust and the Existing Constructive Holders and such Person
to exceed 9.9%) or (ii) such Person does not qualify under the preceding clause
(i), but such Person's Constructive Ownership of an interest in any one or more
Tenants would not cause such Person or any other Person to become a Disqualified
Constructive Holder and, in the case of either (i) or (ii), the Trust obtains
such opinions of counsel, representations and undertakings from such Person as
the Board of Trustees determines are reasonably necessary to ascertain the
relevant facts and such Person agrees that any violation or attempted violation
will result in, to the extent necessary, the automatic exchange of Shares held
by such Person in excess of the Constructive Ownership Limit for Excess Shares
in accordance with Section 5.6(c) (as though the phrase 'other than an Existing
Constructive Holder' did not appear therein).
(3) Notwithstanding any other provision hereof, including without
limitation any restriction on the power of the Board of Trustees to accomplish
the following, the Board of Trustees may make such amendments to and
modifications of the provisions of Sections 5.6, 5.7, 5.8 and 5.9, and may grant
such total or partial exceptions to or waivers of such Sections, as it deems
necessary or advisable to further the interests of the Trust (including without
limitation to facilitate the possible future issuance of Shares to one or more
Persons in connection with the acquisition of property or the raising of capital
by the Trust), subject to the receipt of such opinions of counsel,
representations, undertakings or agreements as the Board of Trustees may deem
necessary or advisable in regard to the Trust's status as a REIT or otherwise.
SECTION 5.7 Legend
(a) Each certificate for Common Shares shall bear the following legend:
'The Common Shares represented by this certificate are subject to
restrictions on ownership and transfer as set forth in the Declaration of
Trust 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'). No Person may Beneficially Own Common Shares in excess of
5.0% (or such greater percentage as may be determined by the Board of
Trustees) of the outstanding Common Equity Shares of the Trust (unless such
Person is an Existing
<PAGE>
Holder) and no Person may Constructively Own Common
Shares in excess of 9.9% of the outstanding Common Equity Shares of the
Trust (unless such person is an Existing Constructive Holder). Any Person
who attempts or purports to Beneficially Own or Constructively Own Shares
in excess of the above limitations must immediately notify the Trust. All
capitalized terms used in this legend have the meanings set forth in the
Declaration of Trust, a copy of which, including the restrictions on
ownership and transfer, will be sent without charge to each Shareholder who
so requests. Any purported Transfer in violation of the restrictions will
be void. If the restrictions on ownership or transfer are violated, the
Common Shares represented hereby will be automatically exchanged for Excess
Shares, which will be held in trust by the Trust and will be subject to
purchase by the Trust.'
(b) Each certificate for Preferred Shares shall bear the following legend:
'The Preferred Shares represented by this certificate are subject to
restrictions on ownership and transfer as set forth in the Declaration of
Trust 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'). No Person may Beneficially Own Preferred Shares of any class
in excess of 5.0% (or such greater percentage as may be determined by the
Board of Trustees) of the outstanding Preferred Equity Shares of such class
and no Person may Constructively Own Preferred Shares of any class in
excess of 9.9% of the outstanding Preferred Equity
Shares of such class (unless such person is an Existing Constructive
Holder). Any Person who attempts or purports to Beneficially Own or
Constructively Own Shares in excess of the above limitations must
immediately notify the Trust. All capitalized terms used in this legend
have the meanings set forth in the Declaration of Trust, a copy of which,
including the restrictions on ownership and transfer, will be sent without
charge to each Shareholder who so requests. Any purported Transfer in
violation of the restrictions will be void. If the restrictions on
ownership or transfer are violated, the Preferred Shares represented hereby
will be automatically exchanged for Excess Shares, which will be held in
trust by the Trust and will be subject to purchase by the Trust.'
SECTION 5.8 Excess Shares
(a) Ownership in Trust. Upon any purported Transfer or other event that
results in an exchange of Shares for Excess Shares pursuant to Section 5.6(c),
such Excess Shares shall be deemed to have been transferred to the Trust, as
trustee of a Special Trust for the exclusive benefit of the Beneficiary or
Beneficiaries to whom an interest in such Excess Shares may later be transferred
pursuant to Section 5.8(c). Shares of Excess Shares so held in trust shall be
issued and outstanding shares of the Trust. The Purported Record Transferee or
Purported Record Holder shall have no rights in such Excess Shares except as
provided in Section 5.8(e). Where a Transfer or other event results in an
automatic exchange of Shares of more than one class for Excess Shares, then
separate Special Trusts shall be deemed to have been established for the Excess
Shares attributable to the Shares of each such class.
(b) Dividend Rights. Excess Shares shall not be entitled to any dividends.
Any dividend or distribution paid prior to the discovery by the Trust that the
Shares with respect to which the
<PAGE>
dividend or distribution was made had been exchanged for Excess Shares shall be
repaid to the Trust upon demand together with interest at the Interest Rate from
the date or dates any such dividends or distributions were paid until the date
repaid to the Trust.
(c) Rights Upon Liquidation. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of, or any distribution of the assets of,
the Trust, (i) subject to the preferential rights of the Preferred Shares, if
any, as may be determined by the Board of Trustees of the Trust pursuant to
Section 5.3 and the preferential rights of the Excess Preferred Shares, if any,
each holder of shares of Excess Common Shares shall be entitled to receive,
ratably with each other holder of Common Shares and Excess Common Shares, that
portion of the assets of the Trust available for distribution to the holders of
Common Shares or Excess Common Shares which bears the same relation to the total
amount of such assets of the Trust as the number of the Excess Common Shares
held by such holder bears to the total number of shares of Common Shares and
Excess Common Shares then outstanding and (ii) each holder of Excess Preferred
Shares shall be entitled to receive that portion of the assets of the Trust
which a holder of the Preferred Shares that was exchanged for such Excess
Preferred Shares would have been entitled to receive had such Preferred Shares
remained outstanding. The Trust, as holder of the Excess Shares in trust, or if
the Trust shall have been dissolved, any trustee appointed by the Trust prior to
its dissolution, shall distribute ratably to the Beneficiaries of the Special
Trust, when determined, any such assets received in respect of the Excess Shares
in any liquidation, dissolution or winding up of, or any distribution of the
assets of the Trust.
(d) Voting Rights. The holders of shares of Excess Shares shall not be
entitled to vote on any matters (except as required by law).
(e) Restrictions on Transfer, Designation of Beneficiary.
(1) Excess Shares shall not be transferable. The Purported Record
Transferee or Purported Record Holder may freely designate one or more
Beneficiaries of an interest in the Special Trust (representing the number of
Excess Shares held by the Special Trust attributable to a purported Transfer or
other event that resulted in the Excess Shares), if (i) the Excess Shares held
in the Special Trust would not be Excess Shares in the hands of any such
Beneficiary and (ii) the Purported Beneficial Transferee or Purported Beneficial
Holder does not receive a price, as determined on a Share-by-Share basis, for
designating any such Beneficiary that reflects a price for such Excess Shares
that, in the case of a Purported Beneficial Transferee, exceeds (x) the price
such Purported Beneficial Transferee paid for the Shares in the purported
Transfer that resulted in the exchanges of Shares for Excess Shares, or (y) if
the Purported Beneficial Transferee did not give value for such Shares (through
a gift, devise or other transaction), a price per share equal to the Market
Price of such Shares on the date of the purported Transfer that resulted in the
exchange of Shares for Excess Shares or, in the case of a Purported Beneficial
Holder, exceeds the Market Price of the Shares that were automatically exchanged
for such Excess Shares on the date of such exchange. Upon such a transfer of an
interest in the Special Trust, the corresponding Excess Shares in the Special
Trust shall be automatically exchanged for an equal number of Common Shares or
shares of a class of Preferred Shares (depending upon the type and class of
Shares that were originally exchanged for such Excess Shares) and such Common
Shares or Preferred Shares shall be transferred of
<PAGE>
record to the transferee or transferees of the interest in the Special Trust if
such Common Shares or Preferred Shares would not be Excess Shares in the hands
of any such transferee. Prior to any transfer of any interest in the Special
Trust, the Purported Record Transferee or Purported Record Holder, as the case
may be, must give advance notice to the Trust of the intended transfer and the
Trust must have waived in writing its purchase rights under Section 5.8(f).
(2) Notwithstanding the foregoing, if a Purported Beneficial
Transferee or Purported Beneficial Holder receives a price for designating a
Beneficiary of an interest in the Special Trust that exceeds the amounts
allowable under Section 5.8(e)(1), such Purported Beneficial Transferee or
Purported Beneficial Holder shall pay, or cause such Beneficiary to pay, such
excess to the Trust together with interest at the Interest Rate from the date
such excess was received until the date repaid to the Trust.
(f) Purchase Right in Excess Shares. Excess Shares shall be deemed to have
been offered for sale to the Trust, or its designee, at a price per share equal
to, in the case of Excess Shares resulting from a purported Transfer, the lesser
of (i) the price per Share in the transaction that created such Excess Shares
(or, in the case of a devise or gift, the Market Price at the time of such
devise or gift) and (ii) the Market Price on the date the Trust, or its
designee, accepts such offer or, in the case of Excess Shares created by any
other event, the lesser of (i) the Market Price of the Shares originally
exchanged for the Excess Shares on the date of such exchange or (ii) the Market
Price of such Shares on the date the Trust, or its designee, accepts such offer.
The Trust shall have the right to accept such offer for a period of ninety days
after the latest of (i) the date of the purported Transfer or other event which
resulted in an exchanges of Shares for such Excess Shares, (ii) the date the
Trust receives written notice of such event, which notice specifically refers to
the purchase right granted by this Section 5.8(f), and (iii) the date the Board
of Trustees determines in good faith that a purported Transfer or other event
resulting in an exchange of Shares for such Excess Shares has occurred, if the
Trust does not receive a notice of any such Transfer pursuant to Section 5.6(e).
SECTION 5.9 Tenant Ownership Limitation.
(a) Notice Requirement. An Existing Constructive Holder shall, immediately
upon the occurrence of an event causing such Existing Constructive Holder to
Constructively Own 2.0% or more of (i) in the case of a Tenant that is a
corporation, the outstanding voting power or the total number of outstanding
Shares of such Tenant, or (ii) in the case of a Tenant that is not a
corporation, the assets or net profits of such Tenant, give written notice to
the Trust of its Constructive Ownership of interests in such Tenant. Such notice
shall specify, as a percentage, (i) in the case of a Tenant that is a
corporation, such Existing Constructive Holder's Constructive Ownership of the
outstanding voting power and the total number of outstanding shares of such
Tenant, or (ii) in the case of a Tenant that is not a corporation, such Existing
Constructive Holder's Constructive Ownership of the assets and net profits of
such Tenant. Existing Constructive Holders that Constructively Own such an
interest in a Tenant on the Adoption Date shall so notify the Trust within 30
days after the Adoption Date.
(b) Ownership Registration. Upon receipt of a notice described in Section
5.9(a) (a 'Section 5.9(a) Notice'), the Trust shall immediately notify the other
Existing Constructive
<PAGE>
Holders of the name of the Tenant subject to the Section 5.9(a) Notice (the
'Designated Tenant'). Each other Existing Constructive Holder shall, within 30
days of receiving such notice from the Trust, provide the Trust with written
notice (a 'Section 5.9(b) Notice') specifying, as a percentage, (i) where the
Designated Tenant is a corporation, such Existing Constructive Holder's
Constructive Ownership of the outstanding voting power and the total number of
outstanding shares of such Designated Tenant, or (ii) where the Designated
Tenant is not a corporation, such Existing Constructive Holder's Constructive
Ownership of the assets and net profits of such Designated Tenant.
(c) Notice of Changes in Ownership. While a Tenant is a Designated Tenant,
each Existing Constructive Holder shall, within 20 days of any event causing a
change in the percentage levels of such Existing Constructive Holder's
Constructive Ownership of such Designated Tenant, notify the Trust of changes in
the information contained in such Existing Constructive Holder's Section 5.9(a)
Notice or Section 5.9(b) Notice with respect to such Designated Tenant (or any
update of such information pursuant to this Section 5.9(c)).
(d) Recordkeeping. The Secretary of the Trust shall maintain a record of
the aggregate Constructive Ownership of each Designated Tenant by the Existing
Constructive Holders and shall make such record available to an Existing
Constructive Holder upon request. A Designated Tenant shall remain a Designated
Tenant for so long as there is an Existing Constructive Holder which
Constructively Owns 2.0% or more of (i) in the case of a Designated Tenant that
is a corporation, the outstanding voting power or the total number of
outstanding shares of such Designated Tenant, or (ii) in the case of a
Designated Tenant that is not a corporation, the assets or net profits of such
Designated Tenant. The Secretary of the Trust shall notify the Existing
Constructive Holders when the status of a Tenant as a Designated Tenant
terminates. An Existing Constructive Holder's status as a Disqualified
Constructive Holder will terminate when the status of the Tenant with respect to
which such disqualified status arose as a Designated Tenant terminates.
(e) Excess Ownership. If, at any time from the Adoption Date to the
Ownership Limitation Termination Date, the aggregate Constructive Ownership of a
Tenant (the 'Related Party Tenant') by the Trust and all Existing Constructive
Holders equals or exceeds 10.0% of (i) in the case of a Tenant that is a
corporation, the outstanding voting power or the total number of outstanding
shares of such Tenant, or (ii) in the case of a Tenant that is not a
corporation, the assets or net profits of such Tenant, then if the amounts
(including without limitation reimbursements for taxes and other items) received
by the Trust from leases of real property rented by such Related Party Tenant
and all other Related Party Tenants exceeded $100,000 in the immediately
preceding fiscal year, or would exceed $100,000 in the current fiscal year under
the terms of leases in effect (the 'De Minimis Level'), one or more of the
Existing Constructive Holders shall be a 'Disqualified Constructive Holder,' in
accordance with the rules set forth below. The De Minimis Level for a particular
Related Party Tenant may be established and adjusted by the Board of Trustees in
its discretion in the event that (i) there are two or more Related Party
Tenants, (ii) the amounts received by the Trust from leases of real property
rented by all such Related Party Tenants exceed the De Minimis Level in the
absence of such adjustment, and (iii) the amounts received by the Trust from
leases of Real Property rented by all Related Party Tenants after such
adjustment will not result in the Trust's gross income from
<PAGE>
qualified sources under Section 856(c)(2) or Section 856(c)(3) of the Code to be
less than 97.5% or 80%, respectively, of the Trust's total gross income.
(1) Excess Ownership of a Non-Designated Tenant. If the Related Party
Tenant is not a Designated Tenant, then each Existing Constructive Holder whose
Constructive Ownership of interest in such Related Party Tenant is such that
such Existing Constructive Holder is required to provide a Section 5.9(a) Notice
shall be a Disqualified Constructive Holder as of the first date that the
aggregate ownership described in Section 5.9(e) first came to equal or exceed
10.0% or, if later, the first day of the first year in which amounts received by
the Trust with respect to Real Property rented by such Related Party Tenant
exceeded the De Minimis Level.
(2) Excess Ownership of a Designated Tenant. Subject to the provisions
of Section 5.9(e)(3), if the Related Party Tenant is a Designated Tenant, then
each Existing Constructive Holder that has not complied with the provisions of
Section 5.9(c) hereof shall be a Disqualified Constructive Holder as of the
first date that the aggregate ownership described in Section 5.9(e) first came
to equal or exceed 10.0% or, if later, the first day of the first year in which
amounts received by the Trust with respect to Real Property rented by such
Related Party Tenant exceeded the De Minimis Level. If the aggregate
Constructive Ownership described in Section 5.9(e) continues to equal or exceed
10.0%, then the Existing Constrictive Holder (x) whose Constructive Ownership of
interests in such Designated Tenant equals or exceeds 2.0% of (i) in the case of
a Designated Tenant that is a corporation, the outstanding voting power or the
total number of outstanding shares of such Designated Tenant, or (ii) in the
case of a Designated Tenant that is not a corporation, the assets or net profits
of such Designated Tenant and (y) which was the last such Existing Constructive
Holder to (a) become an Existing Constructive Holder or (b) have an increase in
its Constructive Ownership of the feature of the Designated Tenant with respect
to which the aggregate ownership described in Section 5.9(e) equals or exceeds
10.0%, shall be treated as a Disqualified Constructive Holder for the period
beginning on the first date that the aggregate ownership described in Section
5.9(e) first came to equal or exceed 10.0% or, if later, the first day of the
first year in which amounts received by the Trust with respect to Real Property
rented by such Related Party Tenant exceeded the De Minimis Level. If the
aggregate Constructive Ownership of the Trust and the remaining Existing
Constructive Holders continues to equal of exceed 10.0%, then the process
described above shall be repeated.
(3) Acquisitions During Notice Periods. If the Related Party Tenant is
a Designated Tenant and the aggregate Constructive Ownership described in
Section 5.9(e) equals or exceeds 10.0% as a result of increases in Constructive
Ownership taking place during the notice periods described in Section 5.9(a) or
Section 5.9(b), then the Existing Constructive Holder that Constructively Owns
an interest in the relevant feature of the Designated Tenant and that was the
last such Existing Constructive Holder to (i) become an Existing Constructive
Holder or (ii) have an increase in its Constructive Ownership of such feature of
the Designated Tenant shall be treated as a Disqualified Constructive Holder for
the period beginning on the first date that the aggregate ownership described in
Section 5.9(e) first came to equal or exceed 10.0% or, if later, the first day
of the first year in which amounts received by the Trust with respect to Real
Property rented by such Related Party Tenant exceeded the De Minimis Level. If
excess aggregate Constructive Ownership continues to exist, then this process
shall be repeated.
<PAGE>
(f) Modification. The Board of Trustees may, on a prospective basis, modify
the Constructive Ownership thresholds described in Section 5.9(a) and Section
5.9(d) and the De Minimis Level described in Section 5.9(e).
(g) Determination of Voting Power. The outstanding voting power of a
corporate Tenant shall be determined for purposes of this Section 5.9 in the
manner in which such is determined for purposes of Section 856(d)(2) of the
Code.
SECTION 5.10 Severability. If any provision of this Article V or any
application of any such provision is determined to be invalid by any Federal or
state court having jurisdiction over the issues, the validity of the remaining
provisions shall not be affected and other applications of such provision shall
be affected only to the extent necessary to comply with the determination of
such court.
SECTION 5.11 New York Stock Exchange Transactions. Nothing in this Article
V shall preclude the settlement of any transaction entered into through the
facilities of the New York Stock Exchange.
ARTICLE VI
SHAREHOLDERS
SECTION 6.1 Meetings of Shareholders. There shall be an annual meeting of
the Shareholders, to be held at such time and place as shall be determined by or
in the manner prescribed in the Bylaws at which the Managing Trustees shall be
elected and any other proper business may be conducted. Except as otherwise
provided in this Declaration of Trust, special meetings of Shareholders may be
called in the manner provided in the Bylaws. If there are no Managing Trustees,
the officers of the Trust shall promptly call a special meeting of the
Shareholders entitled to vote for the election of successor Trustees. Any
meeting may be adjourned and reconvened as the Managing Trustees determine or as
provided in the Bylaws. Actions by Shareholders may only be taken at a duly
convened meeting and not by action in writing.
SECTION 6.2 Voting Rights of Shareholders.
(a) Subject to the provisions of any class or series of Preferred Shares
then outstanding, the Shareholders shall be entitled to vote only on the
following matters: (a) election or removal of Managing Trustees as provided in
Sections 6.1 and 2.3; (b) amendment of this Declaration of Trust as provided in
Section 8.1; (c) termination of the Trust as provided in Section 9.2; (d)
reorganization of the Trust as provided in Section 8.2; and (e) merger,
consolidation or share exchange of the Trust, or the sale or disposition of
substantially all of the Trust Property, as provided in Section 8.3. Except with
respect to the foregoing matters, no action taken by the Shareholders at any
meeting shall in any way bind the Trustees.
(b) Subject to the provisions of any class or series of Preferred Shares
then outstanding, the holders of Common Shares and Preferred Shares then
outstanding shall vote as a single class
<PAGE>
on all matters, with each outstanding Share, regardless of class or series,
entitled to one vote per Share.
(c) Except as may be required by law, Excess Shares shall have no voting
rights, shall not entitle the holder thereof to the exercise of any voting
rights, and shall not be deemed outstanding for purposes of determining the
number of Shares entitled to vote or quorums hereunder.
ARTICLE VII
LIABILITY OF SHAREHOLDERS, TRUSTEES,
OFFICERS, EMPLOYEES AND AGENTS AND
TRANSACTIONS BETWEEN THEM AND THE TRUST
SECTION 7.1 Limitation of Shareholder Liability. No Shareholder shall be
liable for any debt, claim, demand, judgment or obligation of any kind of,
against or with respect to the Trust by reason of his being a Shareholder, nor
shall any Shareholder, by reason of his status as such, be subject to any
personal liability whatsoever, in tort, contract or otherwise, to any Person in
connection with the Trust Property or the affairs of the Trust.
SECTION 7.2 Limitation of Trustee Liability. A Trustee, when acting in such
capacity, shall not be personally liable to any person other than the Trust or a
Shareholder for any act, omission or obligation of the Trust or any Trustee. To
the maximum extent that Delaware law in effect from time to time permits
limitation of the liability of trustees of a business trust, no Trustee shall be
liable to the Trust or to any Shareholder for monetary damages for beach of any
duty (including, without limitation, fiduciary duty) as a Trustee, except (i)
for acts or omissions which involve actual fraud or willful misconduct or (ii)
for any transaction from which the Trustee derived improper personal benefit.
Neither the amendment nor repeal of this Section, nor the adoption or amendment
of any other provision of this Declaration of Trust inconsistent with this
Section, shall apply to or affect in any respect the applicability of the
preceding sentence with respect to any act or failure to act which occurred
prior to such amendment, repeal or adoption.
SECTION 7.3 Express Exculpatory Clauses in Instruments. Neither the
Shareholders nor the Trustees, officers, employees or agents of the Trust shall
be liable under any written instrument creating an obligation of the Trust, and
all persons shall look solely to the Trust Property for the payment of any claim
under or for the performance of that instrument. All such written instruments
shall contain an express exculpatory clause to the foregoing effect. The
omission of the foregoing exculpatory language from any instrument shall not
affect the validity or enforceability of such instrument and shall not render
any Shareholder, Trustee, officer, employee or agent liable thereunder to any
third party, nor shall the Trustee or any officer, employee or agent of the
Trust be liable to anyone for such omission.
SECTION 7.4 Indemnification.
<PAGE>
(a) The Trust shall indemnify and hold harmless each Trustee and officer
(and may, if the Board of Trustees so determines, indemnify the employees and
agents) of the Trust (including any persons who, while a Trustee or officer of
the Trust, is or was serving at the request of the Trust as a director, officer,
partner, trustee, employee or agent of another foreign or domestic corporation,
partnership, joint venture, trust, other enterprise or employee benefit plan) to
the maximum extent permitted by law, except to the extent that the indemnitee is
found liable for (i) an act or omission involving actual fraud or willful
misconduct or (ii) a transaction in which the indemnitee received an improper
personal benefit.
(b) In the event any Shareholder or former Shareholder shall be held to be
personally liable for any obligation of the Trust solely by reason of his being
or having been a Shareholder and not because of his acts or omissions or some
other reason, the Shareholder or former Shareholder (or his legal
representatives or successors) shall be entitled to be indemnified and held
harmless out of Trust assets against all loss and expenses arising from such
liability. The Trust shall, upon request by the concerned Shareholder, assume
the defense of any claim made against the Shareholder for any act or obligation
of the Trust and shall satisfy any judgment thereon from the assets of the
Trust.
(c) The Bylaws may contain additional provisions regarding indemnification.
SECTION 7.5 Transactions Between the Trust and its Trustees, Officers,
Employees or Agents. Subject to any express restrictions in this Declaration of
Trust or adopted by the Managing Trustees in the Bylaws or by resolution, the
Trust may enter into any contract or transaction of any kind (including without
limitation for the purchase or sale of property or for any type of services,
including those in connection with underwriting or the offer or sale of
Securities of the Trust) with any Person, including any Trustee, officer,
employee or agent of the Trust or any Person Affiliated with a Trustee, officer,
employee or agent of the Trust, whether or not any of them has a financial
interest in such transaction.
ARTICLE VIII
AMENDMENT; REORGANIZATION; MERGER, ETC.
SECTION 8.1 Amendment.
(a) The Managing Trustees may at any time amend the Declaration of Trust to
reflect: (a) a change to effect or maintain the qualification of the Trust as a
REIT under the Code; (b) a change in the name of the Trust or the location of
the principal place of business of the Trust; (c) a change that is (i) of an
inconsequential nature and does not adversely affect the Shareholders in any
material respect; (ii) necessary or desirable to cure any ambiguity, to correct
or supplement any provision of the Declaration of Trust that would be
inconsistent with any other provisions of the Declaration of Trust, or to make
any other provision with respect to matters or questions arising under the
Declaration of Trust that will not be inconsistent with the provisions of the
Declaration of Trust; (iii) necessary or desirable to satisfy any requirements,
conditions or guidelines contained in any opinion, directive, order, ruling or
regulation of any
<PAGE>
Federal, state or local agency or contained in any Federal, state or local law;
(iv) necessary or desirable to facilitate the trading of Shares or comply with
any rule, regulation, guideline or requirement of any securities exchange on
which the Shares are or will be listed for trading, compliance with any of which
the Board of Trustees deems to be in the interest of the Trust and the
Shareholders; or (v) required or contemplated by the Declaration of Trust; or
(d) any other amendments similar to the foregoing. Other amendments to the
Declaration of Trust require the recommendation of the Board of Trustees and the
affirmative vote of a majority of the outstanding Shares present in person or by
proxy entitled to vote at a duly convened meeting of Shareholders.
Notwithstanding the foregoing, no rights or powers afforded to the Resident
Trustee hereunder shall be modified, and no additional obligation or duty shall
be imposed on the Resident Trustee, without its prior written consent.
(b) The Bylaws shall be subject to amendment or other modification by the
Managing Trustees as therein provided.
(c) The Certificate of Trust shall be subject to amendment or other
modification by the Managing Trustees in accordance with the provisions of the
Trust Act.
SECTION 8.2. Reorganization. Subject to the provisions of any class or
series of Preferred Shares at the time outstanding, the Managing Trustees shall
have the power to (a) cause the organization of a corporation, association,
trust or other organization to take over the Trust Property and carry on the
affairs of the Trust; (b) merge the Trust into, or sell, convey an transfer the
Trust Property to, any such corporation, association, trust or organization in
exchange for Securities thereof or beneficial interests therein, and the
assumption by the transferee of the liabilities of the Trust; and (c) thereupon
terminate the Trust and deliver such Securities of beneficial interest ratably
among the Shareholders according to the respective rights of the class or series
of Shares held by them; provided that any such action shall have been approved,
at a duly convened meeting of the Shareholders called for that purpose, by the
affirmative vote of the holders of not less than a majority of the outstanding
Shares present in person or by proxy and entitled to vote thereon.
SECTION 8.3 Merger, Consolidation or Sale of Trust Property. Subject to the
provisions of any class or series of Preferred Shares at the time outstanding,
the Managing Trustees shall have the power to (a) merge the Trust into another
entity, (b) merge another entity into the Trust, (c) consolidate the Trust with
one or more other entities into a new entity or (d) sell or otherwise dispose of
all or substantially all of the Trust Property; provided that any such action
shall have been approved, at a duly convened meeting of the Shareholders called
for that purpose, by the affirmative vote of the holders of not less than a
majority of the Shares present in person or by proxy and entitled to vote
thereon. As provided in Section 3815(f) of the Trust Act (or any successor
provision thereto), an agreement of merger or consolidation may (i) effect any
amendment to this Declaration or (ii) effect the adoption of a new governing
instrument of the Trust if it is the surviving or resulting business trust in a
merger or consolidation.
<PAGE>
ARTICLE IX
DURATION AND TERMINATION OF TRUST
SECTION 9.1 Duration of Trust. The Trust shall continue perpetually unless
terminated pursuant to Section 9.2 or pursuant to any applicable provision of
the Trust Act.
SECTION 9.2 Termination of Trust.
(a) Subject to the provisions of any class or series of Preferred Shares at
the time outstanding, the Trust may be terminated at any duly convened meeting
of Shareholders called for that purpose, by the affirmative vote of the holders
of not less than two-thirds of the outstanding Shares. Upon the termination of
the Trust:
(i) The Trust shall carry on no business except for the purpose
of winding up its affairs.
(ii) The Managing Trustees shall proceed to wind up the affairs of the
Trust and all of the powers of the Trustees under this Declaration of Trust
shall continue, including the powers to fulfill or discharge the Trust's
contracts, collect its assets, sell, convey, assign, exchange, transfer or
otherwise dispose of all or any part of the remaining Trust Property 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.
(b) After termination of the Trust, the liquidation of its business, and
the distribution to the Shareholders as herein provided, a majority of the
Managing Trustees shall execute and file with the Trust's records, the Secretary
of State of the State of Delaware, and elsewhere as the Managing Trustees
determine to be necessary or appropriate, a certificate of cancellation and such
other documents as may be required by law certifying that the Trust has been
duly terminated, and the Trustees shall be discharged from all liabilities and
duties hereunder, and the rights and interests of all Shareholders shall cease.
ARTICLE X
MISCELLANEOUS
SECTION 10.1 Governing Law. This Declaration of Trust is executed by the
undersigned Trustees and delivered in the State of Delaware with reference to
the laws thereof, and the rights of all parties and the validity, construction
and effect of every provision hereof shall be subject to and construed according
to the laws of the State of Delaware without regard to conflicts of law
provisions thereof; provided, however, that the Trustees and Shareholders intend
that the provisions hereof and of the Bylaws shall control over any contrary or
limiting statutory or common law of the State of Delaware and that, to the
maximum extent permitted by applicable law, there shall not be applicable to the
Trust, the Trustees or this Declaration any provision of the laws (statutory or
common) of the State of Delaware (other than the Trust Act) pertaining
<PAGE>
to trusts which relate to or regulate in a manner inconsistent with the
terms hereof or of the Bylaws: (i) the filing with any court or governmental
body or agency of trustee accounts or schedules of trustee fees and charges,
(ii) affirmative requirements to post bonds for trustees, officers, agents, or
employees of a trust, (iii) the necessity for obtaining court or other
governmental approval concerning the acquisition, holding or disposition of real
or personal property, (iv) fees or other sums payable to trustees, officers,
agents or employees of a trust, (v) the allocation of receipts and expenditures
to income or principal, (vi) restrictions or limitations on the permissible
nature, amount or concentration of trust investments or requirements relating to
the titling, storage or other manner of holding of trust assets, or (vii) the
establishment of fiduciary or other standards or responsibilities or limitations
on the acts or powers of trustees that are inconsistent with the limitations on
liability or authorities and powers of the Trustees set forth or referenced in
this Declaration or the Bylaws. Section 3540 of Title 12 of the Delaware Code
shall not apply to the Trust. The Trust shall be of the type commonly called a
'business trust,' and without limiting the provisions hereof, the Trust may
exercise all powers that are ordinarily exercised by such a trust under Delaware
law. The Trust specifically reserves the right to exercise any of the powers or
privileges afforded to business trusts and the absence of a specific reference
herein to any such power, privilege or action shall not imply that the Trust may
not exercise such power or privilege or take such actions.
SECTION 10.2 Reliance by Third Parties. Any certificate shall be final and
conclusive as to any Persons dealing with the Trust if executed by an individual
who, according to the records of the Trust, appears to be the Secretary or an
Assistant Secretary of the Trust or a Trustee, and if certifying to: (a) the
number or identity of Trustees, officers of the Trust or Shareholders; (b) the
due authorization or the execution of any document; (c) the action or vote
taken, and the existence of a quorum, at a meeting of Trustees or Shareholders;
(d) a copy of this Declaration or of the Bylaws as a true and complete copy as
then in force; (e) an amendment to this Declaration or the Bylaws; (f) the
termination of the Trust; or (g) the existence of any fact or facts which relate
to the affairs of the Trust. No purchaser, lender, transfer agent or other
Person shall be bound to make any inquiry concerning the validity of any
transaction purporting to be made on behalf of the Trust by the Trustees or by
any officer, employee or agent of the Trust.
SECTION 10.3 Derivative Actions by Shareholders. Pursuant to the Trust Act,
Shareholders may bring an action on behalf of the Trust to recover a judgment in
the Trust's favor (a 'derivative action') where the Trustees here failed to
institute such an action. The right of Shareholders to institute such a
derivative action is subject to the restriction that Shareholders holding a
minimum of ten percent (10%) of the outstanding Common Shares join in the
institution of such action.
SECTION 10.4 Provisions In Conflict with Law or Regulations.
(a) The provisions of this Declaration of Trust are severable, and if the
Managing Trustees shall determine, with the advice of counsel, that any one or
more of such provisions (the 'Conflicting Provisions') are in conflict with the
REIT Provisions of the Code, the Trust Act or other applicable federal or state
laws, the Conflicting Provisions shall be deemed never to have constituted a
part of this Declaration Trust, even without any amendment of this
<PAGE>
Declaration pursuant to Section 8.1; provided, however, that such determination
by the Managing 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 prior to such determination. No Managing Trustee shall be
liable for making or failing to make such a determination.
(b) If any provision of this Declaration of Trust shall be held invalid or
unenforceable in any jurisdiction, such holding shall not in any manner affect
or render invalid or unenforceable such provision in any other jurisdiction or
any other provision of this Declaration of Trust in any jurisdiction.
<PAGE>
SECTION 10.5 Construction. In this Declaration of Trust, unless the context
otherwise requires, words used in the singular or in the plural include both the
plural and singular and words denoting any gender include all genders. The title
and headings of different parts are inserted for convenience and shall not
affect the meaning, construction or effect of this Declaration.
IN WITNESS WHEREOF, the undersigned, being all of the Trustees of the
Trust, have duly executed this Amended and Restated Declaration of Trust as of
the day and year first above written.
TRUSTEES
WILMINGTON TRUST COMPANY,
as Resident Trustee
By: /S/ NORMA P. CLOSS
Title: Vice President
/S/ MYLES H. TANENBAUM
Myles H. Tanenbaum, as a Managing
Trustee
/S/ SYLVAN M. COHEN
Sylvan M. Cohen, as a Managing Trustee
/S/ ALTON G. MARSHALL
Alton G. Marshall, as a Managing
Trustee
/S/ GEORGE R. PEACOCK
George R. Peacock, as a Managing
Trustee
/S/ PHILLIP E. STEPHENS
Phillip E. Stephens, as a Managing
Trustee
<PAGE>
EQK GREEN ACRES TRUST
INCENTIVE SHARE PLAN
1. Purpose.
The purpose of the EQK Green Acres Trust Incentive Share Plan (the 'Plan')
is to further the earnings of EQK Green Acres Trust, its subsidiaries and other
affiliates (collectively, the 'Company'). The Plan provides for the award of
long-term incentives to outside managing trustees and those officers and other
key executives who make substantial contributions to the Company by their
loyalty, industry, and invention. The Company intends that the Plan will
facilitate securing, retaining, and motivating management employees of high
caliber and potential.
2. Administration.
The Plan shall be administered by a Committee (the 'Committee') of the
Board of Trustees of EQK Green Acres Trust (the 'Board'). The Committee shall
consist of two or more persons selected by the Board of Trustees who are
ineligible and who have been ineligible for a one year period prior to
appointment thereto for selection as a person to whom, except as provided in
Section 6 hereof, awards may be granted pursuant to this Plan or any other
similar plan of the Company. Without limiting the foregoing and except as
specifically provided herein, the Committee shall have full and final authority
in its discretion to interpret the provisions of the Plan and to decide all
questions of fact arising in its application; to determine the employees to whom
awards shall be made under the Plan; to determine the type of awards to be made
and the amount, size and terms of each such award; to determine the time when
awards shall be granted; and to make all other determinations necessary or
advisable for the administration of the Plan.
3. Shares Subject to the Plan.
The shares that may be issued under the Plan shall not exceed in the
aggregate more than One Million Five Hundred Thousand (1,500,000) common shares
of beneficial interest, without par value (the 'Common Shares') of the Company.
Such shares may be authorized and unissued shares or treasury shares. Except as
otherwise provided herein, any shares subject to an option or right which for
any reason expires or is terminated unexercised as to such shares shall again be
available under the Plan.
4. Eligibility to Receive Awards.
Persons eligible to receive awards under the Plan shall be limited to
outside managing trustees and those officers and other key executive employees
of the Company who are in positions in which their decisions, actions and
counsel will have a significant impact upon the profitability and success of the
Company. Managing trustees of the Company who are not
<PAGE>
otherwise officers or employees of the Company shall be eligible to participate
in the Plan solely in accordance with Section 6 of the Plan.
5. Form of Awards.
Awards may be made from time to time by the Committee in the form of share
options to purchase Common Shares, share appreciation rights, restricted share
grants, or any combination thereof. Share options may be options which are
intended to qualify as incentive share options within the meaning of Section 422
of the Internal Revenue Code of 1986, or any amendment or substitute thereto
('Incentive Share Options') or options which are not intended to so qualify
('Non-Qualified Share Options').
6. Trustee Awards.
Each outside managing trustee of the Company, i.e., each trustee who is not
an officer or employee of the Company, shall receive awards of Non-Qualified
Share Options ('Trustee Options') in accordance with the terms and provisions of
this Section 6. Trustee Options shall have a term of ten (10) years, shall be
granted and vest as herein provided in this Section 6, and otherwise shall be
governed by Section 7 hereof. Each eligible Trustee as of the date hereof shall
be awarded Seven Thousand Five Hundred (7,500) Options, with an exercise price
of Ten ($10.00) Dollars per Common Share. On January 23 in each of 1997, 2000
and 2003, each eligible Trustee as of the date hereof then serving shall
receive an additional award of Seven Thousand Five Hundred (7,500) Trustee
Options. On election or re-election and qualification as a Trustee, each
other eligible Trustee shall be awarded Two Thousand Five Hundred (2,500)
Trustee Options for each year (or fraction thereof) of the term as Trustee
for which such eligible Trustee was elected or appointed. Each award to a
Trustee made hereunder shall vest ratably over a three (3) year period, with
one-third (1/3) of the awarded options vesting one year from the date of grant
and an additional one-third (1/3) vesting on each subsequent anniversary
thereof; provided that no Options shall vest at a time that the applicable
Trustee is not then serving as an eligible Trustee of the Company. The
Committee shall not have the power to alter the size, timing or vesting of
Trustee Option awards.
7. Share Options.
Share options for the purchase of Common Shares shall be evidenced by
written agreements in such form not inconsistent with the Plan as the Committee
shall approve from time to time, which shall contain in substance the following
terms and conditions:
(a) Type of Option. Each option agreement shall identify the options
represented thereby as Incentive Share Options or Non-Qualified Share Options,
as the case may be.
(b) Option Price. The purchase price of shares subject to an option
shall be the fair market value at the time of grant, as determined by the
Committee.
<PAGE>
(c) Exercise Term. Each option agreement shall state the period or
periods of time within which the option may be exercised, in whole or in part,
which shall be such period or periods of time as may be determined by the
Committee, provided that no option shall be exercisable after ten (10) years
from the date of grant thereof. The Committee may, in its discretion, provide in
the option agreement circumstances under which the option shall become
immediately exercisable, and may, notwithstanding the foregoing, accelerate the
exercisability of any option at any time.
(d) Payment for Shares. The purchase price of the shares with respect
to which an option is exercised shall be payable in full at the time of exercise
in cash, Common Shares held for at least six (6) months at fair market value, or
a combination thereof, as the Committee may determine and subject to such terms
and conditions prescribed by the Committee for such purpose.
(e) Rights Upon Termination of Employment. In the event that an
optionee ceases to be an employee of the Company for any cause other than
retirement after age sixty-five (65), death or disability, the options shall
terminate at the time of termination. In the event that an optionee retires
after attaining age sixty-five (65), dies or becomes disabled prior to the
expiration of his option and without having fully exercised his option, the
optionee or his successor shall have the right to exercise the option during its
term within a period of twelve (12) months after termination of employment due
to death, disability or retirement to the extent that the option was exercisable
at the time of termination, or within such other period, and subject to such
terms and conditions, as may be specified by the Committee.
(f) Nontransferability. Each option agreement shall state that the
option is not transferable other than by will or the laws of descent and
distribution, and that during the lifetime of the optionee the option is
exercisable only by him.
(g) Incentive Share Options. In the case of an Incentive Share Option,
each option agreement shall contain such other terms, conditions and provisions
as the Board determines necessary or desirable in order to qualify such option
as a tax favored option (within the meaning of Section 422 of the Code, or any
amendment or substitute thereto or regulation thereunder) including without
limitation, the following:
(i) The purchase price of shares subject to an Incentive Share Option
shall not be less than one hundred (100%) percent of the fair market value
of such shares on the date the option is granted, as determined by the
Committee;
(ii) The aggregate fair market value (determined as of the time the
option is granted) of the shares with respect to which Incentive Share
Options are exercisable for the first time by any employee during any
calendar year (under all plans of the Company) shall not exceed One Hundred
Thousand ($100,000.00) Dollars; and
<PAGE>
(iii) No Incentive Share Option shall be granted to any employee if at
the time the option is granted the individual owns shares possessing more
than ten (10%) percent of the total combined voting power of all classes of
shares of the Company or its parent or subsidiary corporation unless at the
time such option is granted the option price is at least one hundred ten
(110%) percent of the fair market value of the shares subject to the option
and such option by its terms is not exercisable after the expiration of
five (5) years from the date of grant.
8. Share Appreciation Rights.
Share appreciation rights shall be evidenced by written share appreciation
rights agreements in such form not inconsistent with this Plan as the Committee
shall approve from time to time, which agreements shall contain in substance the
following terms and conditions:
(a) Award. Share appreciation rights shall entitle the grantee,
subject to such terms and conditions determined by the Committee, to receive
upon exercise thereof all or a portion of the excess of (i) the fair market
value of a specified number of Common Shares at the time of exercise, as
determined by the Committee, over (ii) a specified price which shall not be less
than one hundred (100%) percent of the fair market value of the shares at the
time the right is granted, or, if connected with a previously issued share
option, not less than one hundred (100%) percent of the fair market value of the
shares at the time such option was granted. Share appreciation rights may be
granted in connection with a previously or contemporaneously granted share
option, or independently of a share option. In the event of the exercise of a
share appreciation right, the number of shares reserved for issuance hereunder
shall be reduced by the number of shares covered by the share appreciation
right.
(b) Term. Each agreement shall state the period or periods of time
within which the share appreciation right may be exercised, in whole or in part,
as determined by the Committee and subject to such terms and conditions
prescribed for such purpose by the Committee, provided that no share
appreciation right shall be exercisable after ten (10) years from the date
thereof. The Committee may, in its discretion, provide in the agreement
circumstances under which the share appreciation rights shall become immediately
exercisable, and may, notwithstanding the foregoing, accelerate the
exercisability of any share appreciation right at any time.
(c) Termination of Employment. Share appreciation rights will be
exercisable only during the grantee's employment by the Company except that in
the discretion of the Committee, a share appreciation right may be made
exercisable for up to twelve (12) months after the grantee's employment is
terminated, including by death or disability.
(d) Payment. Upon exercise of a share appreciation right, payment
shall be made in the form of Common Shares at fair market value on the date of
exercise, in cash, or in a combination thereof, as the Committee may determine.
<PAGE>
(e) Other Terms. Share appreciation rights shall be granted in such
manner and such form, and subject to such additional terms and conditions as the
Committee in its sole discretion deems necessary or desirable, including without
limitation: (i) if in connection with an Incentive Share Option, in order to
satisfy any requirements set forth under Section 422 of the Internal Revenue
Code of 1986, or any amendment or substitute thereto, or regulation thereunder;
or (ii) in order to avoid any insider trading liability in connection with a
share appreciation right under Section 16(b) of the Securities Exchange Act of
1934.
9. Restricted Share Awards.
Restricted share awards under the Plan shall consist of Common Shares of
the Company free of any purchase price or for such purchase price established by
the Committee, restricted against transfer, subject to forfeiture, and subject
to other terms and conditions intended to further the purpose of the Plan, and
shall be evidenced by written restricted share agreements in such form not
inconsistent with this Plan as the Committee shall approve from time to time,
which agreements shall contain in substance the following terms and conditions:
(a) Restriction Period. Shares awarded pursuant to this Plan shall be
subject to such terms, conditions and restrictions, including without limitation
prohibitions against transfer, substantial risks of forfeiture and attainment of
performance objectives, and for such period or periods as shall be determined by
the Committee, but not in excess of ten (10) years from the date of award. The
Committee may, in its discretion, provide in the agreement circumstances under
which the restricted shares shall become immediately transferable, and may,
notwithstanding the foregoing, accelerate the expiration of the restriction
period imposed on any shares at any time.
(b) Restriction upon Transfer. Restricted shares and the right to vote
such shares and to receive dividends thereon, may not be sold, assigned,
transferred, exchanged, pledged, hypothecated, or otherwise encumbered, except
as herein provided, during the restriction period applicable to such shares.
Notwithstanding the foregoing, and except as otherwise provided in the Plan, the
participant shall have all the other rights of a shareholder, including but not
limited to, the right to receive dividends and the right to vote such shares.
(c) Certificates. Each certificate issued in respect to shares awarded
to a participant shall be deposited with the Company or its designee and shall
bear the following legend:
'This certificate and the shares of beneficial interest
represented hereby are subject to the terms and conditions
(including forfeiture provisions and restrictions against
transfer) contained in the EQK Green Acres Trust Incentive Share
Plan and an Agreement entered into between the registered owner
and EQK Green Acres Trust. Release from such terms and
conditions shall be obtained only in accordance with the
provisions of the Plan and Agreement, a copy
<PAGE>
of each of which is on file in the office of the Secretary of
EQK Green Acres Trust.'
(d) Lapse of Restrictions. The Agreement shall specify the terms and
conditions upon which any restrictions upon shares awarded under the Plan shall
lapse, as determined by the Committee. Upon the lapse of such restrictions,
Common Shares free of the restrictive legend shall be issued to the participant
or his legal representative.
(e) Termination Prior to Lapse of Restrictions. In the event of a
participant's termination of employment prior to the lapse of restrictions as
determined pursuant to the provisions of the preceding paragraph (d), all shares
as to which there still remains unlapsed restrictions shall be forfeited by such
participant to the Company without payment of any consideration by the Company,
and neither the participant nor any successors, heirs, assigns or personal
representatives of such recipient shall thereafter have any further rights or
interest in such shares or certificates.
10. General Restrictions.
Each award under the Plan shall be subject to the requirement that if at
any time the Committee shall determine that (i) the listing, registration or
qualification of Common Shares subject or related thereto upon any securities
exchange or under any state or federal law, or (ii) the consent or approval of
any government regulatory body, or (iii) an agreement by the recipient of an
award with respect to the disposition of Common Shares is necessary or desirable
as a condition of or in connection with the granting of such award or the
issuance or purchase of Common Shares thereunder, such award shall not be
consummated in whole or in part unless such listing, registration,
qualification, consent, approval or agreement shall have been effected or
obtained free of any conditions not acceptable to the Committee.
11. Single or Multiple Agreements.
Multiple forms of awards or combinations thereof may be evidenced by a
single agreement or multiple agreements, as determined by the Committee.
12. Rights of a Shareholder.
The recipient of any award under the Plan, unless otherwise provided by the
Plan, shall have no rights as a shareholder with respect thereto unless and
until certificates for Common Shares are issued to him.
13. Rights to Terminate Employment.
Nothing in the Plan or in any agreement entered into pursuant to the Plan
shall confer upon any participant the right to continue in the employment of the
Company or affect any right which the Company may have to terminate the
employment of such participant.
<PAGE>
14. Withholding.
Whenever the Company proposes or is required to issue or transfer Common
Shares under the Plan, the Company shall have the right to require the recipient
to remit to the Company an amount sufficient to satisfy any federal, state or
local withholding tax requirements prior to the delivery of any certificate or
certificates for such shares.
15. Non-Assignability.
No award under the Plan shall be assignable or transferable by the
recipient thereof except by will or by the laws of descent and distribution or
by such other means as the Committee may approve. During the life of the
recipient, such award shall be exercisable only by such person or by such
person's guardian or legal representative.
16. Non-Uniform Determinations.
The Committee's determination under the Plan (including without limitation
determinations of the persons to receive awards, the form, amount and timing of
such awards, the terms and provisions of such awards and the agreements
evidencing same, and the establishment of values) need not be uniform and may be
made selectively among persons who receive, or are eligible to receive, awards
under the Plan, whether or not such persons are similarly situated.
17. Adjustments.
(a) In the event of any change in the outstanding shares of beneficial
interest of the Company, by reason of a share dividend or distribution,
supplemental offering of shares, recapitalization, merger, consolidation,
split-up, combination, exchange of shares or the like, the Committee may, in its
discretion, adjust the number of Common Shares which may be issued under the
Plan.
(b) The number of Common Shares purchasable upon the exercise of the
outstanding share options ('Options'), the option price and the terms of
outstanding share appreciation rights ('SARs') shall be subject to adjustment
from time to time as provided in this Section 17.
(i) If the Company shall pay or make a dividend or other distribution
on any class of capital shares of the Company in Common Shares, the number
of Common Shares purchasable upon exercise of an Option or the number of
SARs shall be increased by multiplying such number of shares or SARs by a
fraction of which the denominator shall be the number of Common Shares
outstanding at the close of business on the day immediately preceding the
date of such distribution and the numerator shall be the sum of such number
of shares and the total number of shares constituting such dividend or
other distribution,
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such increase to become effective immediately after the opening of business on
the date following such distribution.
(ii) If the outstanding Common Shares shall be subdivided into a
greater number of Common Shares, the number of Common Shares purchasable
upon exercise of an Option or the number of SARs at the opening of business
on the day following the day upon which such subdivision becomes effective
shall be proportionately increased, and, conversely, if outstanding Common
Shares shall each be combined into a smaller number of Common Shares, the
number of Common Shares purchasable upon exercise of an Option or the
number of SARs at the opening of business on the day following the day upon
which such combination becomes effective shall be proportionately
decreased, such increase or decrease, as the case may be, to become
effective immediately after the opening of business on the day following
the day upon which such subdivision or combination becomes effective.
(iii) The reclassification of Common Shares into securities (other
than Common Shares) and/or cash and/or other consideration shall be deemed
to involve a subdivision or combination, as the case may be, of the number
of Common Shares outstanding immediately prior to such reclassification
into the number or amount of securities and/or cash and/or other
consideration outstanding immediately thereafter and the effective date of
such reclassification shall be deemed to be 'the day upon which such
subdivision becomes effective' or 'the day upon which such combination
becomes effective,' as the case may be, within the meaning of the
subparagraph (ii) above.
(iv) The Committee may make such increases in the number of Common
Shares purchasable upon exercise of an Option or the number of SARs, in
addition to those required by this subparagraph (b), as shall be determined
by the Company's Board of Trustees to be advisable in order to avoid
taxation so far as practicable of any dividend of shares or share rights or
any event treated as such for federal income tax purposes to the
recipients.
(c) Whenever the number of Common Shares purchasable upon exercise of
an Option or the number of SARs is adjusted as provided in this Section 17, the
option price in the case of an Option or the Section 7(a)(ii) specified price,
in the case of SARs, shall be adjusted by a fraction in which the numerator is
equal to the number of Common Shares purchasable or SARs granted prior to the
adjustment and the denominator is equal to the number of Common Shares
purchasable or SARs granted after the adjustment.
(d) For the purpose of this Section 17, the term 'Common Shares' shall
include any shares of the Company of any class or series which has no preference
or priority in the payment of dividends or in the distribution of assets upon
any voluntary or involuntary liquidation, dissolution or winding up of the
Company and which is not subject to redemption by the Company.
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18. Change in Control. Upon a Change in Control, as herein defined, all
awards shall become one hundred (100%) percent vested. Change in Control shall
mean a change in control of a nature that would be required to be reported in
response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the
Securities Exchange Act of 1934, as amended, as in effect on the date hereof;
provided that, without limitation, a Change in Control shall also be deemed to
have occurred if and when a material portion (over fifty (50%) percent in value
of all assets or revenues) of the Company's assets, operations or businesses
shall have been sold to an unaffiliated party or parties.
19. Amendment.
The Committee may terminate or amend the Plan at any time, except without
shareholder approval, the Committee may not amend Section 6 hereof, increase the
maximum number of shares which may be issued under the Plan (other than
increases pursuant to Section 17 hereof), extend the period during which any
award may be exercised, extend the term of the Plan or change the minimum option
price (other than pursuant to Section 17 hereof). The termination or any
modification or amendment of the Plan shall not, without the consent of a
participant, affect his rights under an award previously granted.
20. Effect on Other Plans.
Participation in this Plan shall not affect an employee's eligibility to
participate in any other benefit or incentive plan of the Company. Any awards
made pursuant to this Plan shall not be used in determining the benefits
provided under any other plan of the Company unless specifically provided.
21. Duration of the Plan.
The Plan shall be effective as of the date adopted by the Board, but all
grants made hereunder shall be subject to shareholder approval of this Plan
within one (1) year of the date of adoption by the Board. The Plan shall remain
in effect until all awards under the Plan have been satisfied by the issuance of
shares, but no award shall be granted more than ten years after the earlier of
the date the Plan is adopted by the Company or is approved by the Company's
shareholders.
Adopted January 25, 1994
by the Board of Trustees
of EQK Green Acres Trust
/s/ Myles H. Tanenbaum
Myles H. Tanenbaum
Chairman of the Board
