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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
|X| Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the year ended December 31, 1996
OR
|_| Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _________ to _________
Commission File Number 1-12928
Agree Realty Corporation
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(Exact name of registrant as specified in its charter)
Maryland 38-3148187
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
31850 Northwestern Highway, Farmington Hills, Michigan 48334
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, included area code: (810) 737-4190
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Securities Registered Pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
------------------- ------------------------
Common Stock, $.0001 par value New York Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act:
None
(Title of Class)
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Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes __X__ No _____
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of 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__
Shares of common stock outstanding as of March 14, 1997: 2,678,430. The
aggregate market value of the Registrant's shares of common stock held by
non-affiliates on such date was approximately $55,577,422.
DOCUMENTS INCORPORATED BY REFERENCE
Document Incoroprated into Form 10-K
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Portions of the Registrant's Proxy Statement Part III
for its Annual Meeting of Shareholders Items 10-13
to be held on May 12, 1997
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<PAGE>
TABLE OF CONTENTS
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Part I
Page
Numbers
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Item 1. Business 3
Item 2. Properties 7
Item 3. Legal Proceedings 14
Item 4. Submission of Matters to a Vote of
Security Holders 14
Part II
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters 15
Item 6. Selected Financial Data 16
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 17
Item 8. Financial Statements and Supplementary Data 22
Item 9. Changes and Disagreements With Accountants
on Accounting and Financial Disclosure 22
Part III
Item 10. Directors and Executive Officers of the
Registrant 22
Item 11. Executive Compensation 22
Item 12. Security Ownership of Certain Beneficial
Owners and Management 22
Item 13. Certain Relationships and Related Transactions 22
Part IV
Item 14. Exhibits, Financial Statements, Schedules and
Reports on Form 8-K 23
Signatures 25
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<PAGE>
PART 1
Item 1. BUSINESS
General
The Company is a self-administered, self-managed real estate investment
trust (a "REIT") which develops, acquires, owns and operates properties which
are primarily leased to major national and regional retail companies under
net leases. As of December 31, 1996, the Company owned, either directly or
through interests in joint ventures, a portfolio of 32 properties located in
12 states and containing an aggregate of approximately 3.1 million square
feet of gross leasable area ("GLA"). The Properties consist of 13
neighborhood and community shopping centers and 19 free standing properties.
As of December 31, 1996, 98% of GLA in the Portfolio was leased, and
approximately 92% of the Company's base rental income was attributable to
national and regional retailers. Such retailers include Kmart Corporation
("Kmart"), Borders, Inc., Roundy's Inc. ("Roundy's") and Fashion Bug
(Charming Shoppes, Inc.) which, as of December 31, 1996, collectively
represented approximately 70% of current base rental income. The Company was
the developer of all 13 of the shopping centers and 14 of the 19
free-standing properties. As of December 31, 1996, the average age of the
Properties was 5.5 years.
The Company was formed in December 1993, to continue and expand the
retail property business founded in 1971 by its current Chairman of the Board
of Directors and President, Richard Agree. Since 1971, the Company and its
predecessors have specialized in building properties to suit for national and
regional retailers who have signed long-term net leases prior to commencement
of construction. The Company believes that this strategy provides it with a
predictable source of income from primarily national and regional retail
tenants in its existing properties and also provides opportunities for
development of additional properties at attractive returns on investment,
without the lease-up risks inherent in speculative development.
Upon completion of its initial public offering (the "IPO") in April
1994, the Company succeeded to the ownership of 17 properties which contained
an aggregate of 2,376,000 square feet of space. Since the IPO, the Company
has:
o Completed the development or acquisition of 14 properties leased to
Borders, Inc. and other subsidiaries (collectively, "Borders") of Borders
Group, Inc. ("BGI") which contain over 650,000 square feet. These
properties include Borders' corporate headquarters and central
administrative building in Ann Arbor, Michigan. BGI has guaranteed the
leases on all 14 of these properties. Seven of these properties are owned
directly by the Company and seven of these properties (the "Joint Venture
Properties") are owned by entities formed with affiliates of Borders
wherein the Company's economic interest ranges from 8% to 20% (the "Joint
Ventures").
o Developed a Circuit City store in Boynton Beach, Florida, consisting of
approximately 32,500 square feet, pursuant to a twenty-year net lease.
o Continued to operate both its initial portfolio and its new properties
at leased rates of over 95% and without any tenant
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<PAGE>
defaults. Kmart, the Company's largest tenant, reported to the Company
that the aggregate same-store sales at the stores leased from the Company
increased over 6% from 1995 to 1996. Since the IPO, the only anchor tenant
to vacate any of the Company's Properties was J. Byrons, which vacated
its 51,868 square foot location in Lakeland, Florida. The Company has
leased such location to Best Buy Company, at an increased rental rate for
a term which expires in January 2013.
o Announced results for the fourth quarter and year ended December 31,
1996, which included Funds from Operations (as hereafter defined) of
$1,951,000 and $7,076,000 for the quarter and the year, respectively, or
an increase of 18% and 10% respectively, from the same periods in 1995;
and net income for the quarter and the year of $1,382,000 and $3,734,000
respectively, or an increase of 65% and 15%, respectively, over the same
periods in 1995.
The Company is operated under the direction of Richard Agree, Chairman
of the Board and President, and Kenneth R. Howe, Vice President, Finance.
Messrs. Agree and Howe have an combined 35 years experience in the
construction, management, leasing and disposition of shopping center
properties.
Objectives and Strategies
Objectives
The Company's primary objectives are (i) to realize steady and
predictable cash flows through the ownership of high quality properties
leased primarily to national and regional retailers, and (ii) to increase
Funds from Operations per share through the development or acquisition of
additional properties. The Company presently intends to achieve these
objectives by implementing the growth, operating and financial strategies
outlined below.
Growth and Operating Strategies
In seeking to attain these objectives, the Company has applied and
intends to continue to apply the same strategies that have guided its
principals during the past twenty-six years. These strategies include the
following:
o Developing or acquiring each property with the objective of holding it
for long-term investment value.
o Developing or acquiring properties in what the Company considers to be
attractive long term locations. Such locations typically have (i)
convenient access to transportation arteries with traffic count that is
higher than average for the local market; (ii) concentrations of other
retail proprieties and (iii) demographic characteristics which are
attractive to the retail tenant which will lease the property upon
completion.
o Generally, purchasing land and beginning development of a property only
upon the execution of a lease with a national or regional retailer on
terms which provide a return on estimated cost which is attractive
relative to the Company's cost of capital.
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<PAGE>
o Directing all aspects of development, including construction, design,
leasing and management. Property management and the majority of its
leasing activities are handled directly by Company personnel. The Company
believes that this approach to development and management enhances the
ability of the Company to develop and maintain assets of high
construction quality which are designed, leased and maintained to
maximize long-term value and enables it to operate efficiently.
The Company believes that the relationships established by its
principals with national and regional retailers as well as the financing
relationships its principals have developed with lenders provide it with an
advantage in achieving its objectives.
Financing Strategy
As of December 31, 1996, the Company's ratio of indebtedness to market
capitalization was 54%. The Company intends to maintain a ratio of total debt
(including construction and acquisition financing) to market capitalization
of 65% or less. The Company plans to begin construction of additional
pre-leased developments and may acquire additional properties which will
initially be financed by its Credit Facility and Line of Credit. Management
intends to periodically refinance short term construction and acquisition
financing with long-term debt and /or equity. Upon completion of refinancing,
the Company intends to lower the ratio of total debt to market capitalization
to 50% or less. Nevertheless, the Company may operate with debt levels or
ratios which are in excess of 50% for extended periods of time prior to such
refinancing.
The Company may from time to time re-evaluate its borrowing policies in
light of then current economic conditions, relative costs of debt and equity
capital, market value of properties, growth and acquisition opportunities and
other factors. However, there is no contractual limit on the Company's ratio
of debt to total market capitalization and, accordingly, the Company may
modify its borrowing policy and may increase or decrease its ratio of debt to
market capitalization.
Tax Status
The Company has operated and intends to operate in a manner to qualify
as a REIT under Sections 856 through 860 of the Internal Revenue Code of
1986, as amended. In order to maintain qualification as a REIT, the Company
must distribute at least 95% of its real estate investment trust income and
meet certain other asset and income tests. Additionally, ownership of the
Company, directly or constructively, by any single person is limited to 9.8%
of the total number of outstanding shares, subject to certain exceptions. As
a REIT, the Company is not subject to federal income tax with respect to that
portion of its income which meets certain criteria and is distributed
annually to the stockholders.
Competition
The Company faces competition in seeking properties for acquisition and
tenants who will lease space in these properties from insurance companies,
credit companies, pension funds, private individuals, investment companies
and other REITs, many of which have greater financial and other resources
than the Company. There can be no
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<PAGE>
assurance that the Company will be able to successfully compete with such
entities in its development, acquisition and leasing activities in the
future.
Potential Environmental Risks
Investments in real property create a potential for environmental
liability on the part of the owner or operator of such real property. If
hazardous substances are discovered on or emanating from any of the
Properties, the owner or operator of the property (including the Company) may
be held strictly liable for all costs and liabilities relating to such
hazardous substances. The Company has had a Phase I environmental study
(which involves inspection without soil sampling or ground water analysis)
conducted on each Property by independent environmental consultants.
Furthermore, the Company has adopted a policy of conducting a Phase I
environmental study on each property it acquires.
The Phase I environmental studies conducted by the Company have not
revealed the existence of any hazardous substance or environmental liability
on the Properties. In addition, the management of the Company has no reason
to believe that any hazardous substances exist on such Properties in
violation of any applicable laws; however, no assurance can be given that
such substances are not located on any of the Properties. The Company
presently carries no insurance coverage for the types of environmental risks
described above.
The Company believes that it is in compliance in all material respects
with all Federal, state and local ordinances and regulations regarding
hazardous or toxic substances. The Company has not been notified by any
governmental authority of any noncompliance, liability or other claim in
connection with any of the Properties.
Employees
As of March 15, 1997, the Company employed eight persons. Employee
responsibilities include accounting, construction, leasing, property
coordination and administrative functions for the Properties. The Company's
employees are not covered by a collective bargaining agreement and the
Company considers its employee relations to be satisfactory. The Company's
headquarters are located at 31850 Northwestern Highway, Farmington Hills, MI
48334 and its telephone number is (810) 737-4190.
Recent Developments
On January 24, 1997 the Company repaid $4,221,283 of construction loans.
Such funds were paid from the Company's Credit Facility (defined below).
On February 26, 1997 the Company repaid $8,518,615 of construction
loans. Such funds were paid from the Company's Credit Facility (defined
below).
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<PAGE>
Item 2. PROPERTIES
The Properties consist of 13 neighborhood and community shopping centers
and 19 free standing properties. As of December 31, 1996, 98% of GLA in the
Portfolio was leased, and approximately 92% of the Company's base rental
income was attributable to, national and regional retailers. Such retailers
include Kmart, Borders, Roundy's and Fashion Bug which, at December 31, 1996,
collectively represented approximately 70% of current base rental income.
A substantial portion of the Company's income consists of rent received
under net leases. Most of the leases provide for the payment of fixed base
rentals monthly in advance and for the payment by tenants of a pro rata share
of the real estate taxes, insurance, utilities and common area maintenance of
the shopping center as well as payment to the Company of a percentage of such
tenant's sales. However the payments of percentage rents to the Company
historically have not been material and the Company does not anticipate that
they will become material in the future. Although a majority of the leases
require the Company to make roof and structural repairs as needed, a number
of leases place that responsibility on the tenant. The Company's management
places a strong emphasis on sound construction and maintenance on its
properties.
<TABLE>
<CAPTION>
Location of Properties in the Portfolio
Total Gross Percent of
Number of Leasable Area GLA Leased on
State Properties (Sq. feet) December 31, 1996
----- ---------- ------------- -----------------
<S> <C> <C> <C>
California 1 38,015 100%
Florida 5 (1) 486,657 96
Indiana 1 (1) 15,844 100
Illinois 1 20,000 85
Kansas 1 25,000 100
Kentucky 1 135,009 100
Michigan 11 (1) 1,549,758 99
Nebraska 2 (1) 55,000 100
Ohio 2 108,543 100
Oklahoma 3 (1) 74,282 100
Pennsylvania 1 37,004 100
Wisconsin 3 523,036 97
-- --------- ---
Total/Average 32 3,068,148 98%
-- --------- ---
<FN>
- ------------
(1) Includes Joint Venture Properties
</TABLE>
-7-
<PAGE>
Annualized Base Rent of the Company's Properties
The following is a breakdown of Base Rents in place at December 31, 1996
for each property type of retail tenant:
<TABLE>
<CAPTION>
Annualized Percent of
Type of Tenant Base Rent (1) Total Base Rent
---------------------------------------------------------------
<S> <C> <C>
National (2) $13,802,774 81%
Regional (3) 1,882,863 11
Local 1,341,566 8
----------- ---
Total $17,027,203 100%
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<FN>
- --------------------
(1) Includes the Company's share of annualized base rent for each of the
Joint Venture Properties.
(2) Includes the following national tenants: Kmart, Borders, Fashion Bug, Winn
Dixie, Rite Aid, JC Penney, Avco Financial, GNC Group, Radio Shack, On Cue,
Super Value, Maurices, Petrie Stores, Walgreens, Payless Shoes, Food Lion,
Blockbuster Video, Sears, A&P, TGI Fridays and Circuit City.
(3) Includes the following regional tenants: Roundy's, Dunhams Sports, Brauns
Fashion and Hollywood Video.
</TABLE>
As of December 31, 1996, 98% of the Portfolio was leased and
approximately 92% of the Company's base rental income was attributable to
national and regional retailers under long-term leases. On December 31, 1996
the average annualized base rent per square foot of the Portfolio was $6.39.
Four of the Company's largest tenants of are Kmart, Borders, Inc.,
Roundys, Inc. and Fashion Bug (Charming Shoppes). The annualized base rental
income for these tenants, (including the Company's proportionate share of the
annual base rent for the Joint Venture properties) as of December 31, 1996,
is as follows:
<TABLE>
<CAPTION>
Percent
Amount of Total
------ --------
<S> <C> <C>
Kmart $ 5,305,601 31%
Borders, Inc. 4,393,545 26%
Roundys, Inc. 1,730,063 10%
Fashion Bug 573,200 3%
----------- ---
$12,002,409 70%
----------- ---
</TABLE>
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<PAGE>
Community Shopping Centers
Thirteen of the Company's properties are Community Shopping Centers ranging
in size from 20,000 to 228,476 square feet of GLA. The centers are located in
5 states as follows: Florida (2), Illinois (1), Kentucky (1), Michigan (6)
and Wisconsin (3). The location, general character and primary occupancy
information with respect to the community shopping centers at December 31,
1996 are set forth below:
<TABLE>
<CAPTION>
Summary of Community Shopping Centers at December 31, 1996
(2) (3)
Total (1) Average Percent Percent
Year Land Leasable Annualized Base Leased at Occupied Anchor Tenants
Completed/ Area Area Base Rent per at Dec 31, at Dec 31, (Lease expiration/
Property Location Expanded (acres) (Sq. Ft.) Rent Sq. Ft. 1996 1996 Option expiration)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Plaza 1978/ 11.58 135,009 $ 405,268 $ 3.00 100% 100% Kmart (2003/2053)
Frankfort, KY 1991 Winn Dixie (2010/2035)
Fashion Bug (2004/2024)
Charleviox Commons 1991 14.79 137,375 633,395 4.61 96% 70% Kmart (2015/2065)
Charlevoix, MI Roundy's, Inc. (2011/2031)
Chippewa Commons 1991 16.37 168,311 845,833 5.03 96% 96% Kmart (2014/2064)
Chippewa Falls, WI Roundy's, Inc. (2011/2031)
Fashion Bug (2001/2021)
Iron Mountain Plaza 1991 21.20 176,352 835,713 4.74 97% 77% Kmart (2015/2065)
Iron Mountain, MI Roundy's, Inc. (2011/2031)
Fashion Bug (2002/2022)
Ironwood Commons 1991 23.92 185,535 940,679 5.07 100% 100% Kmart (2015/2065)
Ironwood, MI Super Value (2011/2036)
J.C. Penney Co (2006/2026)
Fashion Bug (2002/2022)
Marshall Plaza 1990 10.74 119,279 627,536 5.26 100% 100% Kmart (2015/2065)
Marshall, MI Fashion Bug (2002/2022)
North Lakeland Plaza 1987 16.67 171,334 1,336,611 7.80 100% 100% Kmart (2011/2061)
Lakeland, FL Best Buy (2013/2028)
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<PAGE>
<CAPTION>
Summary of Community Shopping Centers at December 31, 1996 (continued)
(2) (3)
Total (1) Average Percent Percent
Year Land Leasable Annualized Base Leased at Occupied Anchor Tenants
Completed/ Area Area Base Rent per at Dec 31, at Dec 31, (Lease expiration/
Property Location Expanded (acres) (Sq. Ft.) Rent Sq. Ft. 1996 1996 Option expiration)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Petoskey Town Center 1990 22.08 174,870 934,248 5.34 94% 94% Kmart (2015/2065)
Petoskey, MI Roundy's, Inc. (2010/2030)
Fashion Bug (2002/2022)
Plymouth Commons 1990 16.30 162,031 807,131 4.98 95% 95% Kmart (2015/2065)
Plymouth, WI Roundy's, Inc. (2010/2030)
Fashion Bug (2001/2021)
Rapids Associates 1990 16.84 173,557 978,119 5.64 100% 100% Kmart (2015/2065)
Big Rapids, MI Roundy's, Inc. (2010/2030)
Fashion Bug (2001/2021)
Shawano Plaza 1990 17.91 192,694 985,324 5.11 100% 100% Kmart (2014/2064)
Shawano, WI Roundy's, Inc. (2010/2030)
J.C. Penney Co (2005/2025)
Fashion Bug (2001/2021)
West Frankfort Plaza 1982 1.45 20,000 89,250 4.46 85% 85% Fashion Bug (1997/2007)
West Frankfort, IL
Winter Garden Plaza 1988 22.34 228,476 1,210,801 5.30 91% 69% Kmart (2013/2063)
Winter Garden, FL Food Lion (2009/2029)
Sears Roebuck (2000/2010)
------ --------- ----------- ----- -- --
Total/Average 212.19 2,044,823 $10,629,908 $5.20 97% 91%
====== ========= =========== ===== == ==
<FN>
(1) Total annualized base rents of the Company as of December 31, 1996
(2) Calculated as total annualized base rents, divided by GLA actually
leased as of December 31, 1996
(3) Roundy's does not currently occupy the space it leases at the Iron
Mountain Plaza (35,285 square feet, rented at a rate of $5.87 per square
foot) and the Charlevoix Commons Property (35,896 square feet, rented at a
rate of $5.97 per square foot). Both of these leases expire in 2011 (assuming
they are not extended by Roundy's Inc.). Sears, Roebuck & Co. leases but does
not currently occupy, the 50,000 square feet it leases at the Winter Garden
Plaza Property. This lease expires in 2000 (assuming that it is not extended
by Sears) and is rented at a rate of $5.00 per square foot.
(4) All community shopping centers except Capital Plaza (which is subject
to a long-term ground lease expiring in 2053 from a third party are
wholly-owned by the Company.
</TABLE>
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<PAGE>
Free-Standing Properties
Nineteen of the Properties are free-standing properties net leased to
either A&P (1), Borders (14), Circuit City Stores (1), or Kmart (3), which in
the aggregate comprise approximately 1,000,000 square feet. The free-standing
properties range in size from 15,844 to 226,000 square feet of GLA and are
located in the following states: California (1), Florida (3), Indiana (1),
Kansas (1), Michigan (5), Nebraska, (2), Ohio (2), Oklahoma (3) and
Pennsylvania (1). Included in the Company's 19 retail properties are seven
Joint Venture Properties in which the Company owns interests ranging from 8%
to 20% and 12 wholly owned properties. The Company's twelve (12) wholly owned
free-standing properties provide $5,720,378 of annualized base rent at an
average base rent per square foot of $10.00. The location, general character
and primary occupancy information with respect to the wholly-owned
free-standing properties are set forth in the following table:
<TABLE>
<CAPTION>
Wholly Owned Free Standing Properties
Year Lease expiration
Tenant/Location Completed Total GLA (Option expiration)
- --------------- --------- --------- -------------------
<S> <C> <C> <C>
A&P, Roseville, MI 1977 104,000 May 21, 2002 (2022)
Borders, (1)
Aventura, FL 1996 30,000 April 11, 2116 (2036)
Borders, Columbus, OH 1996 21,000 Jan 23, 2016 (2036)
Borders,
Monroeville, PA 1996 37,004 Nov 8, 2016 (2036)
Borders, Norman, OK 1996 24,641 Sep 20, 2016 (2036)
Borders, Omaha, NE 1995 30,000 Nov 3, 2015 (2035)
Borders,
Santa Barbara, CA 1995 38,015 Nov 17, 2015 (2035)
Borders, Wichita, KS 1995 25,000 Nov 10, 2015 (2035)
Circuit City Stores
Boynton Beach, FL 1996 32,459 Dec 15, 2016 (2036)
Kmart, Grayling, MI 1984 52,320 Sep 30, 2009 (2059)
Kmart, Oscoda, MI 1984 90,470 Sep 30, 2009 (2059)
Kmart, (1)
Perysburg, OH 1983 87,543 Oct 31, 2008 (2058)
-------
Total 572,452
-------
<FN>
(1)These properties are subject to long-term ground leases where a third
party owns the underlying land and has leased the land to the Company
to construct or operate two free-standing properties. The Company pays
rent for the use of the land and generally is responsible for all costs
and expenses associated with the building and improvements. At the end
of the lease terms, as extended (2035 and 2027), the land together with
all improvements revert to the land owner. The Company has an option to
purchase the Perrysburg property during its lease term.
</TABLE>
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<PAGE>
Joint Venture Properties
During 1996, the Company developed or acquired seven free-standing
Properties which are leased to Borders, including Borders' corporate
headquarters, its central administrative building and Properties operated as
Borders Books and Music. Each of these Properties is owned by a separate
limited liability company or a limited partnership which is owned jointly by
the Company and an affiliate of Borders. The Company's economic interest in
the Joint Ventures ranges from 8% to 20%. The financing for the development
of the Joint Venture Properties was provided through a financing facility
established by Borders and its affiliates (the "Borders Financing Facility").
The lease between Borders and each of the Joint Ventures has a term
expiring November 21, 2000, unless the Borders Financing Facility is extended
or earlier terminated. At any time during the term of the lease, Borders has
the right to refinance the Property or to purchase the Property for various
percentages of total project costs, provided that, prior to such refinancing
or purchase, the Company may elect to provide alternative financing for the
Property or purchase the Property and purchase the interest of the Borders'
affiliate in the Joint Venture. In the event the Company elects to provide
financing or to purchase the Property, and is subsequently unable to obtain
the requisite financing or in the event that the Company defaults in its
development obligations to the Joint Venture, Borders may purchase the
Property. If the Company provides refinancing or purchases the Property, the
Company will be required to acquire the interest of the Borders' affiliate in
the Joint Venture, and Borders and the Joint Venture will enter into a new
lease providing for a term of 20 years, with four five-year extension
options.
Under certain circumstances, the Company may elect to allow Borders to
place long-term financing on such Properties, in which case, the Company will
maintain its current interest in the Joint Venture and become the sole equity
member of the entity which owns such Property. In such a circumstance, the
Company will own the Property subject to a first mortgage loan which could
exceed 90% of the property's estimated value, and lease payments received by
the Company would be adjusted to reflect Borders' financing.
Prior to one of the financing transactions discussed above, the
Company's investment in the seven Joint Venture properties is expected to
provide in excess of $600,000 annualized base rent. Of this amount, the
Company estimates that approximately $116,000 is variable based on short-term
financing. Under certain circumstances relating to refinancing of such
assets, the rents paid pursuant to such leases are subject to adjustment. The
following table provides additional information on the Joint Venture
Properties.
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<PAGE>
<TABLE>
<CAPTION>
Joint Venture Properties
The Company's
Tenant / Location Interest Total GLA Lease Expirations
- ----------------- ------------- --------- -----------------
<S> <C> <C> <C>
Borders, Inc.
Ann Arbor, MI 11% 110,000 November 21, 2000
Borders, Inc.
Ann Arbor, MI 8% 226,000 November 21, 2000
Borders, Inc.
Boynton Beach, FL 12% 20,000 November 21, 2000
Borders, Inc.
Indianapolis, IN 8% 15,844 November 21, 2000
Borders, Inc.
Oklahoma City, OK 20% 24,641 November 21, 2000
Borders, Inc./Omaha, NE 18% 25,000 November 21, 2000
Borders, Inc./Tulsa, OK 15% 25,000 November 21, 2000
-------
Total 446,485
-------
</TABLE>
Major Tenants
The following table sets forth certain information with respect to the
Company's major tenants:
<TABLE>
<CAPTION>
Annual Base Percent of Total
Number Rent as of Annual Base Rent as
of Leases December 31, 1996 of December 31, 1996
--------- ----------------- --------------------
<S> <C> <C> <C>
Kmart 15 $ 5,305,601 31%
Borders 14 4,393,545 (1) 26%
Roundy's 7 1,730,063 10%
Fashion Bug
(Charming Shoppes) 10 573,200 3%
-- ----------- --
Total/Average 46 $12,002,409 70%
-- ----------- --
<FN>
- --------------
(1) Includes the Company's share of annual base rent for each of the
Joint Venture Properties
</TABLE>
Fifteen of the Properties are anchored by Kmart, a publicly traded
international retailer with over 2,100 stores. Kmart's principal business is
general merchandise retailing through a chain of department stores and it is
one of the world's largest retailers based on sales volume. The Company
derived approximately 31% of its annual base rental income for the year ended
December 31, 1997 from, and approximately 39% of the Company's future minimum
rentals are attributable to, Kmart.
BGI, a publicly-traded company, is the country's second largest
retailers of books, music and other informational, educational and
entertainment products. Two of BGI's subsidiaries, Borders, Inc. and Walden
Books, Co., Inc. together operate in over 1,000 locations, serving all 50
states. The Company derived approximately 26% of its total average annual
base rental income for the year ended December 31, 1996 from, and
approximately 31% of the Company's future minimum rentals are attributable
to, Borders.
Roundy's and its subsidiaries are engaged principally in the wholesale
distribution of food and non-food products to supermarkets and warehouse food
stores. The Company derived approximately 10% of its
-13-
<PAGE>
annual base rental income from, and approximately 11% of the Company's future
minimum rentals are attributable to, Roundy's.
Charming Shoppes, Inc. operates, through its subsidiaries, a chain of
women's specialty clothing stores in over 40 states. Its retail properties
operate under the names Fashion Bug and Fashion Bug Plus. The Company derived
approximately 3% of its annual base rental income for the year ended December
31, 1996 from, and approximately 1% of the Company's future minimum rental
are attributable to, Charming Shoppes, Inc.
Lease Expirations
The following table shows lease expirations for the next 10 years for
the Company's community shopping centers and wholly owned free-standing
properties, assuming that none of the tenants exercise renewal options.
<TABLE>
<CAPTION>
December 31, 1996
Gross Lesable Area Annualized Base Rent
------------------ --------------------
Number
Expiration of Leases Square Percent Per cent
Year Expiring Footage of Total Amount of Total
- ---------- --------- ------- -------- ------ --------
<S> <C> <C> <C> <C> <C>
1997 9 35,240 1.35% $ 289,574 1.77%
1998 22 79,410 3.03 567,242 3.47
1999 4 19,800 0.76 121,620 0.74
2000 13 114,050 4.36 731,530 4.47
2001 26 105,434 4.03 873,346 5.34
2002 10 166,570 6.37 830,969 5.08
2003 7 113,992 4.36 502,732 3.07
2004 -- -- -- -- --
2005 2 34,204 1.31 131,714 0.81
2006 2 31,204 1.18 157,065 0.97
-- ------- ----- ---------- -----
Total/Average 95 699,904 26.75 $4,205,792 25.72%
-- ------- ----- ---------- -----
</TABLE>
Leases on the seven Joint Venture Properties are typically for an
initial term through November 2000. In the event a refinancing is
consummated, Borders is required to enter into a twenty year net lease with a
fixed lease rate.
Item 3. LEGAL PROCEEDINGS
The Company is not presently involved in any litigation nor, to
management's knowledge, is any litigation threatened against the Company,
except for routine litigation arising in the ordinary course of business
which is expected to be covered by the Company's liability insurance.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the fourth
quarter of 1996.
-14-
<PAGE>
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's common stock is traded on the New York Stock Exchange
under the symbol ADC. The following table sets forth the high and low sales
prices of the Common Stock, as reported on the New York Stock Exchange
Composite Tape, and the dividends declared per share of Common Stock by the
Company for each calendar quarter in the last two fiscal years. Dividends
were paid in the periods immediately subsequent to the periods in which such
dividends were declared.
<TABLE>
<CAPTION>
Market Information Dividends Per
High Low Common Share
---- --- -------------
<S> <C> <C> <C>
Quarter Ended
March 31, 1995 $16.250 $15.375 $0.45
June 30, 1995 $17.000 $14.500 $0.45
September 30, 1995 $17.375 $15.500 $0.45
December 31, 1995 $17.000 $13.500 $0.45
March 31, 1996 $18.250 $14.500 $0.45
June 30, 1996 $18.875 $16.500 $0.45
September 30, 1996 $19.750 $17.500 $0.45
December 31, 1996 $21.500 $18.750 $0.45
</TABLE>
At December 31, 1996, there were 2,649,475 shares of Common Stock issued
and outstanding which were held by approximately 216 stockholders of record.
The stockholders of record do not reflect persons or entities who held their
shares in nominee or "street" name.
The Company intends to continue to declare quarterly dividends to its
stockholders. However, distributions by the Company are determined by the
Board of Directors and will depend on a number of factors, including the
amount of Funds from Operations, the financial and other condition of its
properties, its capital requirements, the annual distribution requirements
under the provisions of the code applicable to REIT"s and such other factors
as the Board of Directors deems relevant.
During the year ended December 31, 1996, there were no sales of
unregistered securities by the Company, except the grant under the Company's
1994 Stock Incentive Plan of 11,290 shares of restricted stock to certain
employees of the Company. Such shares vest in equal annual installments over
a five-year period from the date of the grant, but entitle the holder thereof
to receive dividends from the date of the grant.
-15-
<PAGE>
Item 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial information for the
Company and the Agree Predecessors on a historical basis and should be read
in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and all of the financial statements and
notes thereto included elsewhere in the Report. The balance sheet data for
December 31, 1992 through December 31, 1996 and operating data for each of
the periods presented were derived from audited financial statements of the
Company and the Agree Predecessors.
<TABLE>
<CAPTION>
(In thousands, except per share information)
Agree Realty Corporation The Agree Predecessors
------------------------------------- -------------------------------------
Year Year April 22, January 1, Year Year
Ended Ended Through Through Ended Ended
Dec 31, Dec 31, Dec 31, April 21, Dec 31, Dec 31,
Operating Data 1996 1995 1994 1994 1993 1992
- -------------------------------------------------------------------------------- ------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total Revenue $ 16,291 $ 13,699 $ 9,280 $4,080 $ 13,156 $ 12,606
-------- -------- -------- ------ -------- --------
Expenses
Property expense (1) 2,485 2,049 1,245 681 1,872 1,856
General and administrative 1,105 966 668 159 660 639
Interest 6,101 4,335 2,972 2,584 8,803 9,167
Depreciation and amortization 2,620 2,317 1,627 680 2,292 2,260
-------- -------- -------- ------ -------- --------
Total Expenses 12,311 9,667 6,512 4,104 13,627 13,922
-------- -------- -------- ------ -------- --------
Other Income (Expense) (2) 653 -- (375) 85 448 680
-------- -------- -------- ------ -------- --------
Income (loss) before extraordinary
item and minority interest 4,633 4,032 2,393 61 (23) (636)
Extraordinary Item - Early
Extinguishment of Debt -- -- (2,139) -- -- --
-------- -------- -------- ------ -------- --------
Income (loss) before Minority Interest 4,633 4,032 254 61 (23) (636)
Minority Interest 899 785 49 -- -- --
-------- -------- -------- ------ -------- --------
Net Income (Loss) $ 3,734 $ 3,247 $ 205 $ 61 $ (23) $ (636)
======== ======== ======== ====== ======== ========
Funds from Operations $ 7,076 $ 6,389 $ 4,544 -- -- --
======== ======== ======== ====== ======== ========
Number of Properties 32 20 17 17 17 17
======== ======== ======== ====== ======== ========
Number of Square Feet 3,068 2,470 2,377 2,377 2,377 2,377
======== ======== ======== ====== ======== ========
Per share data
- --------------
Net income (3) $ 1.41 $ 1.23 $ 0.08 -- -- --
======== ======== ======== ====== ======== ========
Cash dividends $ 1.80 $ 1.80 $ 1.25 -- -- --
======== ======== ======== ====== ======== ========
Weighted average of common
shares outstanding 2,649 2,638 2,638 -- -- --
======== ======== ======== ====== ======== ========
Balance Sheet Data
Real Estate
(before accumulated depreciation) $132,474 $118,360 $ 96,852 $ 96,548 $ 95,870
Total Assets $121,382 $108,928 $ 89,653 $ 89,835 $ 91,859
Total debt, including accrued interest $ 88,252 $ 73,741 $ 54,431 $ 94,334 $ 95,939
<FN>
- ---------
(1) Property expense includes real estate taxes, property maintenance,
insurance, utilities and land lease expense.
(2) Other income (expense) is composed of development fee income, gain
on land sales, equity in net income of unconsolidated entities and
reorganization costs
(3) Net income per share has been computed by dividing the net income
by the weighted average number of Common Stock.
</TABLE>
-16-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANYALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Overview
The Company was established to continue to operate and expand the retail
property business of its predecessors. The Company commenced its operations
on April 22, 1994 with the sale of 2,500,000 shares of common stock. The net
cash proceeds to the Company from the completion of this IPO were
approximately $45.4 million which were used primarily to reduce outstanding
indebtedness, pay stock issuance costs and establish a working capital
reserve.
The assets of the Company are held by, and all operations conducted through
Agree Limited Partnership, (the "Operating Partnership") of which the Company
is the sole general partner which held an 80.59% interest as of December 31,
1996. The Company is operating so as to qualify as a real estate investment
trust ("REIT") for federal income tax purposes.
The following should be read in conjunction with the Consolidated Financial
Statements of Agree Realty Corporation and the Combined Financial Statements
of the Agree Predecessors, including the respective notes thereto, which are
included elsewhere in this Form 10-K.
Comparison of Year Ended December 31, 1996 to Year Ended December 31, 1995
Rental income increased $2,514,000, or 21%, to $14,450,000 in 1996, compared
to $11,936,000 in 1995. The increase was the result of the development and
acquisition of five properties in 1996 and the development of three
properties in the fourth quarter of 1995.
Operating cost reimbursements, which represent additional rent required by
substantially all of the Company's leases to cover the tenants' proportionate
share of property operating expenses, increased $90,000, or 5%, to $1,761,000
in 1996, compared to $1,671,000 in 1995. Operating cost reimbursements
increased due to the increase in real estate taxes and property operating
expenses from 1995 to 1996 as explained below.
Management fees and other income remained relatively constant at $81,000 in
1996 versus $92,000 in 1995.
Real estate taxes increased $49,000, or 4%, to $1,169,000 in 1996 versus
$1,120,000 in 1995. The increase is the result of general assessment
increases relating to the shopping center properties and the addition of new
properties.
Property operating expenses (shopping center maintenance, insurance and
utilities) increased $109,000, or 12%, to $980,000 in 1996 versus $871,000 in
1995. The increase was the result of increased snow removal costs of $26,000;
an increase in shopping center maintenance costs of $95,000; an increase in
utility costs of $8,000 and a decrease in insurance costs of $20,000 in 1996
versus 1995.
Land lease payments increased $280,000 to $336,000 in 1996 versus $56,000 in
1995 as a result of the acquisition of a ground lease of a free standing
property in Aventura, Florida.
-17-
<PAGE>
General and administrative expenses increased by $139,000, or 14%, to
$1,105,000 in 1996 versus $966,000 in 1995. The increase was primarily the
result of an increase in compensation related expenses of $24,000; increases
in state franchise and income taxes of $40,000; additional administrative
expenses in connection with its secured line of credit of $25,000 and
increased expenses in connection with the management of the Company's
properties of $50,000. General and administrative expenses as a percentage of
rental income decreased from 8.1% for 1995 to 7.6% for 1996.
Depreciation and amortization increased $303,000, or 13%, to $2,620,000 in
1996 versus $2,317,000 in 1995. The increase was the result of the completion
of eight new properties in late 1995 and 1996.
Interest expense increased $1,766,000, or 41%, to $6,101,000 in 1996, from
$4,335,000 in 1995. The increase in interest expense was the result of the
Company financing the development and acquisition of eight new properties in
late 1995 and 1996.
The Company received $510,000 of development fee income in 1996 in connection
with the development of four Joint Venture Properties. There was no
development fee income in 1995. The above amount was not included in the
Company's calculation of Funds from Operations, due to the non-recurring
nature of this type of income.
The Company recognized income of $85,000 on the sale of a parcel of land in
1996. There was no land sale gains in 1995.
Equity in net income of unconsolidated entities represents the Company's
share of the net income of $59,000, from the seven Joint Ventures formed for
the purpose of acquiring and developing the single tenant properties for
Borders. These entities were not in existence during the year ended December
31, 1995.
The Company's income before minority interest increased $601,000 as a result
of the foregoing factors.
Comparison of Year ended December 31, 1995 to Year ended December 31, 1994
Rental income increased $221,000, or 2%, to $11,936,000 in 1995, compared to
$11,715,000 in 1994. The increase was the result of $237,000 from the
addition of three new properties in 1995, $49,000 from periodic rental
increases that came into effect during 1995 and a decrease of $65,000 due
primarily to the releasing of tenant space in one of the Company's Florida
shopping centers.
Operating cost reimbursements increased $83,000, or 5%, to $1,671,000 in
1995, compared to $1,588,000 in 1994. The increase in operating cost
reimbursements resulted from the increase in real estate taxes and property
operating expenses from 1994 to 1995 as explained below.
Management fees and other income increased $35,000 to $91,000 in 1995 versus
$56,000 in 1994.
Real estate taxes increased $15,000, or 1%, to $1,121,000 in 1995 versus
$1,106,000 in 1995. The increase is the result of general assessment
increases.
-18-
<PAGE>
Property operating expense increased $107,000, or 14%, to $871,000 in 1995
versus $764,000 in 1994. The increase was the result of an increase in snow
removal costs of $96,000 as a result of heavy snowfalls in Michigan and
Wisconsin during the fourth quarter of 1995; an increase in property repairs
of $13,000; an increase in utility costs of $3,000 and a decrease in
insurance expense of $5,000.
Land lease payments remained the same at $56,000 for 1995 and 1994.
General and administrative expenses increased $139,000, or 16%, to $1,022,000
in 1995 versus $883,000 in 1994. This increase is primarily the result of
costs associated with being a public company for a full year. General and
administrative expenses as a percentage of rental income increased from 7.1%
in 1994 to 8.1% in 1995.
Depreciation and amortization increased $10,000, to $2,317,000 in 1995 from
$2,307,000 in 1994. The increase reflects depreciation and amortization on
properties developed in 1995.
Interest expense decreased $1,221,000, or 22%, to $4,335,000 in 1995, from
$5,556,000 in 1994. The decrease in interest expense results primarily from
the prepayment and refinancing of the Company's debt in connection with the
IPO.
Other income (excluding reorganization costs) decreased $205,000 as a result
of a decrease in development fee income of $85,000 and a decrease in gain on
land sale of $120,000.
Reorganization costs of $494,000 were incurred during 1994 in connection with
certain property and related mortgage transfers. These costs were associated
with the transfer of the properties from the Agree Predecessors to the
Company in connection with the IPO. There were no reorganization costs in
1995.
There was an extraordinary item in 1994 of $2,139,000 attributable to
prepayment penalties and the write-off of deferred finance charges on the
indebtedness which was repaid with the proceeds of the IPO. There were no
extraordinary items in 1995.
The Company's income before minority interest increased $3,717,000 as a
result of the foregoing factors.
Funds From Operations
Management considers Funds from Operations ("FFO") to be a supplemental
measure of the Company's operating performance. FFO is defined by the
National Association of Real Estate Investment Trusts, Inc. ("NAREIT") to
mean net income computed in accordance with Generally Accepted Accounting
Principals ("GAAP"), excluding gains (or loses) from debt restructuring and
sales of property, plus depreciation and amortization, and after adjustments
for unconsolidated partnerships and joint ventures. FFO does not represent
cash generated from operating activities in accordance with GAAP and is not
necessarily indicative of cash available to fund cash needs. FFO should not
be considered as an alternative to net income as the primary indicator of the
Company's operating performance or as an alternative to cash flow as a
measure of liquidity.
-19-
<PAGE>
The following table illustrates the calculation of FFO for the years ended
December 31, 1996 and 1995:
<TABLE>
<CAPTION>
Year ended December 31, 1996 1995
- ----------------------- ---------- ----------
<S> <C> <C>
Net income before minority interest $4,633,295 $4,032,381
Depreciation of real estate assets 2,556,603 2,248,720
Amortization of leasing costs 52,033 58,867
Amortization of stock awards 82,873 48,750
Depreciation of real estate assets
held in unconsolidated entities 345,972 --
Gain on sale of assets (84,688) --
Development fee income (509,673) --
---------- ----------
Funds from Operations $7,076,415 $6,388,718
---------- ----------
Funds from Operations per share $ 2.15 $ 1.95
---------- ----------
Weighted average shares and
OP Units outstanding 3,287,434 3,276,144
---------- ----------
</TABLE>
FFO increased $688,000, or 11%, for the year ended December 31, 1996, to
$7,076,000. The increase in FFO is primarily the result of the development
and acquisition of five properties in 1996 and the development of three
properties in the fourth quarter of 1995.
Liquidity and Capital Resources
The Company's principal demands for liquidity are distributions to its
stockholders, debt repayment, development of new properties and future
property acquisitions.
During the quarter ended December 31, 1996, the Company declared a quarterly
dividend of $.45 per share. The dividend was paid on January 6, 1997 to
holders of record on December 23, 1996.
As of December 31, 1996, the Company had total mortgage indebtedness of
$53,663,999 with a weighted average interest rate of 7.61%. Future scheduled
annual maturates of mortgages payable for the years ending December 31 are as
follows: 1997 - $357,946; 1998 - $421,123; 1999 - $10,679,397; 2000 -
$969,964; 2001 - $1,046,875. This mortgage debt is all fixed rate debt with
the exception of $2,375,000 which bears interest at one half percent over the
prime rate.
In addition, the Operating Partnership has in place a $50 million line of
credit facility (the "Credit Facility") which is guaranteed by the Company.
The loan matures in November, 1998 and can be extended by the Company for an
additional three years. Advances under the Credit Facility bear interest
within a range of one-month to six-month LIBOR plus 200 basis points to 263
basis points or the Bank's prime rate plus 37 basis points to 75 basis
points, at the option of the Company, based on certain factors such as debt
to property value and debt service coverage. The Credit Facility is used to
fund property acquisitions and development activities and is secured by all
of the Company's existing properties which are not otherwise encumbered and
properties to be acquired or developed. As of December 31, 1996, $20,746,937
was outstanding under the Credit Facility.
-20-
<PAGE>
The Company also has in place a $5 million line of credit (the "Line of
Credit," which matures in September 1997, and which the Company expects
to renew for an additional 12 month period). The line bears interest at
the bank's prime rate or 225 basis points in excess of the one month
LIBOR rate at the option of the Company. The purpose of the line is to
provide working capital to the Company and fund land options and start-up
costs associated with new projects. As of December 31, 1996, $2,869,445 was
outstanding under this Line of Credit.
The Company has received funding from an unaffiliated third party for the
construction of certain of its Properties. Advances under this arrangement
bear no interest and are required to be repaid within sixty (60) days after
the date construction has been completed. The advances are secured by the
specific land and buildings being developed. As of December 31, 1996
$10,616,936 was outstanding under this arrangement.
In November 1996, the Company completed development of two properties which
added 61,061 square feet to the Company's portfolio. The properties are
located in Monroeville, Pennsylvania and Boynton Beach, Florida. The
development of these retail projects is expected to have a positive effect on
cash generated by operating activities and Funds from Operations.
The Company intends to meet its short-term liquidity requirements, including
capital expenditures related to the leasing and improvement of the
Properties, through its cash flow provided by operations and the Line of
Credit. Management believes that adequate cash flow will be available to fund
the Company's operations and pay dividends in accordance with REIT
requirements. The Company may obtain additional funds for future development
or acquisitions through other borrowings or the issuance of additional shares
of Capital Stock. The Company intends to incur additional debt in a manner
consistent with its policy of maintaining a ratio of total debt (including
construction and acquisition financing) to total market capitalization of 65%
or less.
The Company plans to begin construction of additional pre-leased developments
and may acquire additional properties, which will initially be financed by
its Credit Facility and Line of Credit. Management intends to periodically
refinance short-term construction and acquisition financing, with long-term
debt and or equity. Upon completion of refinancing the Company intends to
lower the ratio of total debt to market capitalization to 50% or less.
Nevertheless, the Company may operate with debt levels or ratios which are in
excess of 50% for extended periods of time prior to such refinancing.
Inflation
The Company's leases generally contain provisions designed to mitigate the
adverse impact of inflation on net income. These provisions include clauses
enabling the Company to pass through to tenants certain operating costs,
including real estate taxes, common area maintenance, utilities and
insurance, thereby reducing the Company's exposure to increases in costs and
operating expenses resulting from inflation. Certain of the Company's leases
contain clauses enabling the Company to receive percentage rents based on
tenants' gross sales, which generally increase as prices rise, and, in
certain cases, escalation clauses, which generally increase rental rates
during the terms of the leases. In addition, expiring tenant leases permit
the Company to seek increased rents upon re-lease at market rates if rents
are below the then existing market rates.
-21-
<PAGE>
Item 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data are listed in the
Index to Financial Statements and Financial Statement Schedules appearing on
Page F-1 of this Form 10-K.
Item 9 CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
FINANCIAL DISCLOSURE
During the Company's last two fiscal years, there have been no
changes in the independent accountants nor disagreements with such
accountants as to accounting and financial disclosures of the type required
to be disclosed in this Item 9.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Incorporated herein by reference to the Company's definitive proxy
statement to be filed with the Securities and Exchange Commission within 120
days after the year covered by this Form 10-K with respect to its Annual
Meeting of Stockholders to be held on May 12, 1997.
Item 11. EXECUTIVE COMPENSATION
Incorporated herein by reference to the Company's definitive proxy
statement to be filed with the Securities and Exchange Commission within 120
days after the year covered by this Form 10-K with respect to its Annual
Meeting of Stockholders to be held on May 12, 1997.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Incorporated herein by reference to the Company's definitive proxy
statement to be filed with the Securities and Exchange Commission within 120
days after the year covered by this Form 10-K with respect to its Annual
Meeting of Stockholders to be held on May 12, 1997.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated herein by reference to the Company's definitive proxy
statement to be filed with the Securities and Exchange Commission within 120
days after the year covered by this Form 10-K with respect to its Annual
Meeting of Stockholders to be held on May 12, 1997.
-22-
<PAGE>
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON
FORM 8-K
(a) The following documents are filed as part of this Report
(1)(2) The financial statements indicated by Part II,
Item 8, Financial Statements and Supplementary
Schedule.
(3) Exhibits
3.1 Articles of Incorporation and Articles of Amendment of the
Company (incorporated by reference to Exhibit 3.1 to the
Company's Registration Statement on Form S-11 (Registration
Statement No. 33-73858, as amended ("Agree S-11"))
3.2 Bylaws of the Company (incorporated by reference to Exhibit
3.3 to Agree S-11)
10.1 * Loan Modification Agreement, dated April 22, 1994, by and
among Shawano Plaza, Plymouth Commons, Chippewa Commons and
Nationwide Life Insurance Company
10.2 * Loan Modification Agreement, dated April 22, 1994, by and
among Rapids Associates, Marshall Plaza Phase Two, Petoskey
Town Center, Charlevoix Commons and Nationwide Life
Insurance Company
10.3 Modification Agreement, dated as of March 28, 1994, by and
between North Lakeland Plaza and the Travelers Indemnity
Company (incorporated by reference to Exhibit 4.2 to Agree
S-11)
10.4 Loan Agreement, dated August 19, 1992, by and among Richard
Agree, Edward Rosenberg and Michigan National Bank
(incorporated by reference to Exhibit 4.3 to Agree S-11)
10.5 Loan Agreement dated March 7, 1990, and Modification of
Mortgage and Security Agreement, dated July 10, 1990, by and
between Winter Garden Plaza and American United Life Insurance
Company (incorporated by reference to Exhibit 4.4 to Agree
S-11)
10.6 * First Amended and Restated Agreement of Limited Partnership
of Agree Limited Partnership, dated as of April 22, 1994, by
and among the Company, Richard Agree, Edward Rosenberg and
Joel Weiner
10.7 Amended and Restated Registration Rights Agreement, dated July
8, 1994 by and among the Company, Richard Agree, Edward
Rosenberg and Joel Weiner (incorporated by reference to
Exhibit 10.2 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1994 (the "1994 Form 10-K"))
10.8 * 1994 Stock Incentive Plan of the Company
10.9 * Management Agreement, dated April 22, 1994, by and among Mt
Pleasant Shopping Center, Angola Plaza, Shiloh Plaza and the
Company
10.10 * Contribution Agreement, dated as of April 21, 1994, by and
among the Company, Richard Agree, Edward Rosenberg and the
co-partnerships named therein
10.11 * Employment Agreement, dated April 22, 1994, by and between
the Company and Richard Agree
-23-
<PAGE>
10.12 * Employment Agreement, dated April 22, 1994, by and between
the Company and Edward Rosenberg
10.13 * Agree Realty Corporation Profit Sharing Plan
10.14 Business Loan Agreement by and between Agree Limited
Partnership and Michigan National Bank (incorporated by
reference to Exhibit 10.8 to the 1994 10-K)
10.15 Business Loan Agreement, dated as of September 21, 1995, by
and between Agree Limited Partnership and Michigan National
Bank (incorporated by reference to Exhibit 10.9 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1995 (the "1995 10-K"))
10.16 Line of Credit Agreement by and among Agree Limited
Partnership, the Company, the lenders parties thereto, and
Michigan National Bank as Agent (incorporated by reference to
Exhibit 10.10 to the 1995 10-K)
27.1 * Financial Data Schedule
- ---------
* Filed herewith
(b) Reports on Form 8-K
No reports on Form 8-K have been filed by the Company during
the quarter ending December 31, 1996.
-24-
<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, duly authorized.
AGREE REALTY CORPORATION
By: /s/ Richard Agree
-----------------------------
Name: Richard Agree
President and Chairman of the
Board of Directors
Date: March 28, 1997
PURSUANT to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on the 28th day of March, 1997.
By: /s/Richard Agree By: /s/ Farris G. Kalil
----------------------------- ---------------------------
Richard Agree Farris G. Kalil
President and Chairman of the Director
Board of Directors
(Principal Executive Officer)
By: /s/ Michael Rotchford
---------------------------
Michael Rotchford
Director
By: /s/Kenneth R. Howe
-----------------------------
Kenneth R. Howe
Vice President, Finance By: /s/ Ellis G. Wachs
and Secretary ---------------------------
(Principal Financial and Ellis G. Wachs
Accounting Officer) Director
By: /s/ Gene Silverman
---------------------------
Gene Silverman
By: /s/Edward Rosenberg Director
-----------------------------
Edward Rosenberg
Director and Senior Vice
President
-25-
<PAGE>
Agree Realty Corporation and the
Agree Predecessors
Index
- -----------------------------------------------------------------------------
Page
----
Report of Independent Certified Public Accountants F-2
Financial Statements
Consolidated Balance Sheets of the Company F-3
Consolidated Statements of Operations of the Company
and Combined Statements of Operations of the
Agree Predecessors F-5
Consolidated Statements of Stockholders' Equity of
the Company and Combined Statements of Partners'
Deficit of the Agree Predecessors F-6
Consolidated Statements of Cash Flows of the Company
and Combined Statements of Cash Flows of the
Agree Predecessors F-7
Notes to Financial Statements F-9
Schedule III - Real Estate and Accumulated Depreciation F-20
F - 1
<PAGE>
Report of Independent Certified Public Accountants
To the Board of Directors and Owners of
Agree Realty Corporation
Farmington Hills, Michigan
We have audited the accompanying consolidated balance sheets of Agree Realty
Corporation (the "Company") as of December 31, 1996 and 1995, and the related
consolidated statements of operations, stockholders' equity and cash flows
for the years ended December 31, 1996 and 1995 and for the period from April
22, 1994 to December 31, 1994. We have also audited the accompanying combined
statements of operations, partners' deficit and cash flows for the period
from January 1, 1994 to April 21, 1994 of Agree Realty Group (the "Agree
Predecessors"). We have also audited the schedule listed in the accompanying
index. These financial statements and the schedule are the responsibility of
the Company's and Agree Predecessors' management. Our responsibility is to
express an opinion on these financial statements and the schedule based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and the
schedule are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and the schedule. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall presentation of the financial statements and the
schedule. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Agree Realty
Corporation at December 31, 1996 and 1995 and the results of its operations
and its cash flows for the years ended December 31, 1996 and 1995 and for the
period from April 22, 1994 to December 31, 1994, and the results of the Agree
Predecessors operations and its cash flows for the period from January 1,
1994 to April 21, 1994 in conformity with generally accepted accounting
principles.
Also, in our opinion, the schedule presents fairly, in all material respects,
the information set forth therein.
BDO SEIDMAN, LLP
Troy, Michigan
February 14, 1997
F - 2
<PAGE>
Agree Realty Corporation
Consolidated Balance Sheets
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31, December 31,
1996 1995
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Real Estate Investments (Note 3)
Land $ 25,183,667 $ 23,224,377
Buildings 107,204,583 94,955,086
Property under development 85,993 180,805
------------- -------------
132,474,243 118,360,268
Less accumulated depreciation (17,339,353) (14,792,193)
------------- -------------
Net Real Estate Investments 115,134,890 103,568,075
Cash and Cash Equivalents 294,389 1,283,672
Accounts Receivable - Tenants 638,735 626,280
Restricted Asset - Cash Held in Escrow 266,771 259,204
Investments In and Advances To Unconsolidated Entities 1,820,605 --
Unamortized Deferred Expenses
Financing costs 2,398,377 2,513,665
Leasing costs 141,757 140,026
Other Assets 686,346 537,487
------------- -------------
$ 121,381,870 $ 108,928,409
============= =============
<FN>
See accompanying notes to financial statements.
</TABLE>
F - 3
<PAGE>
Agree Realty Corporation
Consolidated Balance Sheets
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31, December 31,
1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Liabilities and Stockholders' Equity
Mortgages Payable (Note 3) $ 53,663,999 $ 53,970,525
Construction Loans (Note 3) 10,616,936 17,603,785
Note Payable (Note 3) 23,616,382 1,977,808
Dividends and Distributions Payable (Note 4) 1,479,345 1,474,265
Accrued Interest Payable 354,988 189,256
Accounts Payable
Operating 691,981 596,913
Capital expenditures 596,794 1,637,861
Tenant Deposits 50,394 53,477
------------- -------------
Total Liabilities 91,070,819 77,503,890
------------- -------------
Minority Interest (Note 5) 5,869,014 6,118,017
------------- -------------
Stockholders' Equity (Note 4)
Common stock, $.0001 par value, 20,000,000
shares authorized, 2,649,475 and 2,638,185
shares issued and outstanding 265 264
Additional paid-in capital 30,060,908 29,890,292
Deficit (5,619,136) (4,584,054)
------------- -------------
Total Stockholders' Equity 24,442,037 25,306,502
------------- -------------
$ 121,381,870 $ 108,928,409
------------- -------------
<FN>
See accompanying notes to financial statements.
</TABLE>
F - 4
<PAGE>
Agree Realty Corporation and the
Agree Predecessors
Consolidated Statements of Operations of the Company and
Combined Statements of Operations of the Agree Predecessors
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Agree Realty Agree Realty Agree Realty Agree
Corporation Corporation Corporation Predecessors
January 1, to January 1, to April 22, to January 1, to
December 31, 1996 December 31, 1995 December 31, 1994 April 21, 1994
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues
Rental income $ 14,450,035 $ 11,935,523 $ 8,139,566 $ 3,575,128
Operating cost reimbursement 1,760,681 1,671,359 1,093,463 494,909
Management fees and other (Note 7) 80,752 91,714 46,487 9,858
------------ ------------ ----------- -----------
Total Revenues 16,291,468 13,698,596 9,279,516 4,079,895
------------ ------------ ----------- -----------
Operating Expenses
Real estate taxes 1,169,308 1,120,515 737,628 368,124
Property operating expenses 979,606 871,167 464,007 299,623
Land lease payments 336,083 56,000 43,400 12,600
General and administrative 1,104,861 966,464 667,800 159,393
Depreciation and amortization 2,620,274 2,316,862 1,626,604 680,458
------------ ------------ ----------- -----------
Total Operating Expenses 6,210,132 5,331,008 3,539,439 1,520,198
------------ ------------ ----------- -----------
Income From Operations 10,081,336 8,367,588 5,740,077 2,559,697
------------ ------------ ----------- -----------
Other Income (Expense)
Interest expense, net (6,101,106) (4,335,207) (2,972,237) (2,584,002)
Development fee income 509,673 -- -- 85,273
Gain on land sales 84,688 -- 119,635 --
Equity in net income of unconsolidated entities 58,704 -- -- --
Reorganization costs (Note 6) -- -- (494,317) --
------------ ------------ ----------- -----------
Total Other Expense (5,448,041) (4,335,207) (3,346,919) (2,498,729)
------------ ------------ ----------- -----------
Income Before Extraordinary Item and Minority Interest 4,633,295 4,032,381 2,393,158 60,968
Extraordinary Item - Loss on Extinguishment
of Debt (Note 8) -- -- (2,139,114) --
------------ ------------ ----------- -----------
Income Before Minority Interest 4,633,295 4,032,381 254,044 60,968
Minority Interest 899,323 785,105 49,462 --
------------ ------------ ----------- -----------
Net Income $ 3,733,972 $ 3,247,276 $ 204,582 $ 60,968
============ ============ =========== ===========
Earnings Per Share
Income before extraordinary item $ 1.41 $ 1.23 $ .73
Extraordinary item -- -- (.65)
------------ ------------ ----------- -----------
Earnings Per Share $ 1.41 $ 1.23 $ .08
============ ============ =========== ===========
Weighted Average Number of Common Shares
Outstanding 2,649,475 2,638,185 2,638,185
============ ============ =========== ===========
<FN>
See accompanying notes to financial statements.
</TABLE>
F - 5
<PAGE>
Agree Realty Corporation and the
Agree Predecessors
Consolidated Statements of Stockholders' Equity of the Company and
Combined Statements of Partners' Deficit of the Agree Predecessors
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Agree
Common Stock Additional Predecessors
----------------- Paid-In Partners'
Shares Amount Capital Deficit Deficit
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1994 -- $ -- $ -- $ -- $(5,436,893)
Contributions -- -- -- -- 3,000
Distributions -- -- -- -- (3,350,741)
Net income -- -- -- -- 60,968
--------- ---- ------------ ----------- -----------
Balance, April 21, 1994 -- -- -- -- (8,723,666)
Reclassification of Agree
Predecessors partners'
deficit in connection with
formation of the Company -- -- (8,723,666) 8,723,666
Proceeds from issuance of common stock,
net of underwriting fees 2,625,685 263 47,800,594 -- --
Payment of stock issuance costs -- -- (2,203,712) -- --
Issuance of shares under the Stock
Incentive Plan 12,500 1 243,749 -- --
Minority interest equity
immediately following the
April 22, 1994 initial
public offering -- -- (7,226,673) -- --
Dividends declared for the
period April 22, 1994
to December 31, 1994,
$1.246 per share -- -- -- (3,287,179) --
Net income for the period
April 22, 1994
to December 31, 1994 -- -- -- 204,582 --
--------- ---- ------------ ----------- -----------
Balance, December 31, 1994 2,638,185 264 29,890,292 (3,082,597) --
Dividends declared for the year ended
December 31, 1995, $1.80 per share -- -- -- (4,748,733) --
Net income for the year
ended December 31, 1995 -- -- -- 3,247,276 --
--------- ---- ------------ ----------- -----------
Balance, December 31, 1995 2,638,185 264 29,890,292 (4,584,054) --
Issuance of shares under the
Stock Incentive Plan 11,290 1 170,616 -- --
Dividends declared for the year
ended December 31, 1996,
$1.80 per share -- -- -- (4,769,054) --
Net income for the year
ended December 31, 1996 -- -- -- 3,733,972 --
--------- ---- ------------ ----------- -----------
Balance, December 31, 1996 2,649,475 $265 $ 30,060,908 $(5,619,136) $ --
========= ==== ============ =========== ===========
<FN>
See accompanying notes to financial statements.
</TABLE>
F - 6
<PAGE>
Agree Realty Corporation and the
Agree Predecessors
Consolidated Statements of Cash Flows of the Company and Combined
Statements of Cash Flows of the Agree Predecessors
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Agree Realty Agree Realty Agree Realty Agree
Corporation Corporation Corporation Predecessors
January 1, to January 1, to April 22, to January 1, to
December 31, December 31, December 31, April 21,
1996 1995 1994 1994
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash Flows From Operating Activities
Net income $ 3,733,972 $ 3,247,276 $ 204,582 $ 60,968
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation 2,523,621 2,252,642 1,551,570 636,561
Amortization 505,089 311,415 249,971 74,598
Equity in net income of unconsolidated
entities (58,704) -- -- --
Write-off of deferred financing costs -- -- 189,231 --
Minority interests 899,323 785,105 49,462 --
Gain on land sales (84,688) -- (119,635) --
Decrease (increase) in accounts receivable (12,455) (64,629) (561,651) 449,504
Increase in deferred costs (53,764) (27,524) (14,640) --
Decrease (increase) in other assets 677 (133,728) (112,531) 522,163
Increase (decrease) in accounts payable 95,068 197,406 327,885 (760,349)
Increase (decrease) in accrued interest 165,732 9,592 (967,640) (536,099)
Increase (decrease) in tenant deposits (3,083) (5,484) 58,961 (60,461)
------------ ------------ ----------- ---------
Net Cash Provided By Operating Activities 7,710,788 6,572,071 855,565 386,885
------------ ------------ ----------- ---------
Cash Flows From Investing Activities
Acquisition of real estate investments
(including capitalized interest of
$78,703 in 1996 and $59,752 in 1995) (13,577,181) (19,870,270) (117,102) (228,810)
Investments in and advances to
unconsolidated entities (1,761,901) -- -- --
Proceeds from sale of land 144,688 -- 161,635 --
Proceeds from sale of marketable
securities -- 300,188 -- --
Purchase of marketable securities -- -- (300,188) --
------------ ------------ ----------- ---------
Net Cash Used In Investing Activities (15,194,394) (19,570,082) (255,655) (228,810)
------------ ------------ ----------- ---------
<FN>
See accompanying notes to financial statements.
</TABLE>
F - 7
<PAGE>
Agree Realty Corporation and the
Agree Predecessors
Consolidated Statements of Cash Flows of the Company and Combined
Statements of Cash Flows of the Agree Predecessors
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Agree Realty Agree Realty Agree Realty Agree
Corporation Corporation Corporation Predecessors
January 1, to January 1, to April 22, to January 1, to
December 31, December 31, December 31, April 21,
1996 1995 1994 1994
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash Flows From Financing Activities
Line-of-credit proceeds 21,638,574 1,977,808 -- 1,589,774
Payment of construction loans (11,861,006) -- (11,407,600) --
Dividends and limited partners'
distributions paid (5,912,300) (5,897,059) (2,607,811) --
Proceeds from construction loans 4,874,157 17,603,785 -- --
Payments of payables for capital
expenditures (1,637,861) -- -- (45,688)
Payments of mortgages payable (306,526) (280,522) (14,394,680) (1,388,265)
Payments for financing costs (293,148) (765,535) (961,339) (425,424)
Decrease (increase) in escrow and
bond fund deposits (7,567) (16,200) 7,314 380,378
Net proceeds from the issuance of
common stock -- -- 45,597,145 --
Payment of line-of-credit -- -- (7,003,977) --
Payments on related party notes -- -- (4,414,556) --
Payment of bonds -- -- (3,755,000) --
Partners' distributions -- -- -- (3,350,741)
Mortgage proceeds -- -- -- 2,375,000
Partners' contributions -- -- -- 3,000
------------ ------------ ------------ -----------
Net Cash Provided By (Used In)
Financing Activities 6,494,323 12,622,277 1,059,496 (861,966)
------------ ------------ ------------ -----------
Net Increase (Decrease) In Cash
and Cash Equivalents (989,283) (375,734) 1,659,406 (703,891)
Cash and Cash Equivalents,
beginning of period 1,283,672 1,659,406 -- 703,891
------------ ------------ ------------ -----------
Cash and Cash Equivalents,
end of period $ 294,389 $ 1,283,672 $ 1,659,406 $ --
============ ============ ============ ===========
Supplemental Disclosure of
Cash Flow Information
Cash paid for interest $ 5,630,000 $ 4,177,000 $ 2,677,000 $ 4,318,000
============ ============ ============ ===========
Supplemental Disclosure of
Non-Cash Transactions
Dividends and limited
partners' distributions
declared and unpaid $ 1,479,345 $ 1,474,265 $ 1,474,265 $ --
Real estate investments
financed with accounts
payable $ 596,794 $ 1,637,861 $ -- $ --
Shares issued under Stock
Incentive Plan $ 170,617 $ -- $ 243,750 $ --
============ ============ ============ ===========
<FN>
See accompanying notes to financial statements.
</TABLE>
F - 8
<PAGE>
Agree Realty Corporation and the
Agree Predecessors
Notes to Financial Statements
- -----------------------------------------------------------------------------
1. Summary of
Significant
Accounting
Policies
Organization and Business
Agree Realty Corporation (the "Company") was formed as a Maryland real estate
investment trust in December 1993, and commenced operations effective with
the completion of its initial public offering on April 22, 1994. The Company
is the successor to the operations of Agree Realty Group (the "Agree
Predecessors"), which was comprised of seventeen real estate property
partnerships and a management and development company. All of the Company's
assets are held by, and all of its operations are conducted through, Agree
Limited Partnership (the "Operating Partnership"). The Company will, at all
times, be the sole general partner of the Operating Partnership. Minority
interest in the Operating Partnership represents partnership units of the
Operating Partnership (OP Units).
The Company operates, manages, acquires and develops retail properties. At
December 31, 1996, the Company's properties are comprised of thirteen
shopping centers and twelve single tenant retail facilities located in eleven
states. During the year ended December 31, 1996, approximately 90% of the
Company's base rental revenues were received from national or regional
tenants under long-term leases, including approximately 32% from Kmart
Corporation and 23% from Borders, Inc.
Principles of Consolidation
The consolidated financial statements of Agree Realty Corporation include the
accounts of the Company and its majority owned partnership, the Operating
Partnership. The Agree Predecessors' financial statements were prepared on a
combined basis because of common ownership and management. All significant
intercompany accounts and transactions have been eliminated in the
accompanying consolidated and combined financial statements.
Use of Estimates
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and
assumptions that affect (1) the reported amounts of assets and liabilities
and
F - 9
<PAGE>
the disclosure of contingent assets and liabilities as of the date of the
financial statements, and (2) revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Fair Values of Financial Instruments
The carrying amounts of the Company's financial instruments, which consist of
cash, cash equivalents, receivables, notes payable, accounts payable and
long-term debt, approximate their fair values.
Real Estate Investments
Real estate assets are stated at cost less accumulated depreciation. All
costs related to planning, development and construction of buildings prior to
the date they become operational, including interest and real estate taxes
during the construction period, are capitalized for financial reporting
purposes.
Subsequent to completion of construction, expenditures for property
maintenance are charged to operations as incurred, while significant
renovations are capitalized. Depreciation of the buildings is recorded on the
straight-line method using an estimated useful life of forty years.
Cash and Cash Equivalents
Cash and cash equivalents include cash and highly liquid tax anticipation
notes with original maturities of three months or less.
Accounts Receivable - Tenants
Accounts receivable from tenants reflect primarily reimbursement of specified
common area maintenance costs. No allowance for uncollectible accounts has
been provided based on past collection results.
F - 10
<PAGE>
Restricted Assets
These amounts represent funds on deposit restricted by certain lenders
pursuant to agreements entered into by the Company. The funds held in escrow
are used to pay capital-related costs and are released to the Company upon
inspection and leasing of related property to tenants and are used to pay
real estate taxes for one shopping center in Florida.
Investments in Unconsolidated Entities
The Company uses the equity method of accounting for investments in non-
majority owned entities where the Company has the ability to exercise
significant influence over operating and financial policies.
The Company's initial investment is recorded at cost, and the carrying amount
of the investment is (a) increased by the Company's share of the investees'
earnings (as defined in the limited liability company agreements), and (b)
reduced by distributions paid from the investees to the Company.
Unamortized Deferred Expenses
Deferred expenses are stated net of total accumulated amortization. The
nature and treatment of these capitalized costs are as follows: (1) financing
costs, consisting of expenditures incurred to obtain long-term financing, are
being amortized using the interest method over the term of the related loan,
and (2) leasing costs, which are amortized on a straight-line basis over the
term of the related lease.
Accounts Payable - Capital Expenditures
Included in accounts payable are amounts related to the construction of
buildings. Due to the nature of these expenditures, they are reflected in the
statements of cash flows as a financing activity.
F - 11
<PAGE>
Minority Interest
This amount represents the limited partners' interest of 19.41% and 19.47% in
the Operating Partnership as of December 31, 1996 and 1995, respectively,
which is convertible into 637,959 shares of the Company's common stock.
Revenue Recognition
Base rental income attributable to leases is recorded when due from tenants.
Certain leases provide for additional rents based on tenants' sales volume.
These percentage rents are reflected based on the tenants' fiscal year;
however, such amounts earned by the Company have historically not been
material. In addition, leases for certain tenants contain rent escalations
and/or free rent during the first several months of the lease term; however,
such amounts are not material.
The Company acts as the construction developer on certain properties. Related
development fee income is recognized upon completion of construction.
Operating Cost Reimbursement
Substantially all of the Company's leases contain provisions requiring
tenants to pay as additional rent a proportionate share of operating expenses
such as real estate taxes, repairs and maintenance, insurance, etc. The
related revenue from tenant billings is recognized in the same period the
expense is recorded.
Income Taxes
The Company has elected to be taxed as a real estate investment trust
("REIT") under Sections 856 through 860 of the Internal Revenue Code of 1986,
as amended. A REIT will generally not be subject to federal income taxation
on that portion of its income that qualifies as REIT taxable income to the
extent that it distributes at least 95 percent of its taxable income to its
stockholders and complies with certain other requirements. Accordingly, no
F - 12
<PAGE>
provision has been made for federal income taxes for the Company in the
accompanying consolidated financial statements.
The aggregate federal income tax basis of Real Estate Investments is
approximately $10.5 million less than the financial statement basis.
Per Share Data
Earnings per share has been computed by dividing the income by the weighted
average number of common shares and dilutive common equivalent shares
outstanding.
Reclassifications
Certain insignificant amounts in the prior year financial statements have
been reclassified to conform with the 1996 presentation.
2. Formation of
the Company,
Initial Public
Offering and
Basis of
Presentation
The Company was established to continue the business of the Agree
Predecessors. The Company commenced its operations on April 22, 1994 with the
sale of 2,500,000 shares of common stock. The cash proceeds (net of
underwriting fees) to the Company from the completion of this initial public
offering were approximately $45.4 million, which were used primarily
to reduce outstanding indebtedness, pay stock issuance costs and establish a
working capital reserve. Also in connection with the formation of the
Company, 125,685 shares of common stock were purchased by two principals of
the Agree Predecessors in a private transaction at the initial public
offering price of $19.50 per share.
The assets of the Company are held by and all operations conducted through
the Operating Partnership. The Company controls, as the sole general partner,
80.59% and 80.53% of the Operating Partnership as of December 31, 1996 and
1995, respectively.
F - 13
<PAGE>
3. Mortgages,
Construction
Loans and Note
Payable
Mortgages payable consisted of the following:
<TABLE>
<CAPTION>
December 31, 1996 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Note payable in monthly installments of interest only at 6.875% per annum
until May 1999, at which time the Company can elect to either pay the
amount in full or accept the then prevailing interest rate and continue
making principal and interest payments based on a 22-year amortization
schedule, with the remaining unpaid principal and accrued unpaid
interest then due November 2005, collateralized by related
real estate and tenants' leases $33,600,000 $33,600,000
Note payable in monthly installments of $98,477 including interest at 9.75%
per annum, collateralized by related real estate and tenants' leases,
final balloon installment due July 2010 9,698,073 9,874,834
Note payable in monthly installments of $62,881 including interest at 7.75%
per annum, collateralized by related real estate and tenants' leases,
final balloon installment due March 1999 7,990,926 8,120,691
Note payable in monthly installments of interest only at the prime rate
(which was 8.25% at December 31, 1996) plus .5%, beginning April 1997,
payable in monthly installments of principal and interest based on a
20-year amortization, collateralized by related real estate and tenants'
leases, final balloon installment due March 1999 2,375,000 2,375,000
----------- -----------
Mortgages Payable $53,663,999 $53,970,525
=========== ===========
</TABLE>
Future scheduled annual maturities of mortgages payable for years ending
December 31, are as follows: 1997 - $357,946; 1998 - $421,123; 1999 -
$10,679,397; 2000 - $969,964; 2001 - $1,046,875 and $40,188,694 thereafter.
(These maturities assume that the $33,600,000 mortgage will be extended
beyond May 1999.)
F - 14
<PAGE>
In November 1995, the Operating Partnership entered into a $50 million
line-of-credit agreement which is guaranteed by the Company. The agreement
has an initial term of three years and can be extended, at the option of the
Company, for an additional three years. Advances under this credit facility
bear interest within a range of LIBOR plus 200 basis points to 263 basis
points, or the bank's prime rate plus 37 basis points to 75 basis points, at
the option of the Company, based on certain factors such as debt to property
value and debt service coverage. The credit facility will be used to fund
property acquisitions and development activities, and is secured by specific
properties. As of December 31, 1996, $20,746,937 was outstanding under this
facility and there were no amounts outstanding under this credit facility as
of December 31, 1995.
In addition, the Company maintains a $5,000,000 line-of-credit agreement with
a bank which expires on September 21, 1997. Payments of interest only, at the
bank's prime rate, or 225 basis points in excess of the one month LIBOR rate,
at the option of the Company, are required monthly. At December 31, 1996 and
1995, $2,869,445 and $1,977,808 were outstanding under this agreement,
respectively.
The Company has received funding from an unaffiliated third party for certain
of its single tenant retail properties. Borrowings under this arrangement
bear no interest and are required to be repaid within sixty (60) days after
the date the construction has been completed. The advances are secured by the
specific land and buildings being developed. As of December 31, 1996 and
1995, $10,616,936 and $17,603,785 was outstanding under this agreement,
respectively.
4. Dividends and
Distributions
Payable
On December 9, 1996, the Company declared a dividend of $.45 per share for
the quarter ended December 31, 1996; approximately 30 percent of the dividend
represented a return of capital. The holders of OP Units were entitled to an
equal distribution per OP Unit held as of December 31, 1996. The dividends
and distributions payable are recorded as liabilities in the Company's
balance sheet at December 31, 1996. The dividend has been reflected as a
reduction of stockholders' equity and the distribution has been
F - 15
<PAGE>
reflected as a reduction of the limited partners' minority interest. These
amounts were paid on January 6, 1997.
5. Minority
Interest
The following summarizes the changes in the limited partners' minority
interest since January 1, 1995:
<TABLE>
<S> <C>
Minority interest at January 1, 1995 $ 6,481,238
Minority interests' share of income for
the year ended December 31, 1995 785,105
Distributions for the year ended December 31, 1995 (1,148,326)
-----------
Minority Interest at December 31, 1995 6,118,017
Minority interests' share of income for the year
ended December 31, 1996 899,323
Distributions for the year ended December 31, 1996 (1,148,326)
-----------
Minority Interest at December 31, 1996 $ 5,869,014
===========
</TABLE>
6. Reorganization
Costs
Costs incurred by the Company related to title insurance costs, revenue
stamps and transfer fees associated with the transfer of properties and
certain related mortgages from the Agree Predecessors to the Company were
charged to operations and reflected as "Reorganization Costs" in the 1994
consolidated statement of operations.
7. Related Party
Transactions
The Company currently manages certain additional properties which are owned
by certain officers and directors of the Company, but are not included in
these consolidated or combined financial statements. Income related to these
activities are reflected as "Management fees and other" in the accompanying
consolidated statements of operations.
8. Extraordinary
Item
As a result of the early extinguishment of indebtedness with a portion of the
net proceeds from the issuance of its common stock, the Company recognized an
extraordinary loss in 1994 related to loan prepayment penalties and the
write-off of deferred financing costs on debt that was retired.
F - 16
<PAGE>
9. Stock Incentive
Plan
The Company has established a stock incentive plan (the "Plan") under which
29,400 options were granted in April 1994. The options, which have an
exercise price equal to the initial public offering price ($19.50/share), can
be exercised in increments of 25% on each anniversary of the date of the
grant. A total of 14,700 and 7,350 of the options were exercisable at
December 31, 1996 and 1995, respectively. No options were exercised during
either 1996 or 1995.
The Company has adopted the disclosure-only provisions of SFAS No. 123
"Accounting for Stock-Based Compensation." However, since no compensation
cost would have been recognized pursuant to SFAS No. 123 under the Plan in
either 1996 or 1995, there is no effect on the Company's net income or
earnings per share for these years.
10. Restricted Stock
As part of the Company's stock incentive plan, 12,500 restricted common
shares were granted to certain employees in April 1994; an additional 11,290
shares were granted during the first quarter of 1996. The restricted shares
vest in increments of 20% per year for five years. The Company recorded
related compensation expense of $82,873, $48,750 and $34,530 in 1996, 1995
and 1994, respectively. Plan participants are entitled to receive the
quarterly dividends on their respective restricted shares.
11. Profit-Sharing
Plan
The Company has a discretionary profit-sharing plan whereby it contributes to
the plan such amounts as the Board of Directors of the Company determines.
The participants in the plan cannot make any contributions to the plan.
Contributions to the plan are allocated to the employees based on their
percentage of compensation to the total compensation of all employees for the
plan year. Participants in the plan become fully vested after six years of
service. No contributions were made to the plan in 1996, 1995 or 1994.
12. Rental Income
The Company leases premises in its properties to tenants pursuant to lease
agreements which provide for terms ranging generally from 5 to 25 years. The
majority of leases provide for additional rents based on tenants' sales
volume; however, such amounts earned by Agree have historically not been
material.
F - 17
<PAGE>
As of December 31, 1996, the future minimum revenues for the next five years
from rental property under the terms of all noncancellable tenant leases,
assuming no new or renegotiated leases are executed for such premises, are as
follows (in thousands):
<TABLE>
<S> <C>
1997 $ 16,078
1998 15,654
1999 15,350
2000 14,982
2001 13,950
Thereafter 149,949
--------
Total $225,963
========
</TABLE>
Of the future minimum rentals, approximately 39% of the above total is
attributable to Kmart Corporation and approximately 31% is attributable to
Borders, Inc. Kmart's principal business is general merchandise retailing
through a chain of discount department stores, and Borders is a major
operator of book superstores in the United States.
13. Lease
Commitments
The Company has entered into certain land lease agreements for three of its
properties. As of December 31, 1996, approximate future annual lease
commitments under these agreements are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
- ---------------------------------
<S> <C>
1997 $ 446,000
1998 446,000
1999 446,000
2000 482,000
2001 485,000
Thereafter 6,606,000
=========
</TABLE>
F - 18
<PAGE>
14. Interim Results
(Unaudited)
The following summary represents the unaudited results of operations of the
Company, expressed in thousands except per share amounts, for the periods
from January 1, 1995 through December 31, 1996:
<TABLE>
<CAPTION>
Three Months Ended
- --------------------------------------------------------------------------------------
1996 March 31, June 30, September 30, December 31,
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $3,866 $4,026 $4,017 $4,382
====== ====== ====== ======
Income before
minority interest $1,010 $1,064 $ 845 $1,714
Minority interest 196 207 164 332
------ ------ ------ ------
Net Income $ 814 $ 857 $ 681 $1,382
====== ====== ====== ======
Net Income Per
Share $ .31 $ .32 $ .26 $ .52
====== ====== ====== ======
<CAPTION>
Three Months Ended
- --------------------------------------------------------------------------------------
1995 March 31, June 30, September 30, December 31,
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $3,413 $3,337 $3,364 $3,614
====== ====== ====== ======
Income before
minority interest $ 987 $1,003 $1,004 $1,038
Minority interest 192 196 195 202
------ ------ ------ ------
Net Income $ 795 $ 807 $ 809 $ 836
====== ====== ====== ======
Net Income Per
Share $ .30 $ .30 $ .31 $ .32
====== ====== ====== ======
</TABLE>
F - 19
<PAGE>
<TABLE>
<CAPTION>
AGREE REALTY CORPORATION
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
- ---------------------------------------------------------------------------------------------------
Column A Column B Column C Column D
- -------- ----------- ---------------------------- -------------
Costs
Capitalized
Subsequent to
Initial Cost Acquisition
---------------------------- -------------
Building and Building
Description Encumbrance Land Improvements Improvements
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Completed Retail Facilities
Borman Center, MI $ -- $ 550,000 $ 562,404 $ 1,066,115
Capital Plaza, KY -- 7,379 2,240,607 514,580
Charlevoix Commons, MI 3,981,600 305,000 5,152,992 --
Chippewa Commons, WI 5,103,840 1,197,150 6,367,560 35,539
Grayling Plaza, MI -- 200,000 1,778,657 --
Iron Mountain Plaza, MI -- 677,820 7,014,996 372,627
Ironwood Commons, MI -- 212,500 8,181,306 230,953
Marshall Plaza Two, MI 3,407,040 -- 4,662,230 10,764
North Lakeland Plaza, FL 7,990,926 1,641,879 6,364,379 337,905
Oscoda Plaza, MI -- 183,295 1,872,854 --
Perrysburg Plaza, OH 2,375,000 21,835 2,291,651 --
Petoskey Town Center, MI 5,577,600 875,000 8,895,289 5,985
Plymouth Commons, WI 4,811,520 535,460 5,667,504 138,260
Rapids Associates, MI 5,120,640 705,000 6,854,790 13,000
Shawano Plaza, WI 5,597,760 190,000 9,133,934 --
West Frankfort Plaza, IL -- 8,002 784,077 --
Winter Garden Plaza, FL 9,698,073 1,631,448 8,459,024 --
Omaha Store, NE 3,596,937 1,705,619 2,053,615 2,152
Wichita Store, KS 2,910,064 1,039,195 1,690,644 24,666
Santa Barbara Store, CA 5,795,333 2,355,423 3,240,557 2,650
Monroeville, PA 6,773,314 6,332,158 2,168,892 --
Norman, OK 2,274,622 879,562 1,595,379 --
Columbus, OH 3,131,427 826,000 2,321,134 --
Aventura, FL 3,130,000 -- 3,141,821 --
Boyton Beach, FL 2,183,176 3,103,942 1,953,091 --
----------- ----------- ------------ -----------
Sub Total 83,458,872 25,183,667 104,449,387 2,755,196
----------- ----------- ------------ -----------
Retail Facilities
Under Development
Lawrence, KS -- -- 85,993 --
----------- ----------- ------------ -----------
Total $83,458,872 $25,183,667 $104,535,380 $ 2,755,196
=========== =========== ============ ===========
F-20
<PAGE>
<CAPTION>
Column A Column E Column F Column G Column H
- -------- --------------------------------------------- ------------- ----------- -------------
Life
on Which
Gross Amount at Which Carried Depreciation
at Close of Period in Latest
--------------------------------------------- Income
Building and Accumulated Date of Statement
Description Land Improvements Total Depreciation Construction is Computed
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Completed Retail Facilities
Borman Center, MI $ 550,000 $ 1,628,519 $ 2,178,519 $ 878,263 1977 40 Years
Capital Plaza, KY 7,379 2,755,187 2,762,566 1,065,945 1978 40 Years
Charlevoix Commons, MI 305,000 5,152,992 5,457,992 801,471 1991 40 Years
Chippewa Commons, WI 1,197,150 6,403,099 7,600,249 1,056,930 1990 40 Years
Grayling Plaza, MI 200,000 1,778,657 1,978,657 584,444 1984 40 Years
Iron Mountain Plaza, MI 677,820 7,387,623 8,065,443 981,711 1991 40 Years
Ironwood Commons, MI 212,500 8,412,259 8,624,759 1,156,330 1991 40 Years
Marshall Plaza Two, MI -- 4,672,994 4,672,994 677,963 1990 40 Years
North Lakeland Plaza, FL 1,641,879 6,702,284 8,344,163 1,674,282 1987 40 Years
Oscoda Plaza, MI 183,295 1,872,854 2,056,149 608,363 1984 40 Years
Perrysburg Plaza, OH 21,835 2,291,651 2,313,486 759,110 1983 40 Years
Petoskey Town Center, MI 875,000 8,901,274 9,776,274 1,327,675 1990 40 Years
Plymouth Commons, WI 535,460 5,805,764 6,341,224 897,413 1990 40 Years
Rapids Associates, MI 705,000 6,867,790 7,572,790 1,067,320 1990 40 Years
Shawano Plaza, WI 190,000 9,133,934 9,323,934 1,512,238 1990 40 Years
West Frankfort Plaza, IL 8,002 784,077 792,079 290,838 1982 40 Years
Winter Garden Plaza, FL 1,631,448 8,459,024 10,090,472 1,672,227 1988 40 Years
Omaha Store, NE 1,705,619 2,055,767 3,761,386 57,812 1995 40 Years
Wichita Store, KS 1,039,195 1,715,310 2,754,505 48,166 1995 40 years
Santa Barbara Store, CA 2,355,423 3,243,207 5,598,630 91,207 1995 40 years
Monroeville, PA 6,332,158 2,168,892 8,501,050 6,778 1996 40 years
Norman, OK 879,562 1,595,379 2,474,941 9,971 1996 40 years
Columbus, OH 826,000 2,321,134 3,147,134 53,191 1996 40 years
Aventura, FL -- 3,141,821 3,141,821 55,636 1996 40 years
Boyton Beach, FL 3,103,942 1,953,091 5,057,033 4,069 1996 40 years
----------- ------------ ------------ ------------
Sub Total 25,183,667 107,204,583 132,388,250 17,339,353
----------- ------------ ------------ ------------
Retail Facilities
Under Development
Lawrence, KS -- 85,993 85,993 -- N/A N/A
----------- ------------ ------------ ------------
Total $25,183,667 $107,290,576 $132,474,243 $ 17,339,353
=========== ============ ============ ============
</TABLE>
F - 21
<PAGE>
AGREE REALTY CORPORATION
NOTES TO SCHEDULE III
DECEMBER 31, 1996
- -----------------------------------------------------------------------------
1) Reconciliation of Real Estate Properties
The following table reconciles the Real Estate Properties from January
1, 1994 to December 31, 1996:
<TABLE>
<CAPTION>
1996 1995 1994
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at January 1 $ 118,360,268 $ 96,852,137 $ 96,548,225
Construction costs 14,173,975 21,508,131 345,912
Sales (60,000) -- (42,000)
------------- ------------ ------------
Balance at December 31 $ 132,474,243 $118,360,268 $ 96,852,137
============= ============ ============
</TABLE>
2) Reconciliation of Accumulated Depreciation
The following table reconciles the accumulated depreciation from January
1, 1994 to December 31, 1996:
<TABLE>
<CAPTION>
1996 1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at January 1 $14,792,193 $12,548,826 $10,325,699
Current year depreciation expense 2,547,160 2,243,367 2,223,127
----------- ----------- -----------
Balance at December 31 $17,339,353 $14,792,193 $12,548,826
=========== =========== ===========
</TABLE>
3) Tax Basis of Buildings and Improvements
The aggregate cost of Building and Improvements for federal income tax
purposes is equal to the cost basis used for financial statement
purposes.
F - 22
Exhibit 10.1
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is made as of the 22nd day of April,
1994 by and between AGREE LIMITED PARTNERSHIP, a Delaware limited
partnership, whose address is 31850 Northwestern Highway, Farmington Hills,
Michigan 48334 (hereinafter collectively referred to as "Borrower") and
NATIONWIDE LIFE INSURANCE COMPANY, an Ohio corporation, whose address is
One Nationwide Plaza, Columbus, Ohio 43216, Attention: Real Estate
Investments (hereinafter referred to as "Lender").
W I T N E S S E T H:
The following is a recital of facts underlying this Agreement:
A. Shawano Plaza, Plymouth Commons and Chippewa Commons, Michigan
co-partnerships (collectively, the "Original Borrower") heretofore borrowed
the sum of Twenty-One Million Dollars ($21,000,000) (the "Loan") from
Lender, as evidenced by a promissory note ("Original Note") dated November
12, 1990 in the original principal amount of the Loan.
B. To secure repayment of the Loan together with all interest and
charges of whatever nature to become due thereunder, the Original Borrower
executed and delivered to Lender a Mortgage and Security Agreement (the
"Mortgage") and an Assignment of Leases, Rents and Profits (the
"Assignment"), each dated November 12, 1990 and recorded in the Offices of
the Registers of Deeds of Shawano, Sheboygan and Chippewa Counties,
Wisconsin, and various other documents were executed by the Original
Borrower, the Lender or Richard Agree and Edward Rosenberg ("Agree and
Rosenberg") including, without limitation, certain guaranties. The
Mortgage, the Assignment and such other documents (excluding any Mortgage
Note) are hereinafter collectively referred to as the "Loan Documents".
C. On or about February 18, 1991, the Lender made another loan (the
"Michigan Loan") to Rapids Associates, Marshall Plaza Phase Two, Petoskey
Town Center and Charlevoix Commons, Michigan co-partnerships (collectively,
the "Michigan Original Borrower"), which Michigan Loan was cross-
collateralized and cross-defaulted with the Loan. Certain amendments were
made to the Original Note and the Loan Documents in connection with such
cross-collateralization.
<PAGE>
D. The Property (as that term is defined in the Mortgage) has been
conveyed by the Original Borrower to the Borrower.
E. Lender has agreed to accept partial prepayment of the Loan and
the Michigan Loan and to restructure the Loan and the Michigan Loan as set
forth in the letters to Lender from Agree and Rosenberg on behalf of the
Original Borrower and the Michigan Original Borrower dated March 2, 1994
and April 19, 1994, copies of which are attached hereto as Exhibit A-1,
and in the letter from the Lender to Agree and Rosenberg dated March 17,
1994, a copy of which is attached hereto as Exhibit A-2. The parties
hereto are entering into this Agreement for the purpose of stating
certain terms and conditions of the restructured Loan.
NOW THEREFORE, in consideration of the mutual covenants and conditions
stated herein and other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, Borrower, Lender, Agree and
Rosenberg agree as follows:
1. Concurrently herewith, Borrower has partially prepaid the Loan
such that the principal balance thereof has been reduced to Fourteen
Million Four Hundred Fifty Thousand and 00/100 Dollars ($14,450,000.00)
and, to evidence the reduced Loan, has executed and delivered to Lender a
Mortgage Note (the "New Note") in such amount in substitution and complete
replacement for the Original Note. The Lender and Borrower have executed
amendments to the Mortgage and Assignment which reflect the replacement of
the Original Note by the New Note. The parties hereto agree that all
references in the other Loan Documents to the Original Note shall hereafter
be deemed to refer to the New Note. Agree and Rosenberg specifically agree
and confirm that the Indemnity dated November 12, 1990 executed by them for
the benefit of the Lender remains in full force and effect with respect to
the restructured Loan as evidenced by the New Note and that any Guaranty
executed by them for the benefit of the Lender and not released by the
Lender prior hereto remains in full force and effect with respect to the
restructured Loan as evidenced by the New Note.
2. Lender hereby consents to the conveyance of the Property (as that
term is defined in the Mortgage) to the Borrower, an entity whose owners
are those persons described in Exhibit A-1 hereto and who hold the
respective interests described in Exhibit A-1. The conveyance is subject to
the Mortgage, Assignment and other Loan Documents and nothing herein shall
be deemed to be a release, discharge or modification of any liability of
Agree and Rosenberg thereunder. Nothing herein shall be deemed to be a
consent by Lender to any other or further transfer or conveyance of the
Property.
-2-
<PAGE>
3. Borrower assumes and agrees to pay, perform and fulfill all of
the obligations of the Original Borrower under the Loan Documents and to be
bound by all of the terms and provisions thereof as fully and completely as
though Borrower had originally executed the Loan Documents.
4. This Agreement shall be governed by the laws of the State of
Wisconsin and shall be binding upon the parties hereto and their respective
heirs, successors and assigns. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original and all such
counterparts shall constitute one and the same instrument.
IN WITNESS WHEREOF, this Loan Modification Agreement has been executed
by the parties hereto as of the date above.
AGREE LIMITED PARTNERSHIP, a
Delaware limited partnership
By: AGREE REALTY CORPORATION, a
Maryland Corporation
Its: General Partner
By: /s/ Richard Agree
------------------------
Name:
Title:
/s/ Richard Agree
----------------------------------
RICHARD AGREE
/s/ Edward Rosenberg
----------------------------------
EDWARD ROSENBERG
NATIONWIDE LIFE INSURANCE COMPANY
By: /s/ James W. Prude
-----------------------------
Its: Vice President
Attest: /s/ Dennis W. Celick
------------------------
Its: Assistant Secretary
-3-
<PAGE>
EXHIBIT A-1
March 2, 1994
Mr. Jerry Spangler
Nationwide Life Insurance Company
One Nationwide Plaza
Columbus, Ohio 43216
RE: AGREE K-MART LOANS
LOAN A -- WISCONSIN -- No. 030301843
LOAN B -- MICHIGAN -- No. 030301852
Gentlemen:
On November 13, 1990 and February 19, 1991, the above referenced Loan A and
Loan B, respectively, closed with Nationwide Life Insurance Company
(hereinafter "Nationwide").
In order to refinance and consolidate these loans, the Borrower hereby
makes Application to Nationwide subject, but not limited to the following
conditions:
Borrower: Seven individual partnerships, which interests will be
assigned to Agree Realty Limited Partnership, a Delaware
Limited Partnership, the owners of which are as follows:
General Partner:
Agree Realty Corporation, a Maryland Corporation 76.01%*
Limited Partners:
Richard Agree 12.40%*
Edward Rosenberg 9.03%*
Joel Weiner 2.56%*
-----
Total 100.0%
*Approximate Interests
Loan Amount: $33,600,000
It is understood and agreed that the balances on the two
existing loans will be paid down by a total of approximately
$11,000,000. Nationwide is to receive a prepayment premium
of $1,820,000 at the time of closing. This penalty
<PAGE>
Mr. Jerry Spangler
March 2, 1994
Page 2
assumes a closing in the month of April 1994. Should closing
occur later, Nationwide shall be paid a prepayment premium
as follows:
May 1994: $1,730,000
June 1994: $1,640,000
July 1994: $1,550,000
Interest Rate: 6.875%.
Commitment
Fee: At closing, Nationwide is to receive a fee of $700,000.
Maturity Date: November 15, 2005
Monthly
Payments: Years 1-5: $192,500/month (interest only)
Thereafter: Based upon a rate as determined below and a
22 year amortization.
Rate Reset: At the end of the 5th year the rate will be reset for the
remaining loan term as provided for in the existing loan
documents.
Closing Date: No later than July 15, 1994
Documentation: It is understood and agreed that all other terms and
conditions of the existing loan documents shall remain the
same.
Nationwide will attempt to use the existing loan documents
subject to the changes required by the refinancing and
subject to changes necessary to perfect Nationwide's first
lien on the property.
Expenses: Borrower will be responsible for all expenses relating to
the refinancing of the existing loans, whether the
refinancing closes or not.
Good Faith
Deposit: Borrower herewith deposits $50,000 as a good faith deposit.
This good faith deposit will be refunded, less Nationwide's
out of pocket expenses, if any, upon closing and receipt by
Nationwide of all closing items. If the loan fails to close
as herein contemplated, Nationwide shall retain this
deposit.
By execution of this agreement, Borrower authorizes Nationwide (or its
correspondent) to perform any necessary credit and financial inquiries.
Borrower agrees to provide any information requested by Nationwide.
The undersigned hereby apply for this refinancing and consolidation for
Shawano Plaza, Plymouth Commons, and Chippewa Commons (Loan A) and Rapids
Associates, Charlevoix Commons, Marshall Plaza Phase Two and Petoskey Town
Center (Loan B), each a Michigan Co-Partnership.
<PAGE>
Mr. Jerry Spangler
March 2, 1994
Page 3
By: /s/ Richard Agree
Richard Agree, Its Co-Partner
And: /s/ Edward Rosenberg
Edward Rosenberg, Its Co-Partner
Nationwide Hereby Accepts The Above Application. *
NATIONWIDE LIFE INSURANCE COMPANY
By: /s/ Robert H. McNaghten Date: March 17, 1994
--------------------------- ---------------------
Name:
Vice President
---------------------------
Title:
* Subject to Nationwide's March 17, 1994, letter of modification and
clarification.
<PAGE>
April 19, 1994
Mr. Jerry Spangler
Nationwide Life Insurance Company
One Nationwide Plaza
Columbus, Ohio 43216
RE: Agree Kmart Loans
Loan A -- Wisconsin No. 03-0301843
Loan B -- Michigan No. 03-0301852
Gentlemen:
The purpose of this letter is to confirm our agreement to modify the
March 17, 1994, letter amendment to our March 2, 1994, Agreement.
Numbered Paragraph 5 of the March 17, 1994, letter amendment is hereby
deleted in its entirety and replaced with the following:
5. In the "Rate Reset" section of the Agreement delete "as provided
for in the existing loan documents" and replace with "to
Nationwide's then-prevailing Interest rate for a loan with a
seven-year term."
The balance of the Agreement, as modified by letter dated March 17,
1994, is hereby ratified and affirmed.
Please acknowledge your acceptance by signing below:
Very truly yours,
Shawano Plaza
Plymouth Commons
Chippewa Commons
Rapids Associates
Charlevoix Commons
Marshall Plaza Phase Two
Petoskey Town Center
By: /s/ Richard Agree
----------------------
Richard Agree, Partner
ACKNOWLEDGED AND ACCEPTED:
Nationwide Life Insurance Company
April 20, 1994
By: /s/
-------------------------
Its: Vice President
-------------------------
<PAGE>
EXHIBIT A-2
[ LOGO - NATIONWIDE INSURANCE ]
NATIONWIDE LIFE INSURANCE COMPANY
HOME OFFICE ONE NATIONWIDE PLAZA - COLUMBUS, OH 43215-2220
March 17, 1994
Messrs. Richard Agree and Edward Rosenberg
C/o Mr. David J. Sibbold
Proctor & Associates
3883 Telegraph Road, Suite 104
P.O. Box 769
Bloomfield Hills, MI 48303
Re: Agree K-Mart Loans
Loan A -- Wisconsin No. 03-0301843
Loan B -- Michigan No. 03-0301852
Gentlemen:
Nationwide Life Insurance Company hereby approves the March 2, 1994, Letter
Agreement ("Agreement") to refinance the above-captioned loans subject to
the following modifications and clarifications:
1. It is understood and agreed that instead of consolidating the two
loans into one loan as contemplated in the Agreement, two separate
loans shall be maintained: $14,450,000 for Loan A (Wisconsin) and
$19,150,000 for Loan B (Michigan).
2. It is further understood and agreed that the prepayment premiums
outlined in the Agreement shall be divided between Loan A and Loan B,
43 percent and 57 percent, respectively.
3. The Commitment Fee of $700,000 outlined in the "Commitment Fee"
section of the Agreement shall be apportioned $301,000 to Loan A and
$399,000 to Loan B.
4. The monthly payment outlined under the "Monthly Payments" section of
the Agreement shall be changed to "$82,786.46" for Loan A and
"$109,713.54" for Loan B.
5. In the "Rate Reset" section of the Agreement delete "as provided for
in the existing loan documents" and replace with "to Nationwide's
then-prevailing interest rate for a loan with a six-year term".
6. In the "Documentation" section of the Agreement add the following new
paragraph:
"The conditions for release of Property from the security for the loan
set out in Section 30 of the Mortgage for each of the loans shall be
amended as follows:
a. The "eighty percent (80%)" loan-to-value requirement and "1.1"
times debt service requirement in the last paragraph of section
30 shall be changed to "sixty-two percent (62%)" and "1.75",
respectively.
<PAGE>
Messrs. Richard Agree and Edward Rosenberg
Page 2
March 17, 1994
b. The "Project Value" of each property in this same paragraph shall
be changed to the following:
Shawano $5,650,000
Plymouth 4,350,000
Chippewa Falls 4,450,000
Big Rapids 5,790,000
Charlevoix 3,690,000
Marshall 3,660,000
Petoskey 6,010,000
These modifications constitute the only changes made to the Agreement.
Please signify your acceptance of these changes by signing and returning
the original of this amendment letter to Jerry P. Spangler at the
letterhead address no later than March 25, 1994.
Very truly yours,
NATIONWIDE LIFE INSURANCE COMPANY
/s/ Robert H. McNaghten
- -----------------------
Robert H. McNaghten
Vice President
JPS/RHM/sac
Accepted by Borrowers the 22nd day of March, 1994
Shawano Plaza
Plymouth Commons
Chippewa Commons
Rapids Associates
Charlevoix Commons
Marshall Plaza Phase Two
Petoskey Town Center
By: /s/ Richard Agree
-----------------------------
Richard Agree, Its Co-Partner
By: /s/ Edward Rosenberg
--------------------------------
Edward Rosenberg, Its Co-Partner
Exhibit 10.2
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is made as of the 22nd day of April,
1994 by and between AGREE LIMITED PARTNERSHIP, a Delaware limited
partnership, whose address is 31850 Northwestern Highway, Farmington Hills,
Michigan 48334 (hereinafter referred to as "Borrower") and NATIONWIDE
LIFE INSURANCE COMPANY, an Ohio corporation, whose address is One
Nationwide Plaza, Columbus, Ohio 43216, Attention: Real Estate
Investments (hereinafter referred to as "Lender").
W I T N E S S E T H:
The following is a recital of facts underlying this Agreement:
A. Rapids Associates, Marshall Plaza Phase Two, Petoskey Town Center
and Charlevoix Commons, Michigan co-partnerships (collectively, the
"Original Borrower") heretofore borrowed the sum of Twenty-Four Million
Four Hundred Eighty Thousand Dollars ($24,480,000) (the "Loan") from
Lender, as evidenced by a promissory note ("Original Note") dated February
18, 1991 in the original principal amount of the Loan.
B. To secure repayment of the Loan together with all interest and
charges of whatever nature to become due thereunder, the Original Borrower
executed and delivered to Lender a Mortgage and Security Agreement (the
"Mortgage") and an Assignment of Leases, Rents and Profits (the
"Assignment"), each dated February 18, 1991 and recorded in the Offices of
the Registers of Deeds of Calhoun, Mecosta, Charlevoix and Emmet Counties,
Michigan, and various other documents were executed by the Original
Borrower, the Lender or Richard Agree and Edward Rosenberg ("Agree and
Rosenberg") including, without limitation, certain guaranties. The
Mortgage, the Assignment and such other documents (excluding any Mortgage
Note) are hereinafter collectively referred to as the "Loan Documents".
C. On or about November 12, 1990, the Lender made a loan (the
"Wisconsin Loan") to Shawano Plaza, Plymouth Commons and Chippewa Commons,
Michigan co-partnerships (collectively, the "Wisconsin Original Borrower"),
which Wisconsin Loan was cross-collateralized and cross-defaulted with the
Loan.
D. The Property (as that term is defined in the Mortgage) has been
conveyed by the Original Borrower to the Borrower.
<PAGE>
E. Lender has agreed to accept partial prepayment of the Loan and
the Wisconsin Loan and to restructure the Loan and the Wisconsin Loan as
set forth in the letters to Lender from Agree and Rosenberg on behalf of
the Original Borrower and the Wisconsin Original Borrower dated March 2,
1994 and April 19, 1994, copies of which are attached hereto as Exhibit A-1,
and in the letter from the Lender to Agree and Rosenberg dated March 17,
1994, a copy of which is attached hereto as Exhibit A-2. The parties hereto
are entering into this Agreement for the purpose of stating certain terms
and conditions of the restructured Loan.
NOW THEREFORE, in consideration of the mutual covenants and conditions
stated herein and other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, Borrower, Lender, Agree and
Rosenberg agree as follows:
1. Concurrently herewith, Borrower has partially prepaid the Loan
such that the principal balance thereof has been reduced to Nineteen
Million One Hundred Fifty Thousand and 00/100 Dollars ($19,150,000.00) and,
to evidence the reduced Loan, has executed and delivered to Lender a
Mortgage Note (the "New Note") in such amount in substitution and complete
replacement for the Original Note. The Lender and Borrower have executed
amendments to the Mortgage and Assignment which reflect the replacement of
the Original Note by the New Note. The parties hereto agree that all
references in the other Loan Documents to the Original Note shall hereafter
be deemed to refer to the New Note. Agree and Rosenberg specifically agree
and confirm that the Indemnity dated February 18, 1991, executed by them for
the benefit of the Lender remains in full force and effect with respect to
the restructured Loan as evidenced by the New Note and that any Guaranty
executed by them for the benefit of the Lender and not released by the
Lender prior hereto remains in full force and effect with respect to the
restructured Loan as evidenced by the New Note.
2. Lender hereby consents to the conveyance of the Property (as that
term is defined in the Mortgage) to the Borrower, an entity whose owners
are those persons described in Exhibit A-1 hereto and who hold the
respective interests described in Exhibit A-1. The conveyance is subject to
the Mortgage, Assignment and other Loan Documents and nothing herein shall
be deemed to be a release, discharge or modification of any liability of
Agree and Rosenberg thereunder. Nothing herein shall be deemed to be a
consent by Lender to any other or further transfer or conveyance of the
Property.
3. Borrower assumes and agrees to pay, perform and fulfill all of
the obligations of the Original Borrower under the Loan Documents and to be
bound by all of the terms and provisions thereof as fully and completely as
though Borrower had originally executed the Loan Documents.
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<PAGE>
4. This Agreement shall be governed by the laws of the State of
Michigan and shall be binding upon the parties hereto and their respective
heirs, successors and assigns. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original and all such
counterparts shall constitute one and the same instrument.
IN WITNESS WHEREOF, this Loan Modification Agreement has been executed
by the parties hereto as of the date above.
AGREE LIMITED PARTNERSHIP, a
Delaware limited partnership
By: AGREE REALTY CORPORATION, a
Maryland Corporation
Its: General Partner
By: /s/ Richard Agree
------------------------------
Name:
Title:
/s/ Richard Agree
-----------------------------------------
RICHARD AGREE
/s/ Edward Rosenberg
-----------------------------------------
EDWARD ROSENBERG
NATIONWIDE LIFE INSURANCE COMPANY
By: /s/ James W. Prude
------------------------------------
Its: Vice President
Attest: /s/ Dennis W. Celick
-------------------------------
Its: Assistant Secretary
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<PAGE>
EXHIBIT A-1
March 2, 1994
Mr. Jerry Spangler
Nationwide Life Insurance Company
One Nationwide Plaza
Columbus, Ohio 43216
RE: AGREE K-MART LOANS
LOAN A -- WISCONSIN -- No. 030301843
LOAN B -- MICHIGAN -- No. 030301852
Gentlemen:
On November 13, 1990 and February 19, 1991, the above referenced Loan A and
Loan B, respectively, closed with Nationwide Life Insurance Company
(hereinafter "Nationwide").
In order to refinance and consolidate these loans, the Borrower hereby
makes Application to Nationwide subject, but not limited to the following
conditions:
Borrower: Seven individual partnerships, which interests will be
assigned to Agree Realty Limited Partnership, a Delaware
Limited Partnership, the owners of which are as follows:
General Partner:
Agree Realty Corporation, a Maryland Corporation 76.01%*
Limited Partners:
Richard Agree 12.40%*
Edward Rosenberg 9.03%*
Joel Weiner 2.56%*
-----
Total 100.0%
*Approximate Interests
Loan Amount: $33,600,000
It is understood and agreed that the balances on the two
existing loans will be paid down by a total of approximately
$11,000,000. Nationwide is to receive a prepayment premium
of $1,820,000 at the time of closing. This penalty
<PAGE>
Mr. Jerry Spangler
March 2, 1994
Page 2
assumes a closing in the month of April 1994. Should closing
occur later, Nationwide shall be paid a prepayment premium
as follows:
May 1994: $1,730,000
June 1994: $1,640,000
July 1994: $1,550,000
Interest Rate: 6.875%.
Commitment
Fee: At closing, Nationwide is to receive a fee of $700,000.
Maturity Date: November 15, 2005
Monthly
Payments: Years 1-5: $192,500/month (interest only)
Thereafter: Based upon a rate as determined below and a
22 year amortization.
Rate Reset: At the end of the 5th year the rate will be reset for the
remaining loan term as provided for in the existing loan
documents.
Closing Date: No later than July 15, 1994
Documentation: It is understood and agreed that all other terms and
conditions of the existing loan documents shall remain the
same.
Nationwide will attempt to use the existing loan documents
subject to the changes required by the refinancing and
subject to changes necessary to perfect Nationwide's first
lien on the property.
Expenses: Borrower will be responsible for all expenses relating to
the refinancing of the existing loans, whether the
refinancing closes or not.
Good Faith
Deposit: Borrower herewith deposits $50,000 as a good faith deposit.
This good faith deposit will be refunded, less Nationwide's
out of pocket expenses, if any, upon closing and receipt by
Nationwide of all closing items. If the loan fails to close
as herein contemplated, Nationwide shall retain this
deposit.
By execution of this agreement, Borrower authorizes Nationwide (or its
correspondent) to perform any necessary credit and financial inquiries.
Borrower agrees to provide any information requested by Nationwide.
The undersigned hereby apply for this refinancing and consolidation for
Shawano Plaza, Plymouth Commons, and Chippewa Commons (Loan A) and Rapids
Associates, Charlevoix Commons, Marshall Plaza Phase Two and Petoskey Town
Center (Loan B), each a Michigan Co-Partnership.
<PAGE>
Mr. Jerry Spangler
March 2, 1994
Page 3
By: /s/ Richard Agree
Richard Agree, Its Co-Partner
And: /s/ Edward Rosenberg
Edward Rosenberg, Its Co-Partner
Nationwide Hereby Accepts The Above Application. *
NATIONWIDE LIFE INSURANCE COMPANY
By: /s/ Robert H. McNaghten Date: March 17, 1994
--------------------------- ---------------------
Name:
Vice President
---------------------------
Title:
* Subject to Nationwide's March 17, 1994, letter of modification and
clarification.
<PAGE>
April 19, 1994
Mr. Jerry Spangler
Nationwide Life Insurance Company
One Nationwide Plaza
Columbus, Ohio 43216
RE: Agree Kmart Loans
Loan A -- Wisconsin No. 03-0301843
Loan B -- Michigan No. 03-0301852
Gentlemen:
The purpose of this letter is to confirm our agreement to modify the
March 17, 1994, letter amendment to our March 2, 1994, Agreement.
Numbered Paragraph 5 of the March 17, 1994, letter amendment is hereby
deleted in its entirety and replaced with the following:
5. In the "Rate Reset" section of the Agreement delete "as provided
for in the existing loan documents" and replace with "to
Nationwide's then-prevailing Interest rate for a loan with a
seven-year term."
The balance of the Agreement, as modified by letter dated March 17,
1994, is hereby ratified and affirmed.
Please acknowledge your acceptance by signing below:
Very truly yours,
Shawano Plaza
Plymouth Commons
Chippewa Commons
Rapids Associates
Charlevoix Commons
Marshall Plaza Phase Two
Petoskey Town Center
By: /s/ Richard Agree
----------------------
Richard Agree, Partner
ACKNOWLEDGED AND ACCEPTED:
Nationwide Life Insurance Company
April 20, 1994
By: /s/
-------------------------
Its: Vice President
-------------------------
<PAGE>
EXHIBIT A-2
[ LOGO - NATIONWIDE INSURANCE ]
NATIONWIDE LIFE INSURANCE COMPANY
HOME OFFICE ONE NATIONWIDE PLAZA - COLUMBUS, OH 43215-2220
March 17, 1994
Messrs. Richard Agree and Edward Rosenberg
C/o Mr. David J. Sibbold
Proctor & Associates
3883 Telegraph Road, Suite 104
P.O. Box 769
Bloomfield Hills, MI 48303
Re: Agree K-Mart Loans
Loan A -- Wisconsin No. 03-0301843
Loan B -- Michigan No. 03-0301852
Gentlemen:
Nationwide Life Insurance Company hereby approves the March 2, 1994, Letter
Agreement ("Agreement") to refinance the above-captioned loans subject to
the following modifications and clarifications:
1. It is understood and agreed that instead of consolidating the two
loans into one loan as contemplated in the Agreement, two separate
loans shall be maintained: $14,450,000 for Loan A (Wisconsin) and
$19,150,000 for Loan B (Michigan).
2. It is further understood and agreed that the prepayment premiums
outlined in the Agreement shall be divided between Loan A and Loan B,
43 percent and 57 percent, respectively.
3. The Commitment Fee of $700,000 outlined in the "Commitment Fee"
section of the Agreement shall be apportioned $301,000 to Loan A and
$399,000 to Loan B.
4. The monthly payment outlined under the "Monthly Payments" section of
the Agreement shall be changed to "$82,786.46" for Loan A and
"$109,713.54" for Loan B.
5. In the "Rate Reset" section of the Agreement delete "as provided for
in the existing loan documents" and replace with "to Nationwide's
then-prevailing interest rate for a loan with a six-year term".
6. In the "Documentation" section of the Agreement add the following new
paragraph:
"The conditions for release of Property from the security for the loan
set out in Section 30 of the Mortgage for each of the loans shall be
amended as follows:
a. The "eighty percent (80%)" loan-to-value requirement and "1.1"
times debt service requirement in the last paragraph of section
30 shall be changed to "sixty-two percent (62%)" and "1.75",
respectively.
<PAGE>
Messrs. Richard Agree and Edward Rosenberg
Page 2
March 17, 1994
b. The "Project Value" of each property in this same paragraph shall
be changed to the following:
Shawano $5,650,000
Plymouth 4,350,000
Chippewa Falls 4,450,000
Big Rapids 5,790,000
Charlevoix 3,690,000
Marshall 3,660,000
Petoskey 6,010,000
These modifications constitute the only changes made to the Agreement.
Please signify your acceptance of these changes by signing and returning
the original of this amendment letter to Jerry P. Spangler at the
letterhead address no later than March 25, 1994.
Very truly yours,
NATIONWIDE LIFE INSURANCE COMPANY
/s/ Robert H. McNaghten
- -----------------------
Robert H. McNaghten
Vice President
JPS/RHM/sac
Accepted by Borrowers the 22nd day of March, 1994
Shawano Plaza
Plymouth Commons
Chippewa Commons
Rapids Associates
Charlevoix Commons
Marshall Plaza Phase Two
Petoskey Town Center
By: /s/ Richard Agree
-----------------------------
Richard Agree, Its Co-Partner
By: /s/ Edward Rosenberg
--------------------------------
Edward Rosenberg, Its Co-Partner
EXHIBIT 10.6
---------------------------------
FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF
AGREE LIMITED PARTNERSHIP
----------------------------------
Dated as of April 22, 1994
<PAGE>
Table of Contents
Page
----
ARTICLE I - DEFINED TERMS 1
ARTICLE II - ORGANIZATIONAL MATTERS 14
Section 2.1. Continuation of Partnership 14
Section 2.2. Name 14
Section 2.3. Principal Office and Registered Agent 15
Section 2.4. Power of Attorney 15
Section 2.5 Term 16
ARTICLE III - PURPOSE 16
Section 3.1. Purpose and Business 16
Section 3.2. Powers 17
ARTICLE IV - CAPITAL CONTRIBUTIONS 17
Section 4.1. Capital Contribution of the Partners 17
Section 4.2. Issuance of Additional Partnership
Interests 19
Section 4.3. No Preemptive Rights 22
Section 4.4. Capital Accounts 22
Section 4.5 Return of Capital Account; Interest 25
ARTICLE V - DISTRIBUTIONS 26
Section 5.1. Initial Partnership Distributions 26
Section 5.2. Requirement and Characterization of
Distributions 26
Section 5.3 Amounts Withheld 26
Section 5.4. Distributions Upon Liquidation 26
ARTICLE VI - ALLOCATIONS 27
Section 6.1 Allocations For Capital Account Purposes 27
Section 6.2 Allocation of Nonrecourse Debt 27
Section 6.3 Reserved 27
Section 6.4 Special Allocation Rules 27
Section 6.5 Allocations for Tax Purposes 30
ARTICLE VII - MANAGEMENT AND OPERATIONS OF BUSINESS 31
Section 7.1 Management 31
Section 7.2 Certificate of Limited Partnership 32
Section 7.3 Restrictions on General Partner's
Authority 32
Section 7.4. Reimbursement of the General Partner 33
Section 7.5. Outside Activities of the General Partner 34
Section 7.6. Transactions with Affiliates 34
Section 7.7. Indemnification 35
Section 7.8. Liability of the General Partner 36
Section 7.9. Title to Partnership Assets 37
Section 7.10. Reliance by Third Parties 37
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<PAGE>
ARTICLE VIII - RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS 38
Section 8.1. Limitation of Liability 38
Section 8.2. Outside Activities of Limited Partners 38
Section 8.3. Rights of Limited Partners Relating to
the Partnership 38
Section 8.4. Conversion Right 39
Section 8.5. General Partner Covenants Relating to the
Rights 41
Section 8.6. Other Matters Relating to the Conversion
Rights 41
ARTICLE IX - BOOKS, RECORDS, ACCOUNTING AND REPORTS 42
Section 9.1. Records and Accounting 42
Section 9.2. Fiscal Year 43
Section 9.3. Reports 43
ARTICLE X - TAX MATTERS 43
Section 10.1. Preparation of Tax Returns 43
Section 10.2. Tax Elections 43
Section 10.3. Tax Matters Partner 44
Section 10.4. Organizational Expenses 45
Section 10.5. Withholding 45
ARTICLE XI - TRANSFERS AND WITHDRAWALS 46
Section 11.1. Transfer 46
Section 11.2. Transfer of General Partner's
Partnership Interest 46
Section 11.3. Limited Partners' Rights to Transfer 48
Section 11.4. Substituted Limited Partners 52
Section 11.5. General Provisions 52
ARTICLE XII - DISSOLUTION AND LIQUIDATION 53
Section 12.1. Dissolution 53
Section 12.2. Winding Up 54
Section 12.3. Compliance with Timing Requirements of
Regulations 56
Section 12.4. Deemed Distribution and Recontribution 56
Section 12.5. Documentation of Liquidation 57
Section 12.6. Reasonable Time for Winding Up 57
Section 12.7. Indemnification of the Liquidator 57
Section 12.8. Waiver of Partition 57
ARTICLE XIII - AMENDMENT OF PARTNERSHIP AGREEMENT 58
Section 13.1. Amendments 58
ARTICLE XIV - ARBITRATION OF DISPUTES 59
Section 14.1. Arbitration 59
Section 14.2. Procedures 59
Section 14.3. Binding Character 60
Section 14.4 Exclusivity 60
Section 14.5. No Alteration of Agreement 61
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<PAGE>
ARTICLE XV - CONDITIONS/CONCURRENT TRANSACTIONS 61
Section 15.1. General Partner Conditions 61
Section 15.2. Limited Partner Conditions 61
ARTICLE XVI - GENERAL PROVISIONS 62
Section 16.1. Addresses and Notice 62
Section 16.2. Titles and Captions 62
Section 16.3. Pronouns and Plurals 62
Section 16.4. Further Action 62
Section 16.5. Binding Effect 63
Section 16.6. No Third Party Beneficiaries 63
Section 16.7. Waiver 63
Section 16.8. No Agency 63
Section 16.9. Entire Understanding 63
Section 16.10. Counterparts 63
Section 16.11. Applicable Law 63
Section 16.12. Invalidity of Provisions 63
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<PAGE>
FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF
AGREE LIMITED PARTNERSHIP
THIS FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED
PARTNERSHIP, dated as of April 22, 1994, is entered into by and among the
undersigned parties.
W I T N E S S E T H:
WHEREAS, Agree Realty Corporation, as general partner, and
Richard Agree, as limited partner, formed Agree Limited Partnership (the
"Partnership") as a Delaware limited partnership pursuant to that certain
Certificate of Limited Partnership dated April 4, 1994 and filed on April 4,
1994 among the partnership records of the Secretary of State of the State of
Delaware, and that certain Agreement of Limited Partnership dated as of April
4, 1994; and
WHEREAS, the original partners of the Partnership desire to
amend the aforesaid Agreement of Limited Partnership to (i) admit additional
limited partners to the Partnership, and (ii) amend and restate in its
entirety the agreement among the partners.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained and other good and valuable consideration, the
receipt, adequacy and sufficiency of which are hereby acknowledged, the
parties hereto, intending legally to be bound, hereby agree as follows:
ARTICLE I - DEFINED TERMS
Except as otherwise herein expressly provided, the following
terms and phrases shall have the meanings et forth below:
"Act" means the Delaware Revised Uniform Limited Partnership
Act, as it may be amended from time to time, and any successor to such
statute.
"Additional Limited Partner" has the meaning set forth
in Section 4.2 hereof.
"Additional REIT Securities" has the meaning set forth
in Section 4.2.C hereof.
"Adjusted Capital Account" means the Capital Account
maintained for each Partner as of the end of each fiscal year (i) increased
by any amounts which such Partner is obligated to restore pursuant to any
provision of this Agreement or is deemed
<PAGE>
to be obligated to restore pursuant to the penultimate sentences of
Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5) and (ii) decreased by
the items described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5), and 1.704-1(b)(2)(ii)(d)(6). The foregoing
definition of Adjusted Capital Account is intended to comply with the
provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall be
interpreted consistently therewith.
"Adjusted Capital Account Deficit" means, with respect to any
Partner, the deficit balance, if any, in such Partner's Adjusted Capital
Account as of the end of the relevant fiscal year.
"Adjusted Property" means any property the Carrying Value of
which has been adjusted pursuant to Section 4.4.D hereof. Once an Adjusted
Property is deemed distributed by, and recontributed to, the Partnership for
federal income tax purposes upon a termination thereof pursuant to Section
708 of the Code, such property shall thereafter constitute a Contributed
Property until the Carrying Value of such property is further adjusted
pursuant to Section 4.4.D hereof.
"Affiliate" means, with respect to any Person, (i) any Person
directly or indirectly controlling, controlled by or under common control
with such Person, (ii) any Person owning or controlling fifty percent (50%)
or more of the outstanding voting interests of such Person, (iii) any Person
of which such Person owns or controls fifty percent (50%) or more of the
voting interests, (iv) any officer, director, general partner or trustee of
such Person or of any Person referred to in clauses (i), (ii), and (iii)
above, or (v) any member of the Immediate Family of such Person.
"Agreement" means this First Amended and Restated Agreement of
Limited Partnership, as it may be amended, supplemented or restated from time
to time.
"Articles of Incorporation" means the Articles of
Incorporation of the General Partner, as the same may be amended or restated
and in effect from time to time.
"Available Cash" means, with respect to any period for which
such calculation is being made, (i) the sum of:
(a) the Partnership's Net Income or Net Loss, as the
case may be, for such period (without regard to adjustments
resulting from allocations described in Section 6.4.A through
Section 6.4.E),
(b) Depreciation and all other noncash charges
deducted in determining Net Income or Net Loss for such
period,
-2-
<PAGE>
(c) the amount of any reduction in reserves of the
Partnership referred to in clause (ii)(f) below (including,
without limitation, reductions resulting because the General
Partner determines such amounts are no longer necessary),
(d) the excess of proceeds from the sale, exchange,
disposition or refinancing of Partnership property during such
period over the gain (or loss, as the case may be) recognized
from such sale, exchange, disposition or refinancing during
such period (excluding Terminating Capital Transactions),
except such proceeds as are distributed pursuant to Section
5.1, and
(e) all other cash received by the Partnership during
such period that was not included in determining Net Income or
Net Loss for such period;
(ii) less the sum of:
(a) all principal debt payments made during such
period by the Partnership,
(b) capital expenditures made by the Partnership
during such period,
(c) investments in any entity (including loans made
thereto) to the extent that such investments are not otherwise
described in clauses (ii)(a) or (b),
(d) all other expenditures and payments not
deducted in determining Net Income or Net Loss for such
period,
(e) any amount included in determining Net Income or
Net Loss of such period that was not received by the
Partnership during such period, and
(f) the amount of any increase in reserves established
during such period which the General Partner determines are
necessary or appropriate in its sole and absolute discretion.
Notwithstanding the foregoing, Available Cash shall not
include any cash received or reductions in reserves, or take into account any
disbursements made or reserves established, after commencement of the
dissolution and liquidation of the Partnership.
"Bankruptcy" of a Person shall be deemed to have occurred when
(a) the Person commences a voluntary proceeding seeking liquidation,
reorganization or other relief under any bankruptcy, insolvency or other
similar law now or hereafter in
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<PAGE>
effect, (b) the Person is adjudged as bankrupt or insolvent, or a final and
nonappealable order for relief under any bankruptcy, insolvency or similar
law now or hereafter in effect has been entered against the Person, (c) the
Person executes and delivers a general assignment for the benefit of the
Person's creditors, (d) the Person files an answer or other pleading
admitting or failing to contest the material allegations of a petition filed
against the Person in any proceeding of the nature described in clause (b)
above, (e) the Person seeks, consents to or acquiesces in the appointment of
a trustee, receiver or liquidator for the Person or for all or any
substantial part of the Person's properties, (f) any proceeding seeking
liquidation, reorganization or other relief under any bankruptcy, insolvency
or other similar law now or hereafter in effect has not been dismissed within
one hundred twenty (120) days after the commencement thereof, (g) the
appointment without the Person's consent or acquiescence of a trustee,
receiver or liquidator has not been vacated or stayed within ninety (90) days
after such appointment, or (h) an appointment referred to in clause (g) is
not vacated within ninety (90) days after the expiration of any such stay.
"Beneficial Owner" means an owner of shares of stock of the
General Partner under Code Section 542(a)(2), either directly or
constructively through application of Code Section 544, as modified by Code
Section 856(h)(1)(B).
"Business Day" means any day except a Saturday, Sunday or
other day on which banking institutions in the State of New York are
authorized or obligated by law or executive order to close.
"Capital Account" means the Capital Account maintained for a
Partner pursuant to Section 4.4 hereof.
"Capital Contribution" means, with respect to any Partner, the
total amount of any cash, cash equivalents and the Net Asset Value of
Contributed Property which such Partner contributes or is deemed to
contribute to the Partnership pursuant to the terms of this Agreement,
including the Capital Contribution made by a predecessor holder of the
Interest of such Partner.
"Capital Stock" means REIT Shares and any other shares of
stock (including, without limitation, preferred stock) of the General
Partner.
"Carrying Value" means (i) with respect to a Contributed
Property, the Gross Asset Value of such property reduced (but not below zero)
by all Depreciation with respect to such property charged to the Partners'
Capital Accounts, (ii) with respect to an Adjusted Property, the Carrying
Value as last adjusted pursuant to Section 4.4 reduced (but not below zero)
by all Depreciation with respect to such property charged to the Partners'
Capital Accounts since the date of the last adjustment pursuant
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<PAGE>
to Section 4.4, and (iii) with respect to any other Partnership property, the
adjusted basis of such property for federal income tax purposes, all as of
the time of determination. The Carrying Value of any property shall be
adjusted from time to time in accordance with Section 4.4 hereof and to
reflect changes, additions or other adjustments to the Carrying Value for
dispositions and acquisitions of Partnership properties, as deemed
appropriate by the General Partner.
"Certificate" means the Certificate of Limited Partnership of
the Partnership filed in the office of the Secretary of State of the State of
Delaware, as amended from time to time in accordance with the terms hereof
and the Act.
"Code" means the Internal Revenue Code of 1986, as amended and
in effect from time to time, as interpreted by the applicable regulations
thereunder. Any reference herein to a specific section or sections of the
Code shall be deemed to include a reference to any corresponding provision of
future law.
"Consent of the Limited Partners" means the written consent of
a majority-in-interest of the Limited Partners (i.e., Limited Partners
holding in the aggregate more than fifty percent (50%) of the total
Partnership Interests held by the Limited Partners), which consent shall be
obtained prior to the taking of any action for which it is required by this
Agreement and may be given or withheld by each Limited Partner in its sole
and absolute discretion.
"Contributed Property" means each property or other asset (but
excluding cash), in such form as may be permitted by the Act, contributed to
the Partnership or deemed contributed to the Partnership on termination and
reconstitution thereof pursuant to Section 708 of the Code. Once the Carrying
Value of a Contributed Property is adjusted pursuant to Section 4.4.D hereof,
such property shall no longer constitute a Contributed Property for purposes
of Section 4.4 hereof, but shall be deemed an Adjusted Property for such
purposes.
"Contribution Agreements" means the Contribution Agreements,
dated April 22, 1994, pursuant to which the Property Partnerships agreed to
contribute to the Partnership the Properties and other assets owned by such
Property Partnerships in consideration for the issuance of Partnership Units
to the partners of such Property Partnerships.
"Contribution Date" has the meaning set forth in
Section 4.2 hereof.
"Conversion Factor" means 1.0, provided that in the event that
the General Partner (i) pays a dividend on its outstanding REIT Shares in
REIT Shares or makes a distribution to all holders of its outstanding REIT
Shares in REIT Shares, (ii) subdivides its outstanding REIT Shares,or (iii)
combines its
-5-
<PAGE>
outstanding REIT Shares into a smaller number of REIT Shares, the Conversion
Factor shall be adjusted by multiplying the Conversion Factor by a fraction,
the numerator of which shall be the number of REIT Shares that would be
issued and outstanding on the record date for such event if such dividend,
distribution, subdivision or combination had occurred as of such date, and
the denominator of which shall be the actual number of REIT Shares issued and
outstanding on the record date for such dividend, distribution, subdivision
or combination. Any adjustment of the Conversion Factor shall become
effective immediately after the effective date of such event retroactive to
the record date for such event; provided, however, that if a Specified
Conversion Date, Specified Exchange Date or Required Exchange Date, as the
case may be, occurs after the record date, but prior to the effective date,
of any such event, the Conversion Factor shall be determined as if the
Specified Conversion Date, Specified Exchange Date or Required Exchange Date,
as the case may be, had occurred immediately prior to the record date for
such event.
"Conversion Right" has the meaning set forth in Section
8.4 hereof.
"Converting Partner" has the meaning set forth in
Section 8.4 hereof.
"Deemed Partnership Interest Value" as of any date shall mean,
with respect to a Partner, the product of (i) the Deemed Value of the
Partnership as of such date, multiplied by (ii) such Partner's Partnership
Interest as of such date.
"Deemed Value of the Partnership" as of any date shall
mean the quotient of the following amounts:
(i) the product of (a) the Value of a REIT Share as of such
date, multiplied by (b) the total number of REIT Shares
issued and outstanding as of the close of business on
such date (excluding treasury shares), increased by any
liabilities and decreased by any assets of the General
Partner other than its interest in the Partnership,
divided by
(ii) the Partnership Interest of the General Partner as
of such date.
"Demand Notice" has the meaning set forth in Section
14.2 hereof.
"Depreciation" means, for each fiscal year, an amount equal to
the federal income tax depreciation, amortization or other cost recovery
deduction allowable with respect to an asset for such year, except that if
the Carrying Value of an asset differs from its adjusted basis for federal
income tax purposes at the beginning of such year or other period,
Depreciation shall be an amount which bears the same ratio to such beginning
Carry-
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<PAGE>
ing Value as the federal income tax depreciation, amortization or other cost
recovery deduction for such year bears to such beginning adjusted tax basis;
provided, however, that if the federal income tax depreciation, amortization
or other cost recovery deduction for such year is zero, Depreciation shall be
determined with reference to such beginning Carrying Value using any
reasonable method selected by the General Partner.
"ERISA" means the Employee Retirement Income and Security Act
of 1974, as the same may be amended from time to time, or any successor
statute.
"Exchange Act" means the Securities Exchange Act of 1934, as
the same may be amended from time to time, or any successor statute.
"Exchange Right" means the Optional Exchange Right and the
Required Exchange Right set forth in Sections 11.3.C(1) and (2),
respectively.
"General Partner" means Agree Realty Corporation, a Maryland
corporation, its duly admitted successors and assigns and any other Person
who is a General Partner at the time of reference thereto.
"General Partnership Interest" means the Partnership
Interest held by the General Partner.
"Gross Asset Value" of any Contributed Property contributed to
the Partnership in connection with the execution of this Agreement means the
fair market value of such Contributed Property as established pursuant to the
relevant Contribution Agreement. The Gross Asset Value of any other
Contributed Property means the fair market value of such Contributed Property
at the time of contribution as determined by the General Partner using such
reasonable method of valuation as it may, in its sole and absolute
discretion, adopt; provided, however, that the Gross Asset Value of any
property deemed contributed to the Partnership for federal income tax
purposes upon termination and reconstitution thereof pursuant to Section 708
of the Code shall be determined in accordance with Section 4.4 hereof. The
"Gross Asset Value" of any property distributed to a Partner means the fair
market value of such distributed property at the time of distribution as
determined by the General Partner using such reasonable method of valuation
as it may, in its sole and absolute discretion, adopt.
"Immediate Family" means, with respect to any natural Person,
such natural Person's spouse, ancestors, lineal descendants and brothers and
sisters (whether by the whole or half blood). This definition is intended to
conform to the definition of "family" contained in Code Section 544(a)(2). In
the event that the definition of family contained in Code Section 544(a)(2)
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is revised, the definition of "Immediate Family" shall be revised
accordingly.
"Incapacity" or "Incapacitated" means, (i) as to any
individual Partner, death, total physical disability or entry of an order by
a court of competent jurisdiction adjudicating him incompetent to manage his
Person or his estate; (ii) as to any corporation which is a Partner, the
filing a certificate of dissolution, or its equivalent, for the corporation
or the revocation of its charter; (iii) as to any partnership which is a
Partner, the dissolution and commencement of winding up of the partnership;
(iv) as to any estate which is a Partner, the distribution by the fiduciary
of the estate's entire interest in the Partnership; (v) as to any trustee of
a trust which is a Partner, the termination of the trust (but not the
substitution of a new trustee); or (vi) as to any Partner, the Bankruptcy of
such Partner.
"Indemnitee" means (i) any Person made a party to a proceeding
by reason of his status as (A) the General Partner, or (B) a director or
officer of the Partnership or the General Partner, (ii) such other Persons
(including Affiliates of the General Partner or the Partnership) as the
General Partner may designate from time to time, in its sole and absolute
discretion, and (iii) any Person who, at any time prior to the consummation
of the transactions contemplated by the Contribution Agreement, was a general
partner (or a director or officer of a general partner) of, or a director or
officer of, a Property Partnership.
"Independent Directors of the General Partner" means the
independent directors as defined in Article V, Section 3 of the Articles of
Incorporation.
"IRS" means the Internal Revenue Service.
"Lien" means any liens, security interests, mortgages, deeds
of trust, charges, claims, encumbrances, pledges, options, rights of first
offer or first refusal and any other rights or interests of any kind or
nature, actual or contingent, or other similar encumbrances of any nature
whatsoever.
"Limited Partner" means any Person named as a Limited Partner
in Exhibit A attached hereto, as such Exhibit may be amended from time to
time, or any Substituted Limited Partner or Additional Limited Partner, in
such Person's capacity as a Limited Partner in the Partnership.
"Limited Partnership Interest" means a Partnership Interest of
a Limited Partner in the Partnership and includes any and all benefits to
which the holder of such a Partnership Interest may be entitled as provided
in this Agreement, together with all obligations of such Person to comply
with the terms and provisions of this Agreement.
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"Liquidator" has the meaning set forth in Section 12.2
hereof.
"Net Asset Value" means: (i) in the case of any Contributed
Property contributed, or deemed contributed, by a Partner to the Partnership,
the Gross Asset Value of such property as of the time of its contribution to
the Partnership, reduced by any liabilities either assumed by the Partnership
upon such contribution or to which such property is subject when contributed
(including, with respect to the Properties, any prepayment penalties or other
fees and expenses payable on or about the Contribution Date in connection
with the prepayment or modification of the liabilities to which such
Properties are subject), and (ii) in the case of any property distributed to
a Partner by the Partnership, the Gross Asset Value of such property at the
time of its distribution by the Partnership reduced by any liabilities either
assumed by the distributee Partner upon such distribution or to which such
property is subject when distributed.
"Net Income" means, for any taxable period, the excess, if
any, of the Partnership's items of income and gain for such taxable period
over the Partnership's items of loss and deduction for such taxable period.
The items included in the calculation of Net Income shall be determined in
accordance with Section 4.4 hereof. Once an item of income, gain, loss or
deduction that has been included in the initial computation of Net Income is
subjected to the special allocation rules in Sections 6.4 and 6.5, Net Income
or the resulting Net Loss, whichever the case may be, shall be recomputed
without regard to such item.
"Net Loss" means, for any taxable period, the excess, if any,
of the Partnership's items of loss and deduction for such taxable period over
the Partnership's items of income and gain for such taxable period. The items
included in the calculation of Net Loss shall be determined in accordance
with Section 4.4 hereof. Once an item of income, gain, loss or deduction that
has been included in the initial computation of Net Loss is subjected to the
special allocation rules in Sections 6.4 and 6.5, Net Loss or the resulting
Net Income whichever the case may be, shall be recomputed without regard to
such items.
"Nonrecourse Built-in Gain" means, with respect to any
Contributed Properties or Adjusted Properties that are subject to a mortgage
or negative pledge securing a Nonrecourse Liability, the amount of any
taxable gain that would be allocated to the Partners pursuant to Section
6.5.B if such properties were disposed of in a taxable transaction in full
satisfaction of such liabilities and for no other consideration.
"Nonrecourse Deductions" has the meaning set forth in
Regulations Section 1.704-2(b)(1), and the amount of Nonrecourse Deductions
for a fiscal year shall be determined in accordance with the rules of
Regulations Section 1.704-2(c).
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"Nonrecourse Liability" has the meaning set forth in
Regulations Section 1.752-1(a)(2).
"Notice of Conversion" means the Notice of Conversion
substantially in the form of Exhibit B to this Agreement.
"Notice of Exchange" means the Notice of Exchange
substantially in the form of Exhibit C to this Agreement.
"Offering" means the sale of REIT Shares pursuant to
the Registration Statement.
"Offering Date" means the date of closing of the Offering
without regard to any subsequent closing with respect to REIT Shares
constituting the Underwriters' overallotment option.
"Optional Exchange Right" has the meaning set forth in
Section 11.3.C(1) hereof.
"Original Limited Partner" means each of Richard Agree,
Edward Rosenberg and Joel Weiner.
"Partner" means a General Partner or a Limited Partner,
and "Partners" means the General Partner and the Limited Partners
as a collective group.
"Partner Minimum Gain" means an amount, with respect to each
Partner Nonrecourse Debt, equal to the Partnership Minimum Gain that would
result if such Partner Nonrecourse Debt were treated as a Nonrecourse
Liability, determined in accordance with Regulations Section 1.704-2(i)(3).
"Partner Nonrecourse Debt" has the meaning set forth in
Regulations Section 1.704-2(b)(4).
"Partner Nonrecourse Deductions" has the meaning set forth in
Regulations Section 1.704-2(i)(2), and the amount of Partner Nonrecourse
Deductions with respect to a Partner Nonrecourse Debt for a Partnership
year shall be determined in accordance with the rules of Regulations Section
1.704-2(i)(2).
"Partnership" means the Delaware limited partnership formed
under the Act and continued pursuant to this Agreement, as such partnership
may from time to time be constituted.
"Partnership Interest" means an ownership interest in the
Partnership representing a Capital Contribution by either a Limited Partner
or the General Partner and includes any and all benefits to which the holder
of such a Partnership Interest may be entitled as provided in this Agreement,
together with all obligations of such Person to comply with the terms and
provisions of this Agreement. The Partnership Interest of each Partner shall
be expressed as a percentage of the total Partnership Interests owned by all
of the Partners, as specified in
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Exhibit A attached hereto, as such Exhibit may be amended from time to time.
A Partnership Interest may be expressed as a number of Partnership Units.
"Partnership Minimum Gain" has the meaning set forth in
Regulations Section 1.704-2(b)(2), and the amount of Partnership Minimum
Gain, for a fiscal year shall be determined in accordance with the rules of
Regulations Section 1.704-2(d).
"Partnership Record Date" means the record date established by
the General Partner for the distribution of Available Cash pursuant to
Section 5.2 hereof, which record date shall be the same as the record date
established for a distribution to the holders of REIT Shares of some or all
of the General Partner's portion of such distribution.
"Partnership Unit" means a unit of Partnership Interest issued
to a Limited Partner pursuant to the terms of this Agreement, which unit may
be converted into REIT Shares through the exercise of the Rights set forth in
Sections 8.4 and 11.3.C. The number of Partnership Units of each Limited
Partner shall be as specified in Exhibit A attached hereto, as such Exhibit
may be amended from time to time. The Partnership Units shall be evidenced by
certificates as set forth in Section 4.1.E hereof.
"Person" means an individual or a corporation, partnership,
trust, unincorporated organization, association or other entity.
"Properties" means the community shopping centers previously
owned by the Property Partnerships and contributed to the Partnership
pursuant to the Contribution Agreement.
"Property Partnerships" means the partnerships which owned the
Properties prior to their contribution to the Partnership.
"Qualified Individual" has the meaning set forth in
Section 14.2 hereof.
"Recapture Income" means any gain recognized by the
Partnership (computed without regard to any adjustment required by Section
734 or Section 743 of the Code) upon the disposition of any property or asset
of the Partnership, which gain is characterized as ordinary income because it
represents the recapture of deductions previously taken with respect to such
property or asset.
"Registration Statement" means the Registration Statement on
Form S-11 (including the prospectus contained therein) filed by the General
Partner with the SEC, and any amendments thereto, pursuant to which the
General Partner proposes to offer and sell certain of the REIT Shares.
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"Regulations" means the income tax regulations promulgated
under the Code, as such regulations may be amended from time to time
(including corresponding provisions of succeeding regulations).
"REIT" means a real estate investment trust under Sections 856
through 860 of the Code.
"REIT Expenses" has the meaning set forth in Section
7.4.B hereof.
"REIT Share" means a share of common stock, par value $.01 per
share, of the General Partner.
"REIT Shares Conversion Amount" means a number of REIT Shares
equal to the product of (i) the number of Partnership Units offered for
conversion by a Converting Partner pursuant to Section 8.4, multiplied by
(ii) the Conversion Factor; provided that in the event the General Partner
issues to all holders of REIT Shares any Additional REIT Securities or any
other securities or property (collectively, the "rights"), then the REIT
Shares Conversion Amount shall also include such rights that a holder of that
number of REIT Shares would be entitled to receive.
"REIT Shares Exchange Amount" means a number of REIT Shares
equal to the product of (i) the number of Partnership Units to be exchanged
by a Limited Partner pursuant to Section 11.3.C(1) or (2), as the case may
be, multiplied by (ii) the Conversion Factor; provided that in the event the
General Partner issues to all holders of REIT Shares any Additional REIT
Securities or any other securities or property (collectively the "rights")
then the REIT Shares Exchange Amount shall also include such rights that a
holder of that number of REIT Shares would be entitled to receive.
"Requesting Party" has the meaning set forth in Section
14.2 hereof.
"Required Exchange Date" has the meaning set forth in
Section 11.3.C(2) hereof.
"Required Exchange Right" has the meaning set forth in
Section 11.3.C(2) hereof.
"Responding Party has the meaning set forth Section
14.2 hereof.
"Rights" means the Conversion Rights and the Exchange
Rights.
"SEC" means the United States Securities and Exchange
Commission.
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"Securities Act" means the Securities Act of 1933, as the same
may be amended from time to time, or any successor statute.
"Specified Conversion Date" means the tenth Business Day after
receipt by the General Partner of a Notice of Conversion, unless applicable
law requires a later date.
"Specified Exchange Date" means the tenth Business Day after
receipt by the General Partner of a Notice of Exchange, unless applicable law
requires a later date.
"Substituted Limited Partner" means a Person who is admitted
as a Limited Partner to the Partnership pursuant to Section 11.4.
"Terminating Capital Transaction" means any sale or other
disposition of all or substantially all of the assets of the Partnership or a
related series of transactions that, taken together, result in the sale or
other disposition of all or substantially all of the assets of the
Partnership.
"Trading Day" means a day on which the principal national
securities exchange on which the REIT Shares are listed or admitted to
trading is open for the transaction of business, or, if the REIT Shares are
not listed or admitted to trading, means a Business Day.
"Underwriters" means the various underwriters who purchase
REIT Shares in connection with the Offering.
"Unrealized Gain" attributable to any item of Partnership
property means, as of any date of determination, the excess, if any, of (i)
the fair market value of such property (as determined under Section 4.4
hereof) as of such date, over (ii) the Carrying Value of such property (prior
to any adjustment to be made pursuant to Section 4.4 hereof) as of such date.
"Unrealized Loss" attributable to any item of Partnership
property means, as of any date of determination, the excess, if any, of (i)
the Carrying Value of such property (prior to any adjustment to be made
pursuant to Section 4.4 hereof) as of such date, over (ii) the fair market
value of such property (as determined under Section 4.4 hereof) as of such
date.
"Value" means, with respect to a REIT Share as of any date,
the average of the "closing price" for the ten (10) consecutive Trading Days
immediately preceding such date. The "closing price" for each such Trading
Day means the last sale price, regular way on such day, or, if no such sale
takes place on that day, the average of the closing bid and asked prices,
regular way, in either case as reported on the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange, or if the
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REIT Shares are not so listed or admitted to trading, as reported in the
principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange (including
the National Market System of the National Association of Securities Dealers,
Inc. Automated Quotation System) on which the REIT Shares are listed or
admitted to trading or, if the REIT Shares are not so listed or admitted to
trading, the last quoted price or, if not quoted, the average of the high bid
and low asked prices in the over-the-counter market, as reported by the
National Association of Securities Dealers, Inc. Automated Quotation System
or, if such system is no longer in use, the principal automated quotation
system then in use or, if the REIT Shares are not so quoted by any such
system, the average of the closing bid and asked prices are furnished by a
professional market maker selected by the board of directors of the General
Partner making a market in the REIT Shares, or, if there is not such market
maker or such closing prices otherwise are not available, the fair market
value of the REIT Shares as of such day, as determined by the board of
directors of the General Partner in its sole discretion. In the event the
General Partner issues to all holders of REIT Shares rights, options,
warrants or convertible or exchangeable securities entitling the shareholders
to subscribe for or purchase REIT Shares or any other securities or property
(collectively, the "rights"), then the Value of a REIT Share shall include
the value of such rights, as determined by the board of directors of the
General Partner acting in good faith on the basis of such quotations and
other information as it considers, in its reasonable judgment, appropriate.
ARTICLE II - ORGANIZATIONAL MATTERS
Section 2.1. Continuation of Partnership
The Partners hereby continue the Partnership as a limited
partnership pursuant to the provisions of the Act and upon the terms and
conditions set forth in this Agreement. Except as expressly provided herein
to the contrary, the rights and obligations of the Partners and the
administration and termination of the Partnership shall be governed by the
Act. The Partnership Interest of each Partner shall be personal property for
all purposes.
Section 2.2. Name
The name of the Partnership is Agree Limited Partnership. The
General Partner in its sole and absolute discretion may change the name of
the Partnership at any time and from time to time and shall notify the
Limited Partners of such change in the regular communication to the Limited
Partners next succeeding the effectiveness of the change of name.
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Section 2.3. Principal Office and Registered Agent
The principal office of the Partnership is 31850 Northwestern
Highway, Farmington Hills, Michigan 48334, or such other place as the General
Partner may from time to time designate by notice to the Limited Partners.
The registered agent of the Partnership is The Prentice-Hall Corporation
Systems, Inc., 229 South State Street, Kent County, Dover, Delaware 19901, or
such other Person as the General Partner may from time to time designate. The
Partnership may maintain offices at such other place or places within or
outside the State of Delaware as the General Partner deems advisable.
Section 2.4. Power of Attorney
A. Each Limited Partner irrevocably constitutes and appoints
the General Partner, the Liquidator, and the authorized officers and
attorneys-in-fact of each, and each of those acting singly, in each case with
full power of substitution, as its true and lawful agent and
attorney-in-fact, with full power and authority in its name, place and stead
to:
(1) execute, swear to, acknowledge, deliver, file and
record in the appropriate public offices (a) all
certificates, documents and other instruments
(including, without limitation, the Certificate
and all amendments or restatements of this Agree-
ment or the Certificate) that the General Partner
or the Liquidator deems appropriate or necessary
to qualify or continue the existence or qualifica-
tion of the Partnership as a limited partnership
(or a partnership in which the limited partners
have a limited liability) in the State of Delaware
and in all other jurisdictions in which the Part-
nership may conduct business or own property; (b)
all instruments that the General Partner deems
appropriate or necessary to reflect any amendment,
change, modification or restatement of this Agree-
ment or the Certificate made in accordance with
the terms of this Agreement; (c) all conveyances
and other instruments or documents that the Gener-
al Partner or the Liquidator, as the case may be,
deems appropriate or necessary to reflect the
dissolution and liquidation of the Partnership
pursuant to the terms of this Agreement, includ-
ing, without limitation, a certificate of cancel-
lation; and (d) all instruments relating to the
Capital Contribution of any Partner or the admis-
sion, withdrawal, removal or substitution of any
Partner made pursuant to the terms of this Agree-
ment; and
(2) execute, swear to, acknowledge and file all bal-
lots, consents, approvals, waivers, certificates
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and other instruments appropriate or necessary, in the
sole and absolute discretion of the General Partner, to
make, evidence, give, confirm or ratify any vote,
consent, approval, agreement or other action which is
made or given by the Partners hereunder or is
consistent with the terms of this Agreement or
appropriate or necessary, in the sole and absolute
discretion of the General Partner, to effectuate the
terms or intent of this Agreement.
Nothing contained herein shall be construed as authorizing the
General Partner to amend this Agreement except in accordance with Article
XIII hereof or as may be otherwise expressly provided for in this Agreement.
B. The foregoing power of attorney is hereby declared to be
irrevocable and a special power coupled with an interest, and it shall
survive and not be affected by the subsequent Incapacity of any Limited
Partner or the transfer of all or any portion of such Limited Partner's
Partnership Interest and shall extend to such Limited Partner's heirs,
successors, assigns and personal representatives. Each Limited Partner hereby
agrees to be bound by any representation made by the General Partner, acting
in good faith pursuant to such power of attorney; and each Limited Partner
hereby waives any and all defenses which may be available to contest, negate
or disaffirm the action of the General Partner, taken in good faith under
such power of attorney. Each Limited Partner shall execute and deliver to the
General Partner or the Liquidator, within fifteen (15) days after receipt of
the General Partner's or Liquidator's request therefor, such further
designation, powers of attorney and other instruments as the General Partner
or the Liquidator, as the case may be, deems necessary to effectuate this
Agreement and the purposes of the Partnership.
Section 2.5. Term
The term of the Partnership commenced on April 4, 1994, and shall
continue until December 31, 2094, unless it is dissolved sooner pursuant to
the provisions of Article XII or as otherwise provided by law.
ARTICLE III - PURPOSE
Section 3.1. Purpose and Business
The purpose and nature of the business to be conducted by the
Partnership is (i) to acquire, hold, own, develop, construct, improve,
maintain, operate, sell, lease, transfer, encumber, convey, exchange, and
otherwise dispose of or deal with real and personal property of all kinds;
(ii) to enter into any partnership, joint venture or other similar
arrangement to engage in any of the foregoing; to own interests in any entity
engaged in any of the foregoing; and to exercise all of the powers of an
owner
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in any such entity or interest; (iii) to conduct any business that may be
lawfully conducted by a limited partnership organized pursuant to the Act;
and (iv) to do anything necessary, appropriate, proper, advisable, desirable,
convenient or incidental to the foregoing; provided, however, that such
business shall be limited to and conducted in such a manner as to permit the
General Partner at all times to qualify as a REIT, unless the General Partner
voluntarily terminates its REIT status pursuant to its Articles of
Incorporation.
Section 3.2. Powers
Subject to all of the terms, covenants, conditions and limitations
contained in this Agreement and any other agreement entered into by the
Partnership, the Partnership shall have full power and authority to do any
and all acts and things necessary, appropriate, proper, advisable, desirable,
incidental to or convenient for the furtherance and accomplishment of the
purposes and business described herein and for the protection and benefit of
the Partnership, including, without limitation, full power and authority,
directly or through its ownership interest in other entities, to enter into,
perform and carry out contracts of any kind, borrow money and issue evidences
of indebtedness, whether or not secured by mortgage, deed or trust, pledge or
other lien, and acquire and develop real property; provided, however, that
the Partnership shall not take, or refrain from taking, any action which, in
the judgment of General Partner, in its sole and absolute discretion, (i)
could adversely affect the ability of the General Partner to achieve or
maintain qualification as a REIT, (ii) could subject the General Partner to
any additional taxes under Section 857 or Section 4981 of the Code, or (iii)
could violate any law or regulation of any governmental body or agency having
jurisdiction of the General Partner or its securities, unless such action (or
inaction) shall have been specifically consented to by the General Partner in
writing.
ARTICLE IV - CAPITAL CONTRIBUTIONS AND CAPITAL ACCOUNTS
Section 4.1. Capital Contribution of the Partners
A. Concurrently herewith, the General Partner shall
contribute to the capital of the Partnership in cash the dollar amount set
forth on Exhibit A in exchange for the Partnership Interest set forth on
Exhibit A.
B. Concurrently herewith, each Property Partnership shall
cause the Property owned by such Property Partnership, along with the other
assets owned by such Property Partnership, to be contributed to the
Partnership in accordance with the terms of the Contribution Agreements. Upon
the Partnership's acquisition of any Property, whether by reason of the
merger of any Property Partnership into the Partnership or the conveyance of
such Property by any Property Partnership to the Partnership, Persons
receiving Partnership Units in exchange for their inter-
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ests in the Property Partnership merging into the Partnership or the Property
Partnership conveying its Property to the Partnership shall become Limited
Partners in the Partnership and shall be deemed to have made a Capital
Contribution as determined by application of the provisions of the
Contribution Agreements in the amount set forth on Exhibit A opposite such
Persons' names and shall own the Partnership Units and Partnership Interests
set forth on Exhibit A opposite such Persons' names.
C. In the event that the Underwriters exercise their
overallotment option in connection with the Offering, the General Partner
shall contribute any additional funds received by it from the exercise of the
overallotment option to the Partnership in exchange for an additional
Partnership Interest. Upon such contribution, the Partnership Interests of
the Partners shall be adjusted as set forth in Section 4.2.A (with the Deemed
Value of the Partnership calculated for this purpose using the public
offering price as the Value of a REIT Share). The number of Partnership Units
owned by the Limited Partners shall not be decreased in connection with any
additional contribution of funds to the Partnership by the General Partner
pursuant to this Section 4.1.C.
D. The Partners shall own Partnership Units in the amounts
set forth on Exhibit A and shall have Partnership Interests in the
Partnership as set forth on Exhibit A, which Partnership Units and
Partnership Interests shall be adjusted on Exhibit A from time to time by the
General Partner to the extent necessary to reflect accurately redemptions,
exercises of Rights, Capital Contributions, transfers of Partnership
Interests, admissions of Additional Limited Partners or similar events. The
General Partner is authorized on behalf of each of the Partners to amend this
Agreement to reflect each such adjustment, and the General Partner shall
promptly deliver a copy of each such amendment to each Limited Partner. The
Limited Partners shall have no obligation to make any additional Capital
Contributions or loans to the Partnership.
E. The interest of each Limited Partner in Partnership
Units shall be evidenced by one or more certificates in such form as the
General Partner may from time to time prescribe. Upon surrender to the
General Partner of a certificate evidencing the ownership of Partnership
Units accompanied by proper evidence of authority to transfer, the General
Partner shall cancel the old certificate, issue a new certificate to the
Person entitled thereto and record the transaction upon its books. The
transfer of Partnership Units may be effectuated only in connection with a
transfer of a Limited Partnership Interest pursuant to the terms of Section
8.6 or Article 11 hereof. The General Partner may issue a new certificate or
certificates in place of any certificate or certificates previously issued,
which previously-issued certificate or certificates are alleged to have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by
the owner claiming the certificate or certificates to be lost, stolen
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or destroyed. When issuing such new certificate or certificates, the General
Partner may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or its legal representative, to give the Partnership a bond in
such a sum as the General Partner may reasonably direct as indemnity against
any claim that may be made against the Partnership with respect to the
certificate or certificates alleged to have been lost, stolen or destroyed.
Section 4.2. Issuance of Additional Partnership Interests
A. At any time after the date hereof, without the consent
of any Partner, the General Partner may, upon its determination that the
issuance of additional Partnership Interests is in the best interests of the
Partnership and upon no less than fifteen (15) days prior written notice to
the Limited Partners, cause the Partnership to issue Partnership Interests
to, and admit as a limited partner in the Partnership, any Person (an
"Additional Limited Partner") in exchange for the contribution by such Person
of cash and/or property in such amounts as is determined appropriate by the
General Partner to further the purposes of the Partnership under Section 3.1
hereof. In the event that an Additional Limited Partner is admitted to the
Partnership pursuant to this Section 4.2, the Partnership Interest issued to
such Additional Limited Partner shall be in an amount such that:
(1) the Partnership Interest of such Additional Limit-
ed Partner is equal to a fraction, the numerator
of which is equal to the total dollar amount of
the cash contributed and/or the Net Asset Value of
the property contributed by the Additional Limited
Partner as of the date of contribution to the
Partnership (the "Contribution Date") and the
denominator of which is equal to the sum of (i)
the Deemed Value of the Partnership (computed as
of the Business Day immediately preceding the
Contribution Date) and (ii) the total dollar
amount of the cash contributed and/or the Net
Asset Value of the property contributed by the
Additional Partner as of the Contribution Date;
and
(2) the Partnership Interests of each Partner other
than the Additional Limited Partner shall be re-
duced, as of the Contribution Date, such that the
Partnership Interest of each such Partner shall be
equal to a fraction, the numerator of which is
equal to the Deemed Partnership Interest Value of
such Partner (computed as of the Business Day
immediately preceding the Contribution Date) and
the denominator of which is equal to the sum of
(i) the Deemed Value of the Partnership (computed
as of the Business Day immediately preceding the
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Contribution Date) and (ii) the total dollar amount of
the cash contributed and/or Net Asset Value of the
property contributed by the Additional Limited Partner
as of the Contribution Date.
The General Partner shall be authorized on behalf of each of
the Partners to amend this Agreement to reflect the admission of any
Additional Limited Partner and any reduction of the Partnership Interests of
the other Partners in accordance with the provisions of this Section 4.2, and
the General Partner shall promptly deliver a copy of such amendment to each
Limited Partner.
The number of Partnership Units owned by the Limited Partners
shall not be decreased in connection with any admission of an Additional
Limited Partner pursuant to this Section 4.2. An Additional Limited Partner
that acquires a Partnership Interest pursuant to this Section 4.2 shall not
acquire any Partnership Units, and shall not acquire any interest in, and may
not exercise or otherwise participate in, any Rights pursuant to Sections 8.4
or 11.3.C. Notwithstanding anything to the contrary contained in the
immediately preceding sentence, the General Partner may (but is not required
to) grant to an Additional Limited Partner the right to dispose of its
Partnership Interest, and may create in the General Partner the right to
acquire such Partnership Interest, including, in either case, by exchange for
REIT Shares, upon such terms and conditions as are deemed appropriate by the
General Partner.
B. The Partnership shall from time to time issue to the
General Partner additional Partnership Interests or securities, rights,
options or warrants of the Partnership in such classes and having such
designations, preferences and other rights (including preferences and rights
senior to the existing Partnership Interests) as shall be determined by the
General Partner in accordance with the Act and this Agreement. Any such
issuance of Partnership Interests, securities, rights, options or warrants to
the General Partner shall be conditioned upon (i) the undertaking by the
General Partner of a related issuance of REIT Shares or other securities
having designations, rights and preferences such that the economic rights of
the holders of such REIT Shares or other securities are substantially similar
to the rights of the additional Partnership Interests, securities, rights,
options or warrants issued to the General Partner, and the General Partner
making a Capital Contribution in an amount equal to the net proceeds raised
in the issuance of such REIT Shares or other securities, (ii) the issuance by
the General Partner of REIT Shares pursuant to Section 8.4 or 11.3.C, or
(iii) the issuance by the General Partner of REIT Shares under any stock
option or bonus plan, and the General Partner making a Capital Contribution
in an amount equal to the exercise price of the option exercised by any
employee pursuant to such stock option or other bonus plan.
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C. The General Partner shall not issue (i) any additional
REIT Shares, or (ii) any preferred stock or rights, options or warrants
containing the right to subscribe for or purchase REIT Shares or securities
convertible or exchangeable into REIT Shares (collectively, "Additional REIT
Securities"), other than to all holders of REIT Shares, pro rata, unless (x)
the Partnership issues to the General Partner (i) Partnership Interests, or
(ii) securities, rights, options or warrants of the Partnership having
designations, preferences and other rights, including, if applicable, the
right to subscribe for or purchase Partnership Interests or securities
convertible or exchangeable into Partnership Interests, such that the General
Partner receives an economic interest in the Partnership substantially
similar to the economic interest in the General Partner represented by the
Additional REIT Securities, and (y) except with respect to an issuance of
REIT Shares pursuant to Section 8.4 or 11.3.C, the General Partner
contributes the net proceeds from the issuance of such additional REIT Shares
or Additional REIT Securities, as the case may be, and from the exercise of
any rights contained in any Additional REIT Securities to the Partnership.
D. If the General Partner establishes a stock option plan
and stock options granted in connection with such plan are exercised, or if
the General Partner issues Additional REIT Securities and any such Additional
REIT Securities are exercised, converted or exchanged for REIT Shares:
(1) the General Partner shall, as soon as practicable after
such exercise, conversion or exchange, contribute to
the capital of the Partnership an amount equal to the
price paid to the General Partner by the exercising
party; and
(2) the General Partner shall, as of the date on which
the acquisition of the REIT Shares is consummated
by such exercising party, be deemed to have con-
tributed to the Partnership an amount equal to the
Value (computed as of the Business Day immediately
preceding the date on which such acquisition of
REIT Shares is consummated by such exercising
party) of the REIT Shares delivered by the General
Partner to such exercising party.
E. Except as provided in Section 8.6 or 11.3.C., effective
upon the General Partner making, or being deemed to have made, a Capital
Contribution to the Partnership pursuant to clause B, C or D of this Section
4.2 other than with respect to the issuance by the General Partner of any
Additional REIT Securities, and effective upon the General Partner making, or
being deemed to have made, a Capital Contribution to the Partnership upon the
exercise, conversion or exchange of any Additional REIT Securities, the
General Partner shall receive an additional Partnership Interest such that:
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(1) the Partnership Interest of each Limited Partner
shall be equal to a fraction, the numerator of
which is equal to the Deemed Partnership Interest
Value of such Limited Partner (computed as of the
Business Day immediately preceding the date of
such contribution) and the denominator of which is
equal to the sum of (i) the Deemed Value of the
Partnership (computed as of the Business Day imme-
diately preceding the date of such contribution)
and (ii) the amount contributed, or deemed con-
tributed, by the General Partner on such date; and
(2) the Partnership Interest of the General Partner
shall be equal to a fraction, the numerator of
which is equal to the sum of (i) the Deemed Part-
nership Interest Value of the General Partner
(computed as of the Business Day immediately pre-
ceding the date of such contribution) and (ii) the
amount contributed, or deemed contributed, by the
General Partner on such date and the denominator
of which is equal to the sum of (x) the Deemed
Value of the Partnership (computed as of the Busi-
ness Day immediately preceding the date of such
contribution) and (y) the amount contributed, or
deemed contributed, by the General Partner.
The number of Partnership Units owned by the Limited Partners shall
not be decreased in connection with any additional contribution to the
Partnership by the General Partner pursuant to this Section 4.2.
Section 4.3. No Preemptive Rights
No Person shall have any preemptive, preferential or other similar
right with respect to the making of additional Capital Contributions or loans
to the Partnership.
Section 4.4. Capital Accounts.
A. The Partnership shall maintain for each Partner a
separate Capital Account in accordance with the rules of Regulations Section
1.704-1(b)(2)(iv). Such Capital Account shall be increased by (i) the amount
of all Capital Contributions made, or deemed to have been made, by such
Partner to the Partnership pursuant to this Agreement and (ii) all items of
Partnership income and gain (including income and gain exempt from tax)
computed in accordance with clause B hereof and allocated to such Partner
pursuant to Sections 6.1.A and 6.4 of this Agreement, and decreased by (x)
the amount of cash and the Net Asset Value of other property distributed to
such Partner pursuant to this Agreement (including, in the case of the
General Partner, payments of REIT Expenses by the Partnership) and (y) all
items of Partnership deduction and loss computed in accordance with clause
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B hereof and allocated to such Partner pursuant to Sections 6.1.B and 6.4 of
this Agreement.
B. For purposes of computing the amount of any item of
income, gain, deduction or loss to be reflected in the Partners' Capital
Accounts, unless otherwise specified in this Agreement, the determination,
recognition and classification of any such item shall be the same as its
determination, recognition and classification for federal income tax purposes
determined in accordance with Section 703(a) of the Code (for this purpose
all items of income, gain, loss or deduction required to be stated separately
pursuant to Section 703(a)(1) of the Code shall be included in taxable income
or loss), with the following adjustments:
(1) Except as otherwise provided in Regulations Section
1.704-1(b)(2)(iv)(m), the computation of all items of
income, gain, loss and deduction shall be made without
regard to any election under Section 754 of the Code
which may be made by the Partnership.
(2) The computation of all items of income, gain, loss and
deduction shall be made without regard to the fact that
items described in Sections 705(a)(1)(B) or
705(a)(2)(B) of the Code are not includable in gross
income or are neither currently deductible nor
capitalized for federal income tax purposes.
(3) Any income, gain or loss attributable to the taxable
disposition of any Partnership property shall be
determined as if the adjusted basis of such property as
of such date of disposition were equal in amount to the
Partnership's Carrying Value with respect to such
property as of such date.
(4) In lieu of the depreciation, amortization, and other
cost recovery deductions taken into account in
computing such taxable income or loss, there shall be
taken into account Depreciation for such fiscal year.
(5) In the event the Carrying Value of any Partnership
Assets are adjusted pursuant to clause D hereof,
Capital Accounts shall be adjusted to reflect the
aggregate net adjustments as if the Partnership
sold all of its properties for their fair market
values and recognized gain or loss for Federal
income tax purposes equal to the amounts of such
aggregate net adjustment.
(6) Any items specially allocated under Section 6.5 hereof
shall not be taken into account.
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C. Generally, a transferee of a Partnership Interest shall
succeed to a pro rata portion of the Capital Account of the transferor;
provided, however, that, if the transfer causes a termination of the
Partnership under Section 708(b)(1)(B) of the Code, the Partnership's
properties shall be deemed to have been distributed in liquidation of the
Partnership to the Partners (including the transferee of a Partnership
Interest) and recontributed by such Partners in reconstitution of the
Partnership. In such event, the Carrying Values of the Partnership properties
shall be adjusted immediately prior to such deemed distribution pursuant to
clause D(2) hereof. The Capital Accounts of such reconstituted Partnership
shall be maintained in accordance with the principles of this Section 4.4.
D. (1) Consistent with the provisions of Regulations
Section 1.704-(b)(2)(iv)(f), and as provided in
clause D(2), the Carrying Values of all Partner-
ship assets shall be adjusted upward or downward
to reflect any Unrealized Gain or Unrealized Loss
attributable to such Partnership property, as of
the times of the adjustments provided in clause
D(2) hereof, as if such Unrealized Gain or Unreal-
ized Loss had been recognized on an actual sale of
each such property and allocated pursuant to Sec-
tion 6.1 of this Agreement.
(2) Such adjustments shall be made as of the following
times: (a) immediately prior to the acquisition
of an additional interest in the Partnership by
any new or existing Partner in exchange for more
than a de minimis Capital Contribution; (b) imme-
diately prior to the distribution by the Partner-
ship to a Partner of more than a de minimis amount
of property as consideration for an interest in
the Partnership; and (c) immediately prior to the
liquidation of the Partnership within the meaning
of Regulations Section 1.704-1(b)(2)(ii)(g).
(3) In accordance with Regulations Section 1.704-
1(b)(2)(iv)(e) the Carrying Value of Partnership
assets distributed in kind shall be adjusted up-
ward and downward to reflect any Unrealized Gain
or Unrealized Loss attributable to such Partner-
ship property, as of the time any such asset is
distributed.
(4) In determining such Unrealized Gain or Unrealized
Loss the aggregate cash amount and fair market
value of all Partnership assets (including cash or
cash equivalents) shall be determined by the Gen-
eral Partner using such reasonable method of valu-
ation as it may adopt, or in the case of a liqui-
dating distribution pursuant to Article XIII of
this Agreement, be determined and allocated by the
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Liquidator using such reasonable methods of valuation
as it may adopt. The General Partner, or the
Liquidator, as the case may be, shall allocate such
aggregate value among the assets of the Partnership (in
such manner as it determines in its sole and absolute
discretion to arrive at a fair market value for
individual properties).
E. The provisions of this Agreement relating to the
maintenance of Capital Accounts are intended to comply with Regulations
Section 1.704-1(b) and shall be interpreted and applied in a manner
consistent with such Regulations. In the event the General Partner shall
determine that it is prudent to modify the manner in which the Capital
Accounts, or any debits or credits thereto (including, without limitation,
debits or credits relating to liabilities which are assumed by the
Partnership, the General Partner, or the Limited Partners) are computed in
order to comply with such Regulations, the General Partner may make such
modification, provided that it is not likely to have a material effect on the
amounts distributable to any Person pursuant to Article XIII of this
Agreement upon the dissolution of the Partnership. The General Partner also
shall (i) make any adjustments that are necessary or appropriate to maintain
equality between the Capital Accounts of the Partners and the amount of
Partnership Capital reflected on the Partnership's balance sheet, as computed
for book purposes, in accordance with Regulations Section 1.704-1(b)(iv)(q),
and (ii) make any appropriate modifications in the event unanticipated events
might otherwise cause this Agreement not to comply with Regulations Section
1.704-1(b).
Section 4.5. Return of Capital Account; Interest.
Except as otherwise specifically provided in this Agreement, (i) no
Partner shall have any right to withdraw or reduce its Capital Contributions
or Capital Account or to demand and receive property other than cash from the
Partnership in return for its Capital Contributions or Capital Account; (ii)
no Partner shall have any priority over any other Partner as to the return of
its Capital Contributions or Capital Account; (iii) any return of Capital
Contributions or Capital Accounts to the Partners shall be solely from the
assets of the Partnership, and no Partner shall be personally liable for any
such return; and (iv) no interest shall be paid by the Partnership on Capital
Contributions or on balances in Partners' Capital Accounts.
ARTICLE V - DISTRIBUTIONS
Section 5.1. Initial Partnership Distributions
As soon as practicable after the execution of this Agreement, the
Partnership shall return to the General Partner and Richard Agree the initial
capital contributions of Ten Dollars ($10) and Nine Hundred Ninety Dollars
($990), respectively, previously made by such Partners to the Partnership.
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Section 5.2. Requirement and Characterization of Distributions
The General Partner shall cause the Partnership to distribute
quarterly all, or such portion deemed appropriate by the General Partner, of
Available Cash generated by the Partnership during such quarter to the
Partners who are Partners on the Partnership Record Date with respect to such
quarter in accordance with their respective Partnership Interests on such
Partnership Record Date. The General Partner shall take such reasonable
efforts, as determined by it in its sole and absolute discretion and
consistent with its qualification as a REIT, to distribute Available Cash to
the Limited Partners so as to preclude any such distribution or portion
thereof from being treated as part of a sale of property to the Partnership
by a Limited Partner under Section 707 of the Code or the Regulations
thereunder. Notwithstanding the foregoing, the General Partner shall use its
best efforts to cause the Partnership to distribute sufficient amounts to
enable the General Partner to pay shareholder dividends that will (i) allow
the General Partner to achieve and maintain qualification as a REIT, and (ii)
avoid the imposition of any additional taxes under Section 857 or Section
4981 of the Code.
Section 5.3. Amounts Withheld
All amounts withheld pursuant to the Code or any provisions of any
state or local tax law and Section 10.5 hereof with respect to any
allocation, payment or distribution to a Partner shall be treated as amounts
distributed to such Partner pursuant to Section 5.2 for all purposes of this
Agreement.
Section 5.4. Distributions Upon Liquidation
Proceeds from a Terminating Capital Transaction shall be distributed
to the Partners in accordance with Section 12.2.
ARTICLE VI - ALLOCATIONS
Section 6.1 Allocations For Capital Account Purposes
For purposes of maintaining the Capital Accounts and in determining
the rights of the Partners among themselves, the Partnership's items of
income, gain, loss and deduction (computed in accordance with Section 4.4
hereof) shall be allocated among the Partners in each taxable year (or
portion thereof) as provided herein below.
A. Net Income. After giving effect to the special
allocations set forth in Section 6.4 hereof, Net Income shall be
allocated (i) first, to the General Partner to the extent that
Net Losses previously allocated to the General Partner pursuant
to the last sentence of Section 6.1.B exceed Net Income previous-
ly allocated to the General Partner pursuant to this clause (i)
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of Section 6.1.A, and (ii) thereafter, Net Income shall be allocated to the
Partners in accordance with their respective Partnership Interests.
B. Net Losses. After giving effect to the special
allocations set forth in Section 6.4 hereof, Net Losses shall be allocated to
the Partners in accordance with their respective Partnership Interests,
provided that Net Losses shall not be allocated to any Limited Partner
pursuant to this Section 6.1.B to the extent that such allocation would cause
such Limited Partner to have an Adjusted Capital Account Deficit at the end
of such taxable year (or increase any existing Adjusted Capital Account
Deficit). All Net Losses in excess of the limitations set forth in this
Section 6.1.B shall be allocated to the General Partner.
Section 6.2 Allocation of Nonrecourse Debt
For purposes of Regulations Section 1.752-3(a), the Partners agree
that Nonrecourse Liabilities of the Partnership in excess of the sum of (i)
the amount of Partnership Minimum Gain and (ii) the total amount of
Nonrecourse Built-in Gain shall be allocated among the Partners in accordance
with their respective Partnership Interests.
Section 6.3 Reserved.
Section 6.4 Special Allocation Rules.
Notwithstanding any other provision of this Agreement, the following
special allocations shall be made:
A. Minimum Gain Chargeback. Notwithstanding any other
provision of this Agreement (including Section 6.1 above), if there is a net
decrease in Partnership Minimum Gain during any fiscal year (except to the
extent attributable to certain conversions and refinancings of Partnership
indebtedness, certain capital contributions or certain revaluations of the
Partnership property as further described in Regulations Sections 1.704-
2(d)(4), 1.704-2(f)(2) or 1.704-2(f)(3)), each Partner shall be specifically
allocated items of Partnership income and gain for such year (and, if
necessary, subsequent years) in an amount equal to such Partner's share of
the net decrease in Partnership Minimum Gain, as determined under Regulations
Section 1.704-2(g). Allocations pursuant to the previous sentence shall be
made in proportion to the respective amounts required to be allocated to each
Partner pursuant thereto. The items to be so allocated shall be determined in
accordance with Regulations Section 1.704-2(f)(6) and 1.704-2(j)(2). This
Section 6.4.A is intended to comply with the minimum gain chargeback
requirements in Regulations Section 1.704-2(f).
B. Partner Minimum Gain Chargeback. Notwithstanding
any other provision of this Agreement (including Section 6.1
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above but excluding Section 6.4.A, which shall be applied before this Section
6.4.B), if there is a net decrease in Partner Minimum Gain attributable to a
Partner Nonrecourse Debt during any fiscal year (except to the extent
attributable to certain conversions and refinancings of Partnership
indebtedness, certain capital contributions or certain revaluations of the
Partnership property as further described in Regulations Sections 1.704-
2(i)(3) and 1.704-2(i)(4)), each Partner who has a share of the Partner
Minimum Gain attributable to such Partner Nonrecourse Debt, determined in
accordance with Regulations Section 1.704-2(i)(5), shall be specifically
allocated items of Partnership income and gain for such year (and, if
necessary, subsequent years) in an amount equal to such Partner's share of
the net decrease in Partner Minimum Gain attributable to such Partner
Nonrecourse Debt, determined in accordance with Regulations Section
1.704-2(i)(5). Allocations pursuant to the previous sentence shall be made in
proportion to the respective amounts required to be allocated to each Partner
pursuant thereto. The items to be so allocated shall be determined in
accordance with Regulations Sections 1.704-2(i)(4) and 1.704-2(j)(2). This
Section 6.4.B is intended to comply with the minimum gain chargeback
requirement in such Section of the Regulations and shall be interpreted
consistently therewith.
C. Qualified Income Offset. In the event any Partner
unexpectedly receives any adjustments, allocations or distributions
described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6), and after giving effect
to the allocations required under Sections 6.4.A and 6.4.B hereof, such
Partner has an Adjusted Capital Account Deficit, items of Partnership income
and gain shall be specifi- cally allocated to such Partner in an amount and
manner suffi- cient to eliminate, to the extent required by the Regulations,
its Adjusted Capital Account Deficit created by such adjustments, allocations
or distributions as quickly as
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possible. This Section 6.4.C is intended to constitute a "qualified income
offset" under Regulation Section 1.704-1(b)(2)(ii)(d) and shall be
interpreted consistently therewith.
D. Nonrecourse Deductions. Nonrecourse Deductions for any
taxable period shall be allocated to the Partners in accordance with their
respective Partnership Interests. If the General Partner determines, in its
good faith discretion, that the Partnership's Nonrecourse Deductions must be
allocated in a different ratio to satisfy the safe harbor requirements of the
Regulations promulgated under Section 704(b) of the Code, the General Partner
is authorized, upon notice to the Limited Partners, to revise the prescribed
ratio to the numerically closest ratio which does satisfy such requirements.
E. Partner Nonrecourse Deductions. Any Partner
Nonrecourse Deductions for any fiscal year shall be specifically allocated to
the Partner(s) who bear(s) the economic risk of loss with respect to the
Partner Nonrecourse Debt to which such Partner Nonrecourse Deductions are
attributable in accordance with Regulations Section 1.704-2(b)(4) and
1.704-2(i).
F. Code Section 754 Adjustments. To the extent an
adjustment to the adjusted tax basis of any Partnership asset pursuant to
Section 734(b) or 743(b) of the Code is required, pursuant to Regulations
Section 1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital
Accounts, the amount of such adjustment to the Capital Accounts shall be
treated as an item of gain (if the adjustment increases the basis of asset)
or loss (if the adjustment decreases such basis), and such item of gain or
loss shall be specially allocated to the Partners in a manner consistent with
the manner in which their Capital Accounts are required to be adjusted
pursuant to such Section of the Regulations.
G. Sections 1245/1250 Recapture. If any portion of gain
from the sale of property is treated as Recapture Income, then (A) such
Recapture Income shall be allocated among the Partners in the same proportion
that the depreciation and amortization deductions giving rise to the
Recapture Income were allocated, and (B) other tax items of gain of the same
character that would have been recognized, but for the application of Code
Sections 1245 and/or 1250, shall be allocated away from those Partners who
are allocated Recapture Income pursuant to clause (A) so that, to the extent
possible, the other Partners are allocated the same amount, and type, of gain
that would have been allocated to them had Code Sections 1245 and/or 1250 not
applied. For purposes hereof, in order to determine the proportionate
allocations of depreciation and amortization deductions for each fiscal year
or other applicable period, such deductions shall be deemed allocated on the
same basis as Net Income and Net Loss for such respective period.
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H. Distributions of Proceeds of Nonrecourse Liabilities.
To the extent permitted by Regulations Sections 1.704-2(h)(3) and
1.704-2(i)(6), the General Partner shall treat a distribution made from the
proceeds of a nonrecourse liability as not allocable to an increase in
Partnership (or Partner) Minimum Gain to the extent the distribution does not
cause or increase a deficit balance in any Partner's Capital Account that
exceeds the amount such Partner is obligated to restore (within the meaning
of Regulations Section 1.704-1(b)(2)(ii)(c)) as of the end of the
Partnership's taxable year in which the distribution occurs.
I. REIT Expenses. The General Partner shall be
allocated an amount of gross income equal to the REIT Expenses.
Section 6.5 Allocations for Tax Purposes
A. Except as otherwise provided in this Section 6.5, for
federal income tax purposes, each item of income, gain, loss and deduction
shall be allocated among the Partners in the same manner as its correlative
item of "book" income, gain, loss or deduction is allocated pursuant to
Sections 6.1 and 6.4 of this Agreement.
B. Notwithstanding any other provision in this Agreement,
items of income, gain, loss, and deduction attributable to a Contributed
Property or an Adjusted Property, shall, in accordance with Sections 704(b)
and 704(c), be allocated solely for federal income tax purposes (and not for
"book" purposes) among the Partners as follows:
(1) In the case of a Contributed Property, such items
attributable thereto shall be allocated among the
Partners in a manner prescribed by Section 704(c)
of the Code and the Regulations thereunder so as
to take into account the variation between the
Gross Asset Value of such property and its adjust-
ed basis at the time of contribution;
(2) In the case of an Adjusted Property, such items
shall be allocated among the Partners in a manner
prescribed by Sections 704(b) and 704(c) of the
Code and the Regulations thereunder so as to take
into account any variation between the adjusted
basis of such asset for federal income tax purpos-
es and the Carrying Value of such asset as of the
time of the last adjustment under Section
4.4.B.(5) hereof;
(3) In furtherance of the foregoing, the Partnership shall
employ the method prescribed in Regulation Section
1.704-3(b) (the "traditional method") or the equivalent
successor provision(s) of proposed, temporary or final
Regulations; and
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(4) Any deductions attributable to prepayment penal-
ties or other fees and expenses taken into account
in determining the Net Asset Value of any Contrib-
uted Property shall be allocated to the Partners
who (directly or indirectly) contributed the Con-
tributed Property in accordance with the manner in
which they bear the economic cost of the amounts
giving rise to such deductions.
C. Except as provided in Regulations Section
1.704-1(b)(2)(iv)(m), the adjustment to the adjusted tax basis of any
Partnership asset pursuant to Section 734(b) or 743(b) of the Code shall
affect the amount of income, gain, deduction or loss of the Partnership only
for federal (and, if applicable, state or local) income tax purposes, and,
with respect to an adjustment under section 743(b), shall be allocated
entirely to the transferee of the Partnership units so transferred.
D. If any Partner sells or otherwise disposes of any
property, directly or indirectly, to the Partnership, and, as a result
thereof, gain on a subsequent disposition of such property by the Partnership
is reduced pursuant to Section 267(d) of the Code, then, to the extent
permitted by applicable law, gain for federal income tax purposes
attributable to such subsequent disposition shall first be allocated among
the Partners other than the original selling Partner in an amount equal to
such Partner's allocations of "book" gain on the property pursuant to
Sections 6.1 and 6.4 hereof and only the remaining gain, if any, for federal
income tax purposes shall be allocated to the selling Partner.
ARTICLE VII - MANAGEMENT AND OPERATIONS OF BUSINESS
Section 7.1 Management
A. Except as otherwise expressly provided in this
Agreement, all management powers over the business and affairs of the
Partnership are exclusively vested in the General Partner, and no Limited
Partner shall have any right to participate in or exercise control or
management power over the business and affairs of the Partnership. The
General Partner may not be removed by the Limited Partners with or without
cause. In addition to the powers now or hereafter granted a general partner
of a limited partnership under applicable law or which are granted to the
General Partner under any other provision of this Agreement, the General
Partner, subject to Section 7.3 hereof, shall have full power and authority
to do all things and perform all acts specified in this Agreement or
otherwise deemed necessary or desirable by it to conduct the business of the
Partnership, to exercise all Partnership powers set forth in Section 3.2
hereof and to effectuate the Partnership purposes set forth in Section 3.1
hereof.
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B. No Limited Partner (other than any officer, director,
employee, partner, agent or trustee of the General Partner, the Partnership
or any of their Affiliates, in his, her or its capacity as such) shall take
part in the operation, management or control (within the meaning of the Act)
of the Partnership's business, transact any business in the Partnership's
name or have the power to sign documents for or otherwise bind the
Partnership. The transaction of any such business by the General Partner, any
of its Affiliates or any officer, director, employee, partner, agent or
trustee of the General Partner, the Partnership or any of their Affiliates,
in their capacity as such, shall not affect, impair or eliminate the
limitations on the liability of the Limited Partners under this Agreement.
C. The Limited Partners acknowledge that the taking
of certain actions hereunder by the General Partner will require the approval
of a majority of the Independent Directors of the General Partner.
Section 7.2 Certificate of Limited Partnership
To the extent that such action is determined by the General Partner
to be necessary or appropriate, the General Partner shall file amendments to
and restatements of the Certificate and do all things necessary or
appropriate to maintain the Partnership as a limited partnership under the
laws of the State of Delaware and each other jurisdiction in which the
Partnership may elect to do business or own property. Subject to the terms of
Section 8.3.A(3) hereof, the General Partner shall not be required, before or
after filing, to deliver or mail a copy of the Certificate or any amendment
thereto to any Limited Partner. The General Partner shall use all reasonable
efforts to cause to be filed such other certificates or documents as may be
reasonable and necessary or appropriate for the continuation, qualification
and operation of a limited partnership in the State of Delaware and any other
jurisdiction in which the Partnership may elect to do business or own
property.
Section 7.3 Restrictions on General Partner's Authority
A. The General Partner may not, without the written
Consent of the Limited Partners, take any of the following actions:
(1) amend, modify or terminate this Agreement other than in
accordance with Article 4, 12, 13 or 14 hereof;
(2) admit a Person as a Partner, except as otherwise
provided in this Agreement;
(3) make a general assignment for the benefit of cred-
itors or appoint or acquiesce in the appointment
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of a custodian, receiver or trustee for all or any
part of the assets of the Partnership;
(4) institute any proceeding for Bankruptcy on behalf
of the Partnership;
(5) sell, exchange, transfer or otherwise dispose of all or
substantially all of the Partnership's assets in a
single transaction or a series of related transactions
(including by way of merger, consolidation or other
combination with any other Person); or
(6) dissolve the Partnership.
Notwithstanding the foregoing, the Consent of the Limited Partners
shall not be required for any action listed above in this Section 7.3.A if,
at the time that the General Partner desires to take such action, the Limited
Partners own, in the aggregate, less than a ten percent (10%) Partnership
Interest.
B. The General Partner shall not have the authority to:
(1) take any action in contravention of this Agreement or
which would make it impossible to carry on the ordinary
business of the Partnership;
(2) possess Partnership property, or assign any rights
in specific Partnership property, for other than a
Partnership purpose;
(3) do any act in contravention of applicable law; or
(4) perform any act that would subject a Limited Partner to
liability as a general partner in any jurisdiction or
any other liability except as provided herein or under
the Act.
Section 7.4. Reimbursement of the General Partner
A. Except as provided in this Section 7.4 and elsewhere in
this Agreement (including the provisions of Articles V and VI regarding
distributions, payments and allocations to which it may be entitled), the
General Partner shall not be compensated for its services as general partner
of the Partnership.
B. The General Partner shall be reimbursed for all of the
General Partner's operating expenses, including, without limitation, costs
and expenses relating to the formation and continuity of existence of the
Partnership and the General Partner, the Offering and the issuance of any
additional Partnership Interests or REIT Shares, costs and expenses
associated with compliance with the periodic reporting requirements and all
other
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rules and regulations of the SEC or any other federal, state or local
regulatory body, salaries payable to officers and employees of the General
Partner, fees and expenses payable to directors of the General Partner, and
all other operating or administrative costs of the General Partner. To the
extent any reimbursements to the General Partner do not constitute payment of
expenses of the Partnership, such amounts shall constitute "REIT Expenses".
Section 7.5. Outside Activities of the General Partner
A. The General Partner shall not directly or indirectly own
any assets or enter into or conduct any business, other than in connection
with the ownership, acquisition and disposition of Partnership Interests as a
General Partner and the management of the business of the Partnership, and
such activities as are incidental thereto; provided, however, that the
General Partner may own such bank accounts or similar instruments as it deems
necessary to carry out its responsibilities contemplated under this Agreement
and its responsibilities to the holders of REIT Shares.
B. In the event the General Partner purchases or otherwise
acquires REIT Shares, then the General Partner shall cause the Partnership to
purchase from it a portion of its Partnership Interest on the same terms that
the General Partner purchased or acquired such REIT Shares.
Section 7.6. Transactions with Affiliates
A. The Partnership may contribute assets and loan funds to
joint ventures, other partnerships, corporations or other business entities
in which it is or thereby becomes a participant upon such terms and subject
to such conditions as the General Partner, in its sole and absolute
discretion, believes are desirable, consistent with this Agreement and
applicable law.
B. After the Offering is completed, except as expressly
permitted by this Agreement, no Partner or Affiliate of a Partner shall sell,
transfer or convey any property to, purchase any property from, lend funds to
or borrow funds from, provide services to, or enter into any other
transaction with, the Partnership, directly or indirectly, except pursuant to
transactions that are on terms that are no less favorable to the Partnership
than could be obtained from an unaffiliated third party. Any such transaction
with an Original Limited Partner or with an Affiliate of any such Original
Limited Partner is subject to review and approval by a majority of the
Independent Directors of the General Partner.
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Section 7.7. Indemnification
A. The Partnership shall indemnify each Indemnitee who is
made a party to, or otherwise is involved or is threatened to be involved in,
a proceeding that relates to the operations of the Partnership pursuant to
the terms of this Agreement or to the operations of a Property Partnership
prior to the consummation of the transactions contemplated by the
Contribution Agreements, and shall hold each such Indemnitee harmless against
all judgments, penalties, fines, settlements and expenses (including, without
limitation, attorneys' fees, ERISA excise taxes or penalties) reasonably
incurred by such Indemnitee in connection therewith, to the fullest extent
permitted under the Act, unless it is established that (i) the act or
omission of the Indemnitee was material to the matter giving rise to the
proceeding and either was committed (or omitted) in bad faith or was the
result of active or deliberate dishonesty; (ii) the Indemnitee actually
received an improper personal benefit in money, property or services; or
(iii) in the case of any criminal proceeding, the Indemnitee had reasonable
cause to believe that the act or omission was unlawful. The termination of
any proceeding by judgment, order or settlement does not create a presumption
that the Indemnitee did not meet the requisite standard of conduct for
indemnification set forth in this Section 7.7.A. The termination of any
proceeding by conviction or upon a plea of nolo contendere or its equivalent,
or the entry of an order of probation prior to judgment, creates a rebuttable
presumption that the Indemnitee failed to meet the standard of conduct for
indemnification set forth in this Section 7.7.A.
B. The right to indemnification conferred in this Section
7.7 shall be a contract right and shall include the right of each Indemnitee
to be paid by the Partnership the expenses incurred in defending any such
proceeding in advance of its final disposition; provided, however, that the
payment of such expenses in advance of the final disposition of a proceeding
shall be made only upon delivery to the Partnership of (i) a written
affirmation of the Indemnitee of his or her good faith belief that the
standard of conduct necessary for indemnification by the Partnership pursuant
to this Section 7.7 has been met, and (ii) a written undertaking by the
Indemnitee to repay all amounts so advanced if it shall ultimately be
determined that the standard of conduct has not been met.
C. The indemnification provided pursuant to this Section
7.7 shall continue as to a Person who has ceased to have the status of an
Indemnitee pursuant to clause (i) or clause (iii) of the definition of
"Indemnitee" set forth in Article I hereof and shall inure to the benefit of
the heirs, successors, assigns, executors and administrators of any such
Person, and to a Person whose status as an Indemnitee was originally
established pursuant to clause (ii) of such definition and was later
terminated for any reason; provided, however, that except as provided in
Section 7.7.D with respect to proceedings seeking to enforce
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rights to indemnification, the Partnership shall indemnify any such Person
seeking indemnification in connection with a proceeding initiated by such
Person only if such proceeding was authorized by the General Partner.
D. If a claim under Sections 7.7.A, 7.7.B or 7.7.C is not
paid in full by the Partnership within thirty (30) calendar days after a
written claim has been received by the Partnership, the Indemnitee making
such claim may at any time thereafter (but prior to payment of the claim)
bring suit against the Partnership to recover the unpaid amount of the claim
and, if successful, in whole or in part, such Indemnitee shall be entitled to
be paid also the expense of prosecuting such claim.
E. Following any "change in control" of the General Partner
of the type required to be reported under Item 1 of Form 8-K promulgated
under the Exchange Act, any determination as to entitlement to
indemnification shall be made by independent legal counsel selected by the
Indemnitee, which independent legal counsel shall be retained by the General
Partner on behalf of the Partnership and at the expense of the Partnership.
F. The right to indemnification and the payment of expenses
incurred in defending a proceeding in advance of its final disposition
conferred in this Section 7.7 shall not be exclusive of any other right which
any Person may have or hereafter acquire under any statute or agreement, or
pursuant to any vote of the Partners, or otherwise.
G. The Partnership may purchase and maintain insurance, at
its expense, on its own behalf and on behalf of any Indemnitee and of such
other Persons as the General Partner shall determine, against any liability
(including expenses) that may be asserted against and incurred by such Person
in connection with the Partnership's activities pursuant to this Agreement,
whether or not the Partnership would have the power to indemnify such Person
against such liability under the terms of this Agreement.
H. Any indemnification pursuant to this Section 7.7 shall
be made only out of assets of the Partnership. In no event may an Indemnitee
subject any Limited Partner to personal liability by reason of the
indemnification provisions set forth in this Agreement.
I. The provisions of this Section 7.7 are for the
benefit of the Indemnities, their heirs, successors, assigns,
executors and administrators, and shall not be deemed to create
any rights for the benefit of any other Person.
Section 7.8. Liability of the General Partner
A. Notwithstanding anything to the contrary set forth
in this Agreement, the General Partner shall not be liable for monetary
damages to the Partnership or any Partners for losses
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sustained or liabilities incurred as a result of errors in judgment or of any
act or omission if the General Partner acted in good faith and in a manner
reasonably believed to be (i) within the scope of the authority granted by
this Agreement and (ii) in the best interests of the Partnership.
B. Subject to its obligations and duties as General Partner
set forth in Section 7.1.A hereof, the General Partner may exercise any of
the powers granted to it by this Agreement and perform any of the duties
imposed upon it hereunder either directly or by or through its agents. The
General Partner shall not be responsible for any misconduct or negligence on
the part of any such agent appointed by it in good faith.
Section 7.9. Title to Partnership Assets
Title to Partnership assets, whether real, personal or mixed and
whether tangible or intangible, shall be deemed to be owned by the
Partnership as an entity, and no Partner, individually or collectively, shall
have any ownership interest in such Partnership assets or any portion
thereof. Title to any or all of the Partnership assets may be held in the
name of the Partnership, the General Partner or one or more nominees, as the
General Partner may determine, including Affiliates of the General Partner.
Section 7.10. Reliance by Third Parties
Notwithstanding anything to the contrary in this Agreement, any
Person dealing with the Partnership shall be entitled to assume that the
General Partner has full power and authority to encumber, sell or otherwise
use in any manner any and all assets of the Partnership and to enter into any
contracts on behalf of the Partnership, and such Person shall be entitled to
deal with the General Partner as if it were the Partnership's sole party in
interest, both legally and beneficially. In no event shall any Person dealing
with the General Partner or its representatives be obligated to ascertain
that the terms of this Agreement have been complied with. Each and every
certificate, document or other instrument executed on behalf of the
Partnership by the General Partner or its representatives shall be conclusive
evidence in favor of any and every Person relying thereon or claiming there-
under that (i) at the time of the execution and delivery of such certificate,
document or instrument, this Agreement was in full force and effect, (ii) the
Person executing and delivering such certificate, document or instrument was
duly authorized and empowered to do so for and on behalf of the Partnership,
and (iii) such certificate, document or instrument was duly executed and
delivered in accordance with the terms and provisions of this Agreement and
is binding upon the Partnership.
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ARTICLE VIII - RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
Section 8.1. Limitation of Liability
The Limited Partners shall have no liability under this Agreement
except as expressly provided in this Agreement, including Section 10.5
hereof, or under the Act.
Section 8.2. Outside Activities of Limited Partners
Subject to any agreements entered into by a Limited Partner or its
Affiliates with the Partnership, any Limited Partner and any officer,
director, employee, agent, trustee, Affiliate or shareholder of any Limited
Partner shall be entitled to and may have business interests and engage in
business activities in addition to those relating to the Partnership,
including business interests and activities in direct competition with the
Partnership. Neither the Partnership nor any of the Partners shall have any
rights by virtue of this Agreement or the Partnership relationship
established hereby in any business ventures of any Limited Partner, and no
Limited Partner shall have any obligation pursuant to this Agreement to offer
any interest in any such business ventures to the Partnership or any other
Limited Partner, even if such opportunity is of a character which, if
presented to the Partnership or any other Limited Partner, could be taken by
such Person.
Section 8.3. Rights of Limited Partners Relating to the
Partnership
A. In addition to other rights provided by this Agreement
or by the Act, and except as limited by clause C hereof, each Limited Partner
shall have the right, for a purpose reasonably related to such Limited
Partner's interest as a limited partner in the Partnership, upon written
demand with a statement of the purpose of such demand and at such Limited
Partner's own expense:
(1) to obtain a copy of the Partnership's federal,
state and local income tax returns for each fiscal
year;
(2) to obtain a current list of the name and last
known business, residence or mailing address of
each Partner; provided, however, that the General
Partner may require, as a condition of providing
such list to a Limited Partner, that the Limited
Partner confirm in writing to the General Partner
that the names of the Partners and other informa-
tion provided by the list will be held in strict-
est confidence and no distribution of the list
will be made;
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(3) to obtain a copy of this Agreement and the Certif-
icate, and all amendments to the Agreement and the
Certificate; and
(4) to obtain true and full information regarding the
amount of cash and a description and statement of any
other property or services contributed by each Partner
and which each Partner has agreed to contribute in the
future, and the date on which each became a Partner.
B. The Partnership shall notify each Limited Partner in
writing of any change made to the Conversion Factor within ten (10) Business
Days after the date such change becomes effective.
C. Notwithstanding any other provision of this Section 8.3,
the General Partner may keep confidential from the Limited Partners, for such
period of time as the General Partner determines in its sole and absolute
discretion to be reasonable, any information that (i) the General Partner
believes to be in the nature of trade secrets or other information the
disclosure of which the General Partner in good faith believes is not in the
best interests of the Partnership, or (ii) the Partnership is required by law
or by agreements with unaffiliated third parties to keep confidential.
Section 8.4. Conversion Right
A. Subject to the limitations of clause B below, each
Limited Partner who is an Original Limited Partner or an Affiliate of an
Original Limited Partner (other than by virtue of clause (iv) of the
definition of Affiliate) shall have the right (the "Conversion Right") to
require the General Partner to convert on any Specified Conversion Date all
or any portion of the Partnership Units held by such Limited Partner into
REIT Shares or, at the option of the General Partner, to purchase (or to
cause the Partnership to repurchase) all or any portion of the Partnership
Units held by such Limited Partner for cash. The Conversion Right shall be
exercised pursuant to a Notice of Conversion delivered to the General Partner
by the Limited Partner who is exercising the conversion right (the
"Converting Partner"), accompanied by the certificate or certificates
evidencing the Partnership Units to be converted. The General Partner shall
inform the Converting Partner of its election with respect to the manner in
which the exercise of the Conversion Right will be satisfied as provided in
clause C below. The number of REIT Shares to be issued to a Limited Partner
upon exercise of the Conversion Right shall be equal to the REIT Shares
Conversion Amount. The amount of cash to be paid to a Limited Partner, at the
option of the General Partner, upon exercise of the Conversion Right shall be
equal to the Value of the REIT Shares Conversion Amount as of the Business
Day on which the Conversion Right is duly exercised.
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B. Notwithstanding anything to the contrary contained in
clause A above, no REIT Shares shall be issued to a Limited Partner pursuant
to clause A above to the extent that the issuance of such REIT Shares would
either:
(1) cause the aggregate value of the Capital Stock owned by
the following Persons (either as direct owners or
Beneficial Owners):
(i) the Original Limited Partners and their
Affiliates (excluding any Affiliate who is such
by virtue of clause (iv) of the definition of
Affiliate), and
(ii) any Person who has obtained REIT Shares di-
rectly from an Original Limited Partner or an
Affiliate of an Original Limited Partner
(excluding any Affiliate who is such by vir-
tue of clause (iv) of the definition of Af-
filiate) or pursuant to Section 11.3.C here-
of, or any transferee of such Person (but
only to the extent that the value of the
Capital Stock owned by such Person or trans-
feree (as a direct owner or a Beneficial
Owner) exceeds five percent (5%) of the ag-
gregate value of the total Capital Stock
issued and outstanding)
to exceed twenty-four and 9/10 percent (24.9%) of the
aggregate value of the total Capital Stock issued and
outstanding as of the Specified Conversion Date; or
(2) cause the General Partner to be considered to be
closely held within the meaning of Section 856(a)(6) of
the Code as of the Specified Conversion Date.
C. Within twenty (20) Business Days after the Business Day
on which the Conversion Right is duly exercised, the General Partner shall
inform the Converting Partner, in writing, (i) whether it elects to purchase
(or to cause the Partnership to repurchase) all or any portion of the
Partnership Units to which the Notice of Conversion relates for cash, and
(ii) whether the Converting Partner is not entitled to exercise the
Conversion Right with respect to a specified number of Partnership Units by
virtue of clause B above and, if so, stating either that the General Partner
will purchase (or will cause the Partnership to repurchase) such number of
Partnership Units or that the Board of Directors of the General Partner,
acting by a majority of its Independent Directors, has made the good faith
determination that both the General Partner and the Partnership lack
available funds, consistent with Section 5.2 hereof, to make such pur-
chase/repurchase. The General Partner may elect the option set
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forth in the foregoing clause (i) only to the extent it and/or the
Partnership have available funds to make such purchase/repurchase. If the
General Partner informs the Converting Partner pursuant to the foregoing
clause (ii) that both it and the Partnership lack available funds to make
such purchase/repurchase in full, it shall also inform the Converting
Partner of the portion, if any, of the Partnership Units which it and/or the
Partnership have available funds to purchase/repurchase. In the event the
General Partner informs a Converting Partner that such Converting Partner is
not entitled to convert any portion of the Partnership Units held by such
Converting Partner into REIT Shares pursuant to clause B above, and in the
further event that the General Partner informs such Converting Partner that
it lacks available funds to purchase (or that the Partnership lacks available
funds to repurchase) any portion of such Partnership Units which the
Converting Partner is not entitled to convert into REIT Shares, such
Converting Partner shall be deemed to have withdrawn his Notice of Conversion
with respect to that portion of his Partnership Units as to which he is not
entitled to exercise the Conversion Right by virtue of clause B above and
which the General Partner and the Partnership lack adequate funds to
purchase/repurchase.
Section 8.5. General Partner Covenants Relating to the Rights
A. The General Partner shall at all times reserve for
issuance such number of REIT Shares as may be necessary to enable the General
Partner to issue such REIT Shares in full payment of the Rights with respect
to all Partnership Units which are from time to time outstanding.
B. As long as the General Partner shall be obligated to
file periodic reports under the Exchange Act, the General Partner shall
timely file such reports in such manner as shall enable any recipient of REIT
Shares issued pursuant to Section 8.4 or 11.3.C in reliance upon an exemption
from registration under the Securities Act to be eligible to utilize Rule 144
promulgated by the SEC pursuant to the Securities Act, or any successor rule
or regulation thereunder, for the resale hereof.
Section 8.6. Other Matters Relating to the Conversion Rights
A. Any Partnership Units transferred to the General
Partner or the Partnership in connection with the exercise of the Conversion
Rights shall be canceled.
B. Upon any transfer of Partnership Units to the
General Partner or the Partnership by a Limited Partner pursuant to Section
8.4 above, the Partnership Interest of such Converting Partner shall be
decreased, and the Partnership Interest of the
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General Partner shall be correspondingly increased, as provided in this
Section 8.6.B. The Partnership Interest of such Converting Partner subsequent
to the conversion event shall be equal to the product of the following: (i)
the Partnership Interest of such Limited Partner immediately prior to the
conversion event, multiplied by (ii) a fraction, the numerator of which is
the total Partnership Units owned by such Limited Partner immediately after
the conversion event, and the denominator of which is the total number of
Partnership Units owned by such Limited Partner immediately prior to the
conversion event. The Partnership Interest of the General Partner subsequent
to the conversion event shall be equal to the sum of the following: (i) the
Partnership Interest of the General Partner immediately prior to the
conversion event, plus (ii) the amount by which the Partnership Interest of
the Converting Partner was decreased pursuant to the immediately preceding
sentence. Notwithstanding the foregoing, if a Limited Partner owns
Partnership Units and also owns Partnership Interests issued pursuant to
Section 4.2 above (which Partnership Interests did not receive any
Partnership Units), the portion of the Partnership Interest of such Limited
Partner that represents Partnership Interests issued pursuant to Section 4.2
shall not be subject to reduction pursuant to the provisions of this Section
8.6.B. The General Partner shall be deemed to have contributed to the
Partnership an amount equal to the Value (computed as of the Business Day on
which the Notice of Conversion is delivered to the General Partner) of the
REIT Shares delivered, or the cash paid, by the General Partner to the
Converting Partner.
C. The General Partner shall use its best efforts to cause
any delivery of REIT Shares to a Converting Partner pursuant to Section 8.4
to be made on the twentieth (20th) Business Day after the Business Day on
which the Conversion Right is duly exercised. Any payment of cash to a
Converting Partner pursuant to Section 8.4 shall be made on the twentieth
(20th) Business Day after the Business Day on which the Conversion Right is
duly exercised.
D. Any state or local transfer tax that may be
payable as the result of a conversion of Partnership Units pursuant to
Section 8.4 shall be payable by the Converting Partner.
ARTICLE IX - BOOKS, RECORDS, ACCOUNTING AND REPORTS
Section 9.1. Records and Accounting
The General Partner shall keep or cause to be kept at the principal
office of the Partnership appropriate books and records with respect to the
Partnership's business. Any records maintained by or on behalf of the
Partnership in the regular course of its business may be kept on, or be in
the form of, punch cards, magnetic tape, photographs, micrographics or any
other information storage device, provided that the records so main-
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tained are convertible into clearly legible written form within a reasonable
period of time. The books of the Partnership shall be maintained, for
financial and tax reporting purposes, on an accrual basis in accordance with
generally accepted accounting principles.
Section 9.2. Fiscal Year
The fiscal year of the Partnership shall be the calendar year.
Section 9.3. Reports
As soon as practicable after the close of each fiscal year, the
General Partner shall cause to be mailed to each Limited Partner (i) an
annual report containing financial statements of the Partnership, or of the
General Partner if such statements are prepared solely on a consolidated
basis with the General Partner, for such fiscal year, presented in accordance
with generally accepted accounting principles, and (ii) IRS Form 1065 and
Schedule K-1, or similar forms as may be required by the IRS, with respect to
such fiscal year. The statements required pursuant to clause (i) shall be
audited by a nationally recognized firm of independent public accountants
selected by the General Partner.
ARTICLE X - TAX MATTERS
Section 10.1. Preparation of Tax Returns
The General Partner shall arrange for the preparation and timely
filing of all returns of Partnership income, gains, deductions, losses and
other items required of the Partnership for federal, state and local income
tax purposes, and the delivery to the Limited Partners of all tax information
reasonably required by the Limited Partners for federal, state and local
income tax reporting purposes.
Section 10.2. Tax Elections
Except as otherwise provided herein, the General Partner shall, in
its sole and absolute discretion, determine whether to make any available
election or choose any available reporting method pursuant to the Code or
state or local tax law; provided, however, that the General Partner shall
make the election under Section 754 of the Code in accordance with applicable
regulations thereunder. The General Partner shall have the right to seek to
revoke any such election (including, without limitation, the election under
Section 754 of the Code) or change any reporting method upon the General
Partner's determination, in its sole and absolute discretion, that such
revocation is in the best interests of all of the Partners. Each Partner
hereby agrees to provide the Partnership with all information necessary to
evaluate or give effect to such election.
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Section 10.3. Tax Matters Partner
A. The General Partner shall be the "tax matters partner"
of the Partnership for federal income tax matters pursuant to Section
6223(c)(3) of the Code. As such, the General Partner is authorized to
represent the Partnership in connection with all examinations of the affairs
of the Partnership by any federal, state or local tax authorities.
B. The tax matters partner is authorized, but not
required:
(1) to enter into any settlement with the IRS with
respect to any administrative or judicial proceed-
ings for the adjustment of Partnership items re-
quired to be taken into account by a Partner for
income tax purposes (such administrative proceed-
ings being referred to as a "tax audit" and such
judicial proceedings being referred to as "judi-
cial review"), and in the settlement agreement the
tax matters partner may expressly state that such
agreement shall bind all Partners, except that
such settlement agreement shall not bind any Part-
ner (i) who (within the time prescribed pursuant
to the Code and Regulations) files a statement
with the IRS providing that the tax matters part-
ner shall not have the authority to enter into a
settlement agreement on behalf of such Partner or
(ii) who is a "notice partner" (as defined in
Section 6231 of the Code) or a member of a "notice
group" (as defined in Section 6223(b)(2) of the
Code);
(2) in the event that a notice of a final administra-
tive adjustment at the Partnership level of any
item required to be taken into account by a Part-
ner for tax purposes ( a "final adjustment") is
mailed to the tax matters partner, to seek judi-
cial review of such final adjustment, including
the filing of a petition for readjustment with the
Tax Court or the United States Claims Court, or
the filing of a complaint for refund with the
District Court of the United States for the dis-
trict in which the Partnership's principal place
of business is located;
(3) to intervene in any action brought by any other
Partner for judicial review of a final adjustment;
(4) to file a request for an administrative adjustment with
the IRS at any time and, if any part of such request is
not allowed by the IRS, to file an appropriate pleading
(petition or complaint) for judicial review with
respect to such request;
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(5) to enter into an agreement with the IRS to extend the
period for assessing any tax which is attributable to
any item required to be taken into account by a Partner
for tax purposes, or an item affected by such item; and
(6) to take any other action on behalf of the Partners of
the Partnership in connection with any tax audit or
judicial review proceeding to the extent permitted by
applicable law or regulations.
The taking of any action and the incurring of any expense by
the tax matters partner in connection with any such proceeding, except to the
extent required by law, is a matter in the sole and absolute discretion of
the tax matters partner and the provisions relating to indemnification of the
General Partner set forth in Section 7.7 of this Agreement shall be fully
applicable to the tax matters partner in its capacity as such.
C. The tax matters partner shall receive no compensation
for its services. All third party costs and expenses incurred by the tax
matters partner in performing its duties as such (including legal and
accounting fees) shall be borne by the Partnership. Nothing herein shall be
construed to restrict the Partnership from engaging an accounting firm to
assist the tax matters partner in discharging its duties hereunder.
Section 10.4. Organizational Expenses
The Partnership shall elect to deduct expenses, if any, incurred by
it in organizing the Partnership ratably over a sixty (60)-month period as
provided in Section 709 of the Code.
Section 10.5. Withholding
Each Limited Partner hereby authorizes the Partnership to withhold
from or pay on behalf of or with respect to such Limited Partner any amount
of federal, state, local or foreign taxes that the General Partner determines
that the Partnership is required to withhold or pay with respect to any
amount distributable or allocable to such Limited Partner pursuant to this
Agreement, including, without limitation, any taxes required to be withheld
or paid by the Partnership pursuant to Sections 1441, 1442, 1445, or 1446 of
the Code. Any amount paid on behalf of or with respect to a Limited Partner
shall constitute a loan by the Partnership to such Limited Partner, which
loan shall be repaid by such Limited Partner within fifteen (15) days after
notice from the General Partner that such payment must be made unless (i) the
Partnership withholds such payment from a distribution which would otherwise
be made to the Limited Partner, or (ii) the General Partner determines, in
its sole and absolute discretion, that such payment may be satisfied out of
the available funds of the Partnership which would, but for such payment, be
distributed to the Limited Partner. Any amounts withheld pursuant to the
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foregoing clauses (i) or (ii) shall be treated as having been distributed to
such Limited Partner. Each Limited Partner hereby unconditionally and
irrevocably grants to the Partnership a security interest in such Limited
Partner's Partnership Interest to secure such Limited Partner's obligation to
pay to the Partnership any amounts required to be paid pursuant to this
Section 10.5. In the event that a Limited Partner fails to pay any amounts
owed to the Partnership pursuant to this Section 10.5 when due, the General
Partner may, in its sole and absolute discretion, elect to make the payment
to the Partnership on behalf of such defaulting Limited Partner, and in such
event shall be deemed to have loaned such amount to such defaulting Limited
Partner and, until repayment of such loan, shall succeed to all rights and
remedies of the Partnership as against such defaulting Limited Partner
(including, without limitation, the right to receive distributions). Any
amounts payable by a Limited Partner hereunder shall bear interest at the
base rate on corporate loans at large United States money center commercial
banks, as published from time to time in the Wall Street Journal, plus two
(2) percentage points (but not higher than the maximum lawful rate) from the
date such amount is due (i.e., fifteen (15) days after demand) until such
amount is paid in full. Each Limited Partner shall take such actions as the
Partnership or the General Partner shall reasonably request in order to
perfect or enforce the security interest created hereunder.
ARTICLE XI - TRANSFERS AND WITHDRAWALS
Section 11.1. Transfer
A. The term "transfer," when used in this Article XI with
respect to a Partnership Interest, shall be deemed to refer to a transaction
by which the General Partner purports to assign its General Partnership
Interest to another Person or by which a Limited Partner purports to assign
its Limited Partnership Interest to another Person, and includes a sale,
assignment, gift, pledge, encumbrance, hypothecation, mortgage, exchange or
any other disposition by law or otherwise. The term "transfer" when used in
this Article XI does not include any conversion of Partnership Units by a
Limited Partner pursuant to Section 8.4.
B. No Partnership Interest shall be transferred, in whole
or in part, except in accordance with the terms and conditions set forth in
this Article XI. Any transfer or purported transfer of a Partnership Interest
not made in accordance with this Article XI shall be null and void.
Section 11.2. Transfer of General Partner's Partnership Interest
A. The General Partner shall not withdraw from the
Partnership or transfer all or any portion of its interest in the Partnership
without the Consent of the Limited Partners. Upon any transfer of a
Partnership Interest in accordance with the
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provisions of this Section 11.2.A, the transferee General Partner shall
become a substituted General Partner, effective simultaneously with such
transfer, vested with the powers and rights of the transferor General
Partner, and shall be liable for all obligations and responsible for all
duties of the General Partner, once such transferee has executed such
instrument as may be necessary to effectuate such admission and to confirm
the agreement of such transferee to be bound by all the terms and provisions
of this Agreement with respect to the Partnership Interest so acquired. It is
a condition to any transfer otherwise permitted hereunder that the transferee
assumes by operation of law or express agreement all of the obligations of
the transferor General Partner under this Agreement with respect to such
transferred Partnership Interest and no such transfer (other than pursuant to
a statutory merger or consolidation wherein all obligations and liabilities
of the transferor General Partner are assumed by a successor by operation of
law) shall relieve the transferor General Partner of its obligations under
this Agreement without the Consent of the Limited Partners.
B. The General Partner may transfer General Partner-
ship Interests held by it to the Partnership in accordance with Section 7.5.B
hereof.
C. The General Partner shall not engage in any merger,
consolidation or other combination with or into another Person or any sale of
all or substantially all of its assets, or any reclassification,
recapitalization or change of outstanding REIT Shares (other than a
reincorporation, a change in par value or from par value to no par value, or
as a result of a subdivision or combination as described in the definition of
"Conversion Factor") ("Transaction"), unless either:
(1) the Transaction also includes a merger of the
Partnership or sale of substantially all of the
assets of the Partnership, as a result of which
all Limited Partners will receive for each Part-
nership Unit an amount of cash, securities or
other property equal to the product of the Conver-
sion Factor and the greatest amount of cash, secu-
rities or other property paid to a holder of one
REIT Share in consideration of one REIT Share at
any time during the period from and after the date
on which the Transaction is consummated, provided
that if, in connection with the Transaction, a
purchase, tender or exchange offer shall have been
made to and accepted by the holders of more than
fifty (50%) percent of the outstanding REIT
Shares, the holders of Partnership Units shall
receive the greatest amount of cash, securities or
other property which a Limited Partner would have
received had it exercised the Conversion Right or
the Exchange Right, as the case may be, and re-
ceived REIT Shares in exchange for all of its
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Partnership Units immediately prior to the expira-
tion of such purchase, tender or exchange offer;
or
(2) the Transaction provides that the Partnership
shall continue as a separate entity and grants to
the Limited Partners conversion and exchange
rights with respect to the ownership interests in
the new entity that are substantially equivalent
to the Rights provided for in Sections 8.4 and
11.3.C.
The Limited Partners shall make the election as to whether option (1) or (2)
above shall apply with respect to a Transaction. Such election shall be made
by Limited Partners owning a majority-in-interest of the total Partnership
Interests owned by the Limited Partners.
Section 11.3. Limited Partners' Rights to Transfer
A. No Limited Partner shall transfer all or any portion of
its Partnership Interest without the consent of the General Partner, which
consent may be withheld in its sole and absolute discretion; provided,
however, that, notwithstanding the foregoing, each Limited Partner which is
an Original Limited Partner or an Affiliate of an Original Limited Partner
(excluding any Affiliate who is such by virtue of clause (iv) of the
definition of Affiliate) may, subject to the provisions of this Section 11.3,
at any time, without the consent of the General Partner, (i) exercise its
Conversion Rights, if any, in accordance with the terms of Section 8.4; (ii)
transfer all or a portion of its Partnership Interest to an Original Limited
Partner or an Affiliate of an Original Limited Partner (excluding any
Affiliate who is such by virtue of clause (iv) of the definition of
Affiliate); or (iii) pledge or otherwise encumber all or any portion of its
Partnership Interest to any Person in a bona fide transaction and grant the
secured party the right to acquire such Partnership Interest upon default. In
addition, notwithstanding the foregoing, any Person who is not an Original
Limited Partner or an Affiliate of an Original Limited Partner (excluding any
Affiliate who is such by virtue of clause (iv) of the definition of
Affiliate) and acquires a Limited Partnership Interest pursuant to clause
(iii) of the preceding sentence may, without the consent of the General
Partner, (x) exercise its Exchange Rights in accordance with the terms of
Section 11.3.C, and (y) subject to the provisions of Section 11.3.C hereof,
transfer all or a portion of such Limited Partnership Interest to an Original
Limited Partner or an Affiliate of an Original Limited Partner (excluding any
Affiliate who is such by virtue of clause (iv) of the definition of
Affiliate). Subject to the provisions of Section 11.3.C hereof, upon any
transfer of a Limited Partnership Interest in accordance with the provisions
of this Section 11.3.A, the transferee shall be admitted as a Substituted
Limited Partner as provided in Section 11.4 hereof.
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B. If a Person who is an Original Limited Partner or an
Affiliate of an Original Limited Partner (excluding any Affiliate who is such
by virtue of clause (iv) of the definition of Affiliate) becomes the owner of
a Limited Partnership Interest in accordance with the provisions of clause
(ii) or (iii) of the first sentence of Section 11.3.A or clause (y) of the
second sentence of Section 11.3.A, such Person shall also become the owner of
the Partnership Units allocable to such Partnership Interest and shall be
entitled to exercise the Conversion Rights with respect to such Partnership
Units in accordance with the terms and conditions set forth in Section 8.4
above.
C. If a Person who is not an Original Limited Partner or an
Affiliate of an Original Limited Partner (excluding any Affiliate who is such
by virtue of clause (iv) of the definition of Affiliate) becomes the owner of
a Limited Partnership Interest in accordance with the provisions of clause
(iii) of the first sentence of Section 11.3.A hereof, such Person shall also
become the owner of the Partnership Units allocable to such Partnership
Interest; provided, however, that, in lieu of Conversion Rights, such
Partnership Units shall have the following rights and shall be subject to the
following restrictions:
(1) For a period of one (1) year after the date on
which such Person acquires the Partnership Units,
such Person shall have the right (the "Optional
Exchange Right") to require the General Partner to
exchange for REIT Shares on any Specified Exchange
Date all or any portion of the Partnership Units
held by such Limited Partner or, at the option of
the General Partner, to purchase (or to cause the
Partnership to repurchase) for cash on any Speci-
fied Exchange Date all or any portion of the Part-
nership Units held by such Limited Partner. The
Optional Exchange Right shall be exercised pursu-
ant to a Notice of Exchange delivered to the Gen-
eral Partner by the Limited Partner who is exer-
cising the exchange right, accompanied by the
certificate or certificates evidencing the Part-
nership Units to be exchanged. The General Part-
ner shall notify such Limited Partner of its elec-
tion with respect to the manner in which the exer-
cise of the Exchange Right will be satisfied with-
in twenty (20) Business Days after the Business
Day on which the Exchange Right is duly exercised.
The number of REIT Shares to be issued to the
Limited Partner upon exercise of the Optional
Exchange Right shall be equal to the REIT Shares
Exchange Amount. The amount of cash to be paid to
a Limited Partner, at the option of the General
Partner, upon exercise of the Optional Exchange
Right shall be equal to the Value of the REIT
Shares Exchange Amount as of the Business Day on
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which the Optional Exchange Right is duly exer-
cised.
(2) Any of the Partnership Units so acquired by such
Person that have not been exchanged for REIT
Shares or cash pursuant to the provisions of Sec-
tion 11.3.C(1) above on or prior to the date which
is one (1) year after the date of such acquisition
(the "Required Exchange Date") shall be exchanged
(the "Required Exchange Right") for a number of
REIT Shares equal to the REIT Shares Exchange
Amount as of the Required Exchange Date or, at the
option of the General Partner, an amount of cash
equal to the Value of the REIT Shares Exchange
Amount as of the Required Exchange Date.
(3) Any state or local transfer tax that may be payable as
the result of an exchange of Partnership Units pursuant
to this Section 11.3.C shall be payable by the
exchanging Limited Partner.
(4) Upon any transfer of Partnership Units to the
General Partner or the Partnership by a Limited
Partner pursuant to this Section 11.3.C, the Part-
nership Interest of such Limited Partner shall be
decreased, and the Partnership Interest of the
General Partner shall be correspondingly in-
creased, as provided in this Section 11.3.C(4).
The Partnership Interest of such Limited Partner
subsequent to the exchange event shall be equal to
the product of the following: (i) the Partnership
Interest of such Limited Partner immediately prior
to the exchange event, multiplied by (ii) a frac-
tion, the numerator of which is the total Partner-
ship Units owned by such Limited Partner immedi-
ately after the exchange event, and the denomina-
tor of which is the total number of Partnership
Units owned by such Limited Partner immediately
prior to the exchange event. The Partnership
Interest of the General Partner subsequent to the
exchange event shall be equal to the sum of the
following: (i) the Partnership Interest of the
General Partner immediately prior to the exchange
event, plus (ii) the amount by which the Partner-
ship Interest of the exchanging Limited Partner
was decreased pursuant to the immediately preced-
ing sentence. Notwithstanding the foregoing, if a
Limited Partner owns Partnership Units and also
owns Partnership Interests issued pursuant to
Section 4.2 above (which Partnership Interests did
not receive any Partnership Units), the portion of
the Partnership Interest of such Limited Partner
that represents the Partnership Interests issued
pursuant to Section 4.2 shall not be subject to
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reduction pursuant to the provisions of this Section
11.3.C(4). The General Partner shall be deemed to have
contributed to the Partnership an amount equal to the
Value (computed as of the Business Day which is or
proximately follows the first to occur of (x) the day
on which the notice of Exchange is delivered to the
General Partner or (y) the Required Exchange Date) of
the REIT Shares delivered, or the cash paid, by the
General Partner to the exchanging Limited Partner.
(5) Any Partnership Units transferred to the General
Partner or the Partnership pursuant to the provisions
of this Section 11.3.C shall be canceled.
(6) Notwithstanding anything to the contrary contained
in this Section 11.3.C, if all or any portion of
the Partnership Interest owned by a Person who is
not an Original Limited Partner or an Affiliate of
an Original Limited Partner (excluding any Affili-
ate who is such by virtue of clause (iv) of the
definition of Affiliate) is transferred to an
Original Limited Partner or an Affiliate of an
Original Limited Partner (excluding any Affiliate
who is such by virtue of clause (iv) of the defi-
nition of Affiliate) prior to the Required Ex-
change Date, the Partnership Units allocable to
such Partnership Interest (or portion thereof)
shall not be subject to the required exchange of
Partnership Units for REIT Shares set forth in
Section 11.3.C(2) above.
D. If a Limited Partner is Incapacitated, the executor,
administrator, trustee, committee, guardian, conservator or receiver of such
Limited Partner's estate shall have all the rights of a Limited Partner, for
the purpose of settling or managing the estate and such power as the
Incapacitated Limited Partner possessed to transfer all or any part of his,
her or its interest in the Partnership. The Incapacity of a Limited Partner,
in and of itself, shall not dissolve or terminate the Partnership.
E. The General Partner may prohibit any transfer by a
Limited Partner otherwise permitted under this Section 11.3 if, in the
opinion of legal counsel to the Partnership, such transfer would require
filing of a registration statement under the Securities Act or would
otherwise violate any federal or state securities laws or regulations
applicable to the Partnership or the Partnership Interest.
F. No transfer by a Limited Partner of its Partner-
ship Interest may be made to any Person if (i) in the opinion of
legal counsel for the Partnership, it would result in the Part-
nership being treated as an association taxable as a corporation
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for federal income tax purposes, (ii) in the opinion of legal counsel for the
Partnership, it would adversely affect the ability of the General Partner to
continue to qualify as a REIT or subject the General Partner to any
additional taxes under Section 857 or Section 4981 of the Code, or (iii) such
transfer is effectuated through an "established securities market" or a
"secondary market (or the substantial equivalent thereof)" within the meaning
of Section 7704 of the Code.
G. No transfer by a Limited Partner of its Partnership
Interest may be made (i) to any Person who lacks the legal right, power or
capacity to own a Partnership Interest, (ii) in violation of any provision of
any mortgage or trust deed (or the note or bond secured thereby) constituting
a Lien against an asset of the Partnership, or other instrument, document or
agreement to which the Partnership is a party or otherwise bound, (iii) in
violation of applicable law, or (iv) if such transfer would, in the opinion
of legal counsel for the Partnership, cause any portion of the assets of the
Partnership to constitute assets of any employee benefit plan pursuant to
Department of Labor regulations section 2510.2-101.
Section 11.4. Substituted Limited Partners
A. Unless otherwise agreed by the transferor and
transferee, a transferee of a Limited Partnership Interest shall be admitted
as a Substituted Limited Partner in accordance with this Article XI and shall
have all the rights and powers and be subject to all the restrictions and
liabilities of a Limited Partner under this Agreement. It shall be a
condition precedent to the admission of any Person as a Substituted Limited
Partner that such Person execute and deliver to the Partnership (i) evidence
of acceptance, in form reasonably satisfactory to the General Partner, of all
of the terms and conditions of this Agreement, including, without limitation,
the power of attorney granted in Section 2.4 hereof, and (ii) such other
documents or instruments as may be reasonably required in the discretion of
the General Partner in order to effect such Person's admission as a
Substituted Limited Partner.
B. Upon the admission of a Substituted Limited Partner, the
General Partner shall amend Exhibit A to reflect the name, address, number of
Partnership Units, if any, and Partnership Interest of such Substituted
Limited Partner and to eliminate or adjust, if necessary, the name, address
and interest of the predecessor of such Substituted Limited Partner. The
admission of any Person as a Substituted Limited Partner shall become
effective on the date upon which the name of such Person is recorded on the
books and records of the Partnership.
Section 11.5. General Provisions
A. No Limited Partner may withdraw from the Partner-
ship other than as a result of a permitted transfer or exchange
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of all of such Limited Partner's Partnership Interest in accordance with this
Article XI or pursuant to a conversion of all of its Partnership Interest
under Section 8.4.
B. Any Limited Partner who shall transfer all of its
Partnership Interest in a permitted transfer or exchange pursuant to this
Article XI or pursuant to a conversion of all of its Partnership Interest
under Section 8.4 shall cease to be a Limited Partner.
C. If any Partnership Interest is transferred or exchanged
in compliance with the provisions of this Article XI, or converted pursuant
to Section 8.4, during any quarterly segment of the Partnership's fiscal
year, Net Income, Net Losses, each item thereof and all other items
attributable to such interest for such fiscal year shall be divided and
allocated between the transferor Partner and the transferee Partner by taking
into account their varying interests during the fiscal year in accordance
with Section 706(d) of the Code, using the interim closing of the books
method. Solely for purposes of making such allocations, each of such items
for the calendar month in which the transfer or conversion occurs shall be
allocated to the Person who is a Partner as of midnight on the last day of
said month. All distributions of Available Cash with respect to which the
Partnership Record Date is before the date of such transfer or conversion
shall be made to the transferor Partner, and all distributions of Available
Cash thereafter shall be made to the transferee Partner.
ARTICLE XII - DISSOLUTION AND LIQUIDATION
Section 12.1. Dissolution
The Partnership shall not be dissolved by the admission of
Substituted Limited Partners or Additional Limited Partners or by the
admission of a substituted General Partner in accordance with the terms of
this Agreement. Upon the withdrawal of the General Partner, any substituted
General Partner shall continue the business of the Partnership. The
Partnership shall dissolve, and its affairs shall be wound up, upon the first
to occur of any of the following (each, a "Liquidating Event"):
A. the expiration of its term as provided in Section
2.5 hereof;
B. an event of withdrawal of the General Partner, as
defined in the Act (including an event of Bankruptcy), unless within ninety
(90) days after the withdrawal remaining Partners owning a
majority-in-interest of the total Partnership Interests of the remaining
Partners agree in writing to continue the business of the Partnership and to
the appointment, effective immediately prior to the date of withdrawal, of a
substitute General Partner;
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C. an election to dissolve the Partnership made in writing
by the General Partner with the Consent of the Limited Partners; provided,
however, that the General Partner may elect to dissolve the Partnership
without the Consent of the Limited Partners at any time that the Limited
Partners own, in the aggregate, less than a ten percent (10%) Partnership
Interest;
D. entry of a decree of judicial dissolution of the
Partnership pursuant to the provisions of the Act; or
E. the sale of all or substantially all of the assets of
the Partnership, unless the General Partner, with the Consent of the Limited
Partners, elects to continue the Partnership business for the purpose of the
receipt and the collection of indebtedness or the collection of other
consideration to be received in exchange for the assets of the Partnership
(which activities shall be deemed to be part of the winding up of the
Partnership); provided that the General Partner may elect to continue the
Partnership in accordance with the provisions of this Section 12.1.E without
the Consent of the Limited Partners if at the time of such sale the Limited
Partners own, in the aggregate, less than a ten percent (10%) Partnership
Interest.
Section 12.2. Winding Up
A. Upon the occurrence of a Liquidating Event, the
Partnership shall continue solely for the purpose of winding up its affairs
in an orderly manner, liquidating its assets (subject to the provisions of
Section 12.2.B below), and satisfying the claims of its creditors and
Partners. No Partner shall take any action that is inconsistent with, or not
necessary to or appropriate for, the winding up of the Partnership's business
and affairs. The General Partner (or, in the event there is no remaining
General Partner, any Person elected by Limited Partners owning a
majority-in-interest of the total Partnership Interests of the Limited
Partners (the General Partner or such other Person overseeing the winding up
of the Partnership, the "Liquidator")) shall be responsible for overseeing
the winding up of the Partnership. The assets of the Partnership shall be
liquidated as promptly as is consistent with obtaining the fair market value
thereof, and the proceeds therefrom (which may include shares of stock in the
General Partner) shall be applied and distributed in the following order:
(1) First, to the payment and discharge of all of the
Partnership's debts and liabilities to creditors
other than the Partners;
(2) Second, to the payment and discharge of all of the
Partnership's debts and liabilities to the Part-
ners; and
(3) The balance, if any, to the General Partner and
Limited Partners in accordance with their positive
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Capital Account balances, after giving effect to all
contributions, distributions and allocations for all
periods.
The General Partner shall not receive any additional compensation for any
services performed pursuant to this Article XII.
B. Notwithstanding the provisions of Section 12.2.A hereof
which require liquidation of the assets of the Partnership, but subject to
the order of priorities set forth therein, if prior to or upon dissolution of
the Partnership, the Liquidator determines that an immediate sale of part or
all of the Partnership's assets would be impractical or would cause undue
loss to the Partners, the Liquidator may, in its sole and absolute
discretion, defer for a reasonable time the liquidation of any assets except
those necessary to satisfy liabilities of the Partnership (including to those
Partners as creditors) and/or distribute to the Partners, in lieu of cash, as
tenants in common and in accordance with the provisions of Section 12.2.A
hereof, undivided interests in such Partnership assets as the Liquidator
deems not suitable for liquidation. Any such distributions in kind shall be
made only if, in the good faith judgment of the Liquidator, such
distributions in kind are in the best interest of the Partners, and shall be
subject to such conditions relating to the disposition and management of such
properties as the Liquidator deems reasonable and equitable and to any
agreements governing the operation of such properties at such time. The
Liquidator shall determine the fair market value of any property distributed
in kind using such reasonable method of valuation as it may adopt.
C. As part of the liquidation and winding up of the
Partnership, a proper accounting shall be made of the Capital Account of each
Partner, including an analysis of changes to the Capital Account from the
date of the last previous accounting. Financial statements presenting such
accounting shall include a report of an independent certified public
accountant selected by the Liquidator.
D. As part of the liquidation and winding up of the
Partnership, the Liquidator may sell Partnership assets (or assets owned by
any partnership in which the Partnership is a partner) solely on an
"arm's-length" basis, at the best price and on the best terms and conditions
as the Liquidator in good faith believes are reasonably available at the
time.
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Section 12.3. Compliance with Timing Requirements of Regulations
In the event the Partnership is "liquidated" within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g), distributions shall be made
pursuant to this Article XII to the General Partner and Limited Partners who
have positive Capital Accounts in compliance with Regulations Section
1.704-1(b)(2)(ii)(b)(2). If any Partner has a deficit balance in its Capital
Account (after giving effect to all contributions, distributions and
allocations for all taxable years, including the year during which such
liquidation occurs), such Partner shall have no obligation to make any
contribution to the capital of the Partnership with respect to such deficit,
and such deficit shall not be considered a debt owed to the Partnership or to
any other Person for any purpose whatsoever. In the discretion of the
Liquidator, a pro rata portion of the distributions that would otherwise be
made to the General Partner and Limited Partners pursuant to this Article XII
may be:
A. distributed to a trust established for the benefit of
the General Partner and Limited Partners for the purposes of liquidating
Partnership assets, collecting amounts owed to the Partnership and paying any
contingent or unforeseen liabilities or obligations of the Partnership or of
the General Partner arising out of or in connection with the Partnership. The
assets of any such trust shall be distributed to the General Partner and
Limited Partners from time to time, in the reasonable discretion of the
Liquidator, in the same proportions as the amount distributed to such trust
by the Partnership would otherwise have been distributed to the General
Partner and Limited Partners pursuant to this Agreement; or
B. withheld to provide a reasonable reserve for Partnership
liabilities (contingent or otherwise) and to reflect the unrealized portion
of any installment obligations owed to the Partnership, provided that such
withheld amounts shall be distributed to the General Partner and Limited
Partners as soon as practicable.
Section 12.4. Deemed Distribution and Recontribution
Notwithstanding any other provisions of this Article XII, in the
event the Partnership is liquidated within the meaning of Regulations Section
1.704-1(b)(2)(ii)(q) but no Liquidating Event has occurred, the Partnership's
property shall not be liquidated, the Partnership's liabilities shall not be
paid or discharged, and the Partnership's affairs shall not be wound up.
Instead, the Partnership shall be deemed to have distributed the Partnership
property in kind to the General Partner and Limited Partners, who shall be
deemed to have assumed and taken such property subject to all Partnership
liabilities, all in accordance with their respective Capital Accounts.
Immediately thereafter, the General Partner and Limited Partners shall be
deemed to have
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recontributed the Partnership property in kind to the Partnership, which
shall be deemed to have assumed and taken such property subject to all such
liabilities.
Section 12.5. Documentation of Liquidation
Upon the completion of the liquidation of the Partnership as provided
in Section 12.2 hereof, the Partnership shall be terminated and the
Certificate and all qualifications of the Partnership as a foreign limited
partnership in jurisdictions other than the State of Delaware shall be
canceled, and such other actions as may be necessary to terminate the
Partnership shall be taken. The Liquidator shall have the authority to
execute and record any and all documents or instruments required to effect
the dissolution, liquidation and termination of the Partnership.
Section 12.6. Reasonable Time for Winding Up
A reasonable time shall be allowed for the orderly winding up of the
business and affairs of the Partnership and the liquidation of its assets
pursuant to Section 12.2 hereof, in order to minimize any losses otherwise
attendant upon such winding-up, and the provisions of this Agreement shall
remain in effect during the period of liquidation.
Section 12.7. Indemnification of the Liquidator
The Liquidator shall be indemnified and held harmless by the
Partnership from and against any and all claims, demands, liabilities, costs,
damages and causes of action of any nature whatsoever arising out of or
incidental to the Liquidator's taking of any action authorized under or
within the scope of this Agreement; provided, however, that the Liquidator
shall not be entitled to indemnification, and shall not be held harmless,
where the claim, demand, liability, cost, damage or cause of action at issue
arises out of:
(1) a matter entirely unrelated to the Liquidator's
action or conduct pursuant to the provisions of
this Agreement; or
(2) the proven willful misconduct or gross negligence
of the Liquidator.
Section 12.8. Waiver of Partition
Each Partner hereby waives may right to partition of the Partnership
property.
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ARTICLE XIII - AMENDMENT OF PARTNERSHIP AGREEMENT
Section 13.1. Amendments
A. Amendments to this Agreement may be proposed by the
General Partner or by any Limited Partners holding twenty-five percent (25%)
or more of the Partnership Interests. Except as provided in Section 13.1.B or
13.1.C, a proposed amendment shall be adopted and be effective as an
amendment hereto if it is approved by the General Partner and it receives the
Consent of the Limited Partners (provided that, the Consent of the Limited
Partners shall not be required for any amendment if the Limited Partners own,
in the aggregate, less than a ten percent (10%) Partnership Interest).
B. Notwithstanding Section 13.1.A, the General Partner
shall have the power, without the Consent of the Limited Partners, to amend
this Agreement as may be required to facilitate or implement any of the
following purposes:
(1) to add to the obligations of the General Partner or
surrender any right or power granted to the General
Partner or any Affiliate of the General Partner for the
benefit of the Limited Partners;
(2) to reflect the admission, substitution, termina-
tion or withdrawal of Partners in accordance with
this Agreement;
(3) to amend Schedule A to this Agreement in accordance
with Section 4.2, 8.4 or 11.3.C of this Agreement; and
(4) to reflect a change that is of an inconsequential
nature and does not adversely affect the Limited
Partners in any material respect, or to cure any
ambiguity, correct or supplement any provision in
this Agreement not inconsistent with law or with
other provisions, or make other changes with re-
spect to matters arising under this Agreement that
will not be inconsistent with law or with the
provisions of this Agreement.
The General Partner will provide notice to the Limited Partners when any
action under this Section 13.1.B is taken.
C. Notwithstanding anything to the contrary contained in
Section 13.1.A hereof, this Agreement shall not be amended without the prior
written consent of each Partner adversely affected if such amendment would
(i) convert a Limited Partner's interest in the Partnership into a general
partner's interest, (ii) modify the limited liability of a Limited Partner,
(iii) alter rights of the Partner to receive distributions pursuant to
Article V, or the allocations specified in Article VI
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(except as permitted pursuant to Section 4.2 and Section 13.1.B(3) hereof),
(iv) alter or modify the Rights set forth in Sections 8.4 and 11.3.C, (v)
cause the termination of the Partnership prior to the time set forth in
Section 2.5 or 12.1, or (vi) amend this Section 13.1.C. Further, no amendment
may alter the restrictions on the General Partner's authority set forth in
Section 7.3 without the consent of all Limited Partners.
ARTICLE XIV - ARBITRATION OF DISPUTES
Section 14.1. Arbitration
Notwithstanding anything to the contrary contained in this Agreement,
all claims, disputes and controversies between the parties hereto (including,
without limitation, any claims, disputes and controversies between the
Partnership and any one or more of the Partners and any claims, disputes and
controversies between any one or more Partners) arising out of or in
connection with this Agreement or the Partnership created hereby, relating to
the validity, construction, performance, breach, enforcement or termination
thereof, or otherwise, shall be resolved by binding arbitration in the State
of Michigan, in accordance with this Article XIV and, to the extent not
inconsistent herewith, the Expedited Procedures and Commercial Arbitration
Rules of the American Arbitration Association.
Section 14.2. Procedures
Any arbitration called for by this Article XIV shall be conducted in
accordance with the following procedures:
(1) The Partnership or any Partner (the "Requesting
Party") may demand arbitration pursuant to Section
14.1 hereof at any time by giving written notice
of such demand (the "Demand Notice") to all other
Partners against whom a claim is made or with
respect to which a dispute has arisen and (if the
Requesting Party is not the Partnership) to the
Partnership (all such other Partners and, if ap-
plicable, the Partnership, collectively, the "Re-
sponding Party"), which Demand Notice shall de-
scribe in reasonable detail the nature of the
claim, dispute or controversy.
(2) Within fifteen (15) days after the giving of a
Demand Notice, the Requesting Party, on the one
hand, and the Responding Party, on the other hand,
shall select and designate in writing to the other
party one reputable, disinterested individual
deemed competent to arbitrate the claim, dispute
or controversy and who is willing to act as an
arbitrator of the claim, dispute or controversy (a
"Qualified Individual"). Within fifteen (15) days
after the foregoing selections have been made, the
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<PAGE>
arbitrators so selected shall jointly select a third
Qualified Individual. In the event that the two
arbitrators initially selected are unable to agree on a
third arbitrator within the second fifteen (15) day
period referred to above, then, on the application of
either party, the American Arbitration Association
shall promptly select and appoint a Qualified
Individual to act as the third arbitrator. The three
arbitrators selected pursuant to this Section 14.2(2)
shall constitute the arbitration panel for the
arbitration in question
(3) The presentations of the parties in the arbitra-
tion proceeding shall be commenced and completed
within sixty (60) days after the selection of the
arbitration panel pursuant to Section 14.2(2)
above, and the arbitration panel shall render its
decision in writing within thirty (30) days after
the completion of such presentations. Any deci-
sion concurred in by any two (2) of the arbitra-
tors shall constitute the decision of the arbitra-
tion panel; unanimity shall not be required.
(4) The arbitration panel shall have the discretion to
include in its decision a direction that all or part of
the attorneys' fees and costs of any party or parties
and/or the costs of such arbitration be paid by any one
or more of the parties.
(5) Notwithstanding anything to the contrary contained
above in this Section 14.2, if either party fails
to select a Qualified Individual to act as an
arbitrator for such party with the fifteen (15)
day time period set forth in the first sentence of
Section 14.2(2), the Qualified Individual selected
by the other party shall serve as sole arbitrator
under this Section 14.2 in lieu of the arbitration
panel. Such sole arbitrator shall have all of the
rights and duties of the arbitration panel set
forth above in this Section 14.2.
Section 14.3. Binding Character
Any decision rendered pursuant to this Article XIV shall be final and
binding on the parties hereto, and judgment thereon may be entered by any
state or federal court of competent jurisdiction.
Section 14.4. Exclusivity
Arbitration shall be the exclusive method available for resolution of
claims, disputes and controversies described in Section 14.1 hereof, and the
Partnership and its Partners stipulate that the provisions hereof shall be a
complete defense to
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<PAGE>
any suit, action or proceeding in any court or before any administrative or
arbitration tribunal with respect to any such claim, controversy or dispute.
The provisions of this Article XIV shall survive the dissolution of the
Partnership.
Section 14.5. No Alteration of Agreement
Nothing contained herein shall be deemed to give the arbitrators any
authority, power or right to alter, change, amend, modify, add to or subtract
from any of the provisions of this Agreement.
ARTICLE XV - CONDITIONS/CONCURRENT TRANSACTIONS
Section 15.1. General Partner Conditions
The obligation of the General Partner to consummate the transactions
contemplated herein is subject to fulfillment of all of the following
conditions on or prior to the date hereof:
(1) The transactions contemplated by the Contribution
Agreement shall have been consummated in accordance
with the terms and conditions of the Contribution
Agreement;
(2) All consents, waivers, approvals and authorizations
required for the consummation of the transactions
contemplated hereby shall have been obtained; and
(3) The Registration Statement shall have become effective
under the provisions of the Securities Act, and no
order or other administrative proceeding shall have
been entered or instituted with respect thereto, and be
pending, as of the date hereof.
Section 15.2. Limited Partner Conditions
The obligation of the Limited Partners to consummate the transactions
contemplated herein is subject to fulfillment of all of the following
conditions on or prior to the date hereof:
(1) The General Partner shall have contributed to the
Partnership the amount of its Capital Contribution set
forth in Exhibit A;
(2) The transactions contemplated by the Contribution
Agreement shall have been consummated in accordance
with the terms and conditions of the Contribution
Agreement;
(3) All consents, waivers, approvals and authoriza-
tions required for the consummation of the trans-
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<PAGE>
actions contemplated hereby shall have been ob-
tained; and
(4) The Registration Statement shall have become effective
under the provisions of the Securities Act, and no stop
order or other administrative proceeding shall have
been entered or instituted with respect thereto, and be
pending, as of the date hereof.
ARTICLE XVI - GENERAL PROVISIONS
Section 16.1. Addresses and Notice
All notices, requests, demands and other communications hereunder to
a Partner shall be in writing and shall be deemed to have been duly given and
received (i) on the day delivered by hand, or (ii) on the third Business Day
after sent by certified mail, return receipt requested, properly addressed
and postage prepaid, or (iii) on the first Business Day after transmitted by
commercial overnight courier to the Partner at the address set forth in
Exhibit A or at such other address as the Partner shall notify the General
Partner in writing.
Section 16.2. Titles and Captions
All article or section titles or captions in this Agreement are for
convenience only and in no way define, limit, extend or describe the scope or
intent of any provisions hereof. Each Exhibit attached hereto and referred to
herein is hereby incorporated by reference.
Section 16.3. Pronouns and Plurals
Whenever the context may require, any pronoun used in this Agreement
shall include the corresponding masculine, feminine or neuter forms, and the
singular form of nouns, pronouns and verbs shall include the plural and vice
versa. Any reference in this Agreement to "including" shall be deemed to mean
"including without limitation."
Section 16.4. Further Action
The Partners shall execute and deliver all such further documents,
provide all information and take or refrain from taking such further action
as may be necessary or appropriate to carry out the transactions contemplated
by this Agreement.
Section 16.5. Binding Effect
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their heirs, executors, administrators, successors, legal
representatives and permitted assigns.
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<PAGE>
Section 16.6. No Third Party Beneficiaries
None of the provisions of this Agreement shall be for the benefit of,
or shall be enforceable by, any creditor of the Partnership or any other
Person to whom any debts, liabilities or obligations may be owed by (or who
otherwise has any claim against) the Partnership or any of the Partners.
Section 16.7. Waiver
No failure by any party to insist upon the strict performance of any
covenant, duty, agreement or condition of this Agreement or to exercise any
right or remedy consequent upon a breach thereof shall constitute waiver of
any such breach or any other covenant, duty, agreement or condition.
Section 16.8. No Agency
Except as specifically provided herein, nothing contained herein
shall be construed to constitute any Partner the agent of another Partner or
in any manner to limit the Partners in carrying on their own respective
businesses and activities.
Section 16.9. Entire Understanding
This Agreement constitutes the entire agreement and understanding
among the Partners and supersedes any prior understanding and/or written or
oral agreements among them respecting the subject matter herein.
Section 16.10. Counterparts
This Agreement may be executed in counterparts, all of which together
shall constitute one agreement binding on all the parties hereto,
notwithstanding that all such parties are not signatories to the original or
the same counterpart.
Section 16.11. Applicable Law
This Agreement shall be construed in accordance with and governed by
the laws of the State of Delaware, without regard to the principles of
conflict of laws.
Section 16.12. Invalidity of Provisions
If any provision of this Agreement is or becomes invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of
the remaining provisions contained herein shall not be affected thereby.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first written above.
GENERAL PARTNER:
AGREE REALTY CORPORATION
By: /s/ Kenneth Howe
------------------------------
Name: Kenneth Howe
Title: Secretary
LIMITED PARTNERS:
/s/ Richard Agree
-----------------------------------
Richard Agree
/s/ Edward Rosenberg
-----------------------------------
Edward Rosenberg
/s/ Joel Weiner
-----------------------------------
Joel Weiner
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<PAGE>
EXHIBIT A
<TABLE>
<CAPTION>
EXHIBIT A
---------
Name and Address Partnership Partnership
of Partner Contribution Interest Units
- ---------------- ------------ ----------- -----------
<S> <C> <C> <C>
General Partner:
- ----------------
Agree Realty Corporation $45.1 million 80.53% 2,638,185
3180 Northwestern Highway
Farmington Hills Michi-
gan 48334
Limited Partners:
- -----------------
Richard Agree
- ---------------- interest in certain 10.09% 329,825
- ---------------- real property
Edward Rosenberg
- ---------------- interest in certain 7.30% 240,000
- ---------------- real property
Joel Weiner
- ---------------- interest in certain 2.08% 68,134
- ---------------- real property
</TABLE>
A-1
<PAGE>
EXHIBIT B
NOTICE OF CONVERSION
The undersigned hereby irrevocably (i) converts ____________________
_____________ Partnership Units in Agree Realty Limited Partnership in
accordance with the terms of the First Amended and Restated Agreement of
Limited Partnership Agreement of Agree Realty Limited Partnership and the
Conversion Right referred to in Section 8.4 therein, (ii) surrenders such
Partnership Units and all right, title and interest therein, and (iii)
directs that the REIT Shares deliverable upon exercise of the Conversion
Right be delivered to the address specified below, and registered or placed
in the name(s) and at the address(es) specified below.
The undersigned hereby represents and warrants that (i) it has full
power and authority to transfer all of its right, title and interest in such
Partnership Units, (ii) such Partnership Units are free and clear of all
Liens, and (iii) it will pay any state or local transfer tax that may be
payable as a result of the conversion of such Partnership Units and the
issuance of such REIT Shares.
Dated: _________________
Name of Limited Partner: _______________________________
Signature of Limited Partner: _______________________________
By:____________________________
Title:_________________________
Address: _______________________________
(Street Address)
_______________________________
(City) (State) (Zip Code)
Signature [Attested]
[Witnessed] by:
_______________________________
<PAGE>
Issue REIT Shares to:
Please insert social security or identifying number;
Name:
Address:
Deliver the REIT Shares to the following address:
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<PAGE>
EXHIBIT C
NOTICE OF EXCHANGE
The undersigned hereby irrevocably (i) exchanges ___________________
_______________ Partnership Units in Agree Realty Limited Partnership in
accordance with the terms of the First Amended and Restated Agreement of
Limited Partnership Agreement of Agree Reality Limited Partnership and the
Optional Exchange Right referred to in Section 11.3.C therein, (ii)
surrenders such Partnership Units and all right, title and interest therein,
and (iii) directs that the REIT Shares deliverable upon exercise of the
Optional Exchange Right be delivered to the address specified below, and
registered or placed in the name(s) and at the address(e) specified below.
The undersigned hereby represents and warrants that (i) it has full
power and authority to transfer all of its right, title and interest in such
Partnership Units, (ii) such Partnership Units are free and clear of all
Liens, and (iii) it will pay any state or local transfer tax that may be
payable as a result of the exchange of such Partnership Units and the
issuance of such REIT Shares.
Dated: ___________________
Name of Limited Partner: _____________________________
Signature of Limited Partners: _____________________________
By:__________________________
Title:_______________________
_____________________________
(Street Address)
_____________________________
(City) (State) (Zip Code)
Signature [Attested]
[Witnessed] by:
_____________________________
EXHIBIT 10.8
AGREE REALTY CORPORATION
1994 STOCK INCENTIVE PLAN
<PAGE>
Table of Contents
-----------------
Page
----
ARTICLE I
GENERAL
1.1 Purpose......................................................... 1
1.2 Administration.................................................. 1
1.3 Persons Eligible for Awards..................................... 3
1.4 Types of Awards Under Plan...................................... 3
1.5 Shares Available for Awards..................................... 4
1.6 Definitions of Certain Terms.................................... 6
ARTICLE II
AWARDS UNDER THE PLAN
2.1 Agreements Evidencing Awards.................................... 8
2.2 Grant of Stock Options, Stock Appreciation
Rights and Dividend Equivalent Rights......................... 9
2.3 Exercise of Options and Stock Appreciation
Rights........................................................ 13
2.4 Termination of Employment; Death................................ 16
2.5 Grant of Restricted Stock....................................... 17
2.6 Grant of Unrestricted Stock..................................... 19
2.7 Grant of Performance Shares..................................... 20
ARTICLE III
MISCELLANEOUS
3.1 Amendment of the Plan; Modification
of Awards..................................................... 21
3.2 Restrictions.................................................... 23
3.3 Nonassignability................................................ 24
3.4 Requirement of Notification of Election
Under Section 83(b) of the Code............................... 24
3.5 Requirement of Notification Upon
Disqualifying Disposition Under
Section 421(b) of the Code.................................... 24
3.6 Withholding Taxes............................................... 25
3.7 Change in Control............................................... 26
3.8 Right of Discharge Reserved..................................... 28
3.9 Nature of Payments.............................................. 28
3.10 Non-Uniform Determinations...................................... 28
3.11 Other Payments or Awards........................................ 29
3.12 Section Headings................................................ 29
3.13 Effective Date and Term of Plan................................. 29
3.14 Governing Law................................................... 30
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<PAGE>
ARTICLE I
GENERAL
1.1 Purpose
The purpose of the 1994 Agree Realty Corporation Stock
Incentive Plan (the "Plan") is to provide for officers and other employees
(including directors who are employees) of Agree Realty Corporation (the
"Company"), employees of joint ventures in which the Company participates,
and consultants to the Company, an incentive (a) to become and remain
associated with the Company, (b) to enhance the long-term performance of the
Company, and (c) to acquire a proprietary interest in the success of the
Company. 1.2 Administration
1.2.1 Subject to Section 1.2.6, the Plan shall be administered
by the Executive Compensation Committee (the "Committee") of the board of
directors of the Company (the "Board"), which shall consist of not less than
two directors and to which the Board shall grant power to authorize the
issuance of the Company's capital stock pursuant to awards granted under the
Plan. The members of the Committee shall be appointed by, and serve at the
pleasure of, the Board. To the extent necessary for transactions under the
Plan to qualify for the exemptions available under Rule 16b-3 ("Rule 16b-3")
promulgated under the Securities Exchange Act of 1934 (the "1934 Act"), no
person may serve on the Committee if, during the year preceding such ser-
<PAGE>
vice, he was granted or awarded equity securities of the Company (including
options on such securities) under the Plan or any other plan of the Company
or any affiliate thereof. To the extent necessary for compliance with section
162(m)(4)(C) of the Internal Revenue Code of 1986, members of the Committee
shall be "outside directors" within the meaning thereof.
1.2.2 The Committee shall have the authority (a) to exercise
all of the powers granted to it under the Plan, (b) to construe, interpret
and implement the Plan and any Plan Agreements executed pursuant to Section
2.1, (c) to prescribe, amend and rescind rules and regulations relating to
the Plan, including rules governing its own operations, (d) to make all
determinations necessary or advisable in administering the Plan, (e) to
correct any defect, supply any omission and reconcile any inconsistency in
the Plan, and (f) to amend the Plan to reflect changes in applicable law.
1.2.3 Actions of the Committee shall be taken by the vote of a
majority of its members. Any action may be taken by a written instrument
signed by a majority of the Committee members, and action so taken shall be
fully as effective as if it had been taken by a vote at a meeting.
1.2.4 The determination of the Committee on all matters
relating to the Plan or any Plan Agreement shall be final, binding and
conclusive.
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<PAGE>
1.2.5 No member of the Committee shall be liable for any
action or determination made in good faith with respect to the Plan or any
award thereunder.
1.2.6 Notwithstanding anything to the contrary contained
herein: (a) until the Board shall appoint the members of the Committee, the
Plan shall be administered by the Board; and (b) the Board may, in its sole
discretion, at any time and from time to time, resolve to administer the
Plan. In either of the foregoing events, the term "Committee" as used herein
shall be deemed to mean the Board.
1.3 Persons Eligible for Awards
Awards under the Plan may be made to such officers and
executive, managerial, professional or administrative employees of the
Company or any subsidiary (including employees who are directors), and to
such consultants to the Company and employees of joint ventures in which the
Company participates (collectively, "key persons") as the Committee shall in
its sole discretion select.
1.4 Types of Awards Under Plan
Awards may be made under the Plan in the form of (a) incentive
stock options, (b) nonqualified stock options, (c) stock appreciation rights,
(d) dividend equivalent rights, (e) restricted stock, (f) unrestricted stock,
and (g) performance
-3-
<PAGE>
shares, all as more fully set forth in Article II. The term "award" means any
of the foregoing. No incentive stock option may be granted to a person who is
not an employee of the Company on the date of grant.
1.5 Shares Available for Awards
1.5.1 The total number of shares of common stock of the
Company, par value $0.0001 per share ("Common Stock"), with respect to which
awards may be granted pursuant to the Plan shall not exceed 200,000 shares
plus additional shares determined as follows. As of January 1, 1995 and each
January 1 thereafter, the Board in its discretion may increase the number of
shares authorized under this Section 1.5.1 by an amount not in excess of one
percent (1%) of the total number of shares of Common Stock then issued and
outstanding. The increments authorized pursuant to the preceding sentence
shall be cumulative, so that any amount of permitted increase in shares not
implemented in one year may in the Board's discretion be implemented in a
subsequent year. Notwithstanding the foregoing, no more than 200,000 shares
of Common Stock shall be available for issuance upon the exercise of
incentive stock options. Shares issued pursuant to the Plan may be authorized
but unissued Common Stock or authorized and issued Common Stock held in the
Company's treasury or acquired by the Company for the purposes of the Plan.
The Committee may direct that any stock certificate evidencing shares issued
pursuant to
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<PAGE>
the Plan shall bear a legend setting forth such restrictions on
transferability as may apply to such shares pursuant to the Plan.
1.5.2 The maximum number of shares of Common Stock that may be
subject to awards of stock options or stock appreciation rights made to any
one individual pursuant to this Plan in any three-year period shall be
100,000 shares.
1.5.3 If there is any change in the outstanding shares of
Common Stock by reason of a stock dividend or distribution, stock split-up,
recapitalization, combination or exchange of shares, or by reason of any
merger, consolidation, spinoff or other corporate reorganization in which the
Company is the surviving corporation, the number of shares available for
issuance both in the aggregate and with respect to each outstanding award,
the maximum number of shares set forth in Section 1.5.2, and the purchase
price per share under outstanding option awards, shall be equitably adjusted
by the Committee, whose determination shall be final, binding and conclusive.
After any adjustment made pursuant to this Section 1.5.3, the number of
shares subject to each outstanding award shall be rounded to the nearest
whole number.
1.5.4 The following shares of Common Stock shall again become
available for awards under the Plan: any shares subject to an award under the
Plan that remain unissued upon the cancellation or termination of such award
for any reason whatsoever;
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<PAGE>
any shares of restricted stock forfeited pursuant to Section 2.5.5, provided
that any dividends paid on such shares are also forfeited pursuant to Section
2.5.5; and any shares in respect of which a stock appreciation right is
settled for cash. Except as provided in this Section 1.5 and in Section
2.2.7, there shall be no limit on the number or the value of the shares of
Common Stock issuable to any individual under the Plan.
1.6 Definitions of Certain Terms
1.6.1 The "Fair Market Value" of a share of Common Stock on
any day shall be determined as follows.
(a) If the principal market for the Common Stock
(the "Market") is a national securities exchange or the National Association
of Securities Dealers Automated Quotation System ("NASDAQ") National Market,
the last sale price or, if no reported sales take place on the applicable
date, the average of the high bid and low asked price of Common Stock as
reported for such Market on such date or, if no such quotation is made on
such date, on the next preceding day on which there were quotations, provided
that such quotations shall have been made within the ten (10) business days
preceding the applicable date;
(b) If the Market is the NASDAQ National List,
the NASDAQ Supplemental List or another market, the average of the high bid
and low asked price for Common Stock on the applicable date, or, if no such
quotations shall have been made on such
-6-
<PAGE>
date, on the next preceding day on which there were quotations, provided that
such quotations shall have been made within the ten (10) business days
preceding the applicable date; or,
(c) In the event that neither paragraph (a) nor
(b) shall apply, the Fair Market Value of a share of Common Stock on any day
shall be determined by the Committee.
1.6.2 The term "incentive stock option" means an option that
is intended to qualify for special federal income tax treatment pursuant to
sections 421 and 422 of the Internal Revenue Code of 1986 (the "Code"), as
now constituted or subsequently amended, or pursuant to a successor provision
of the Code, and which is so designated in the applicable Plan Agreement. Any
option that is not specifically designated as an incentive stock option shall
under no circumstances be considered an incentive stock option. Any option
that is not an incentive stock option is referred to herein as a
"nonqualified stock option."
1.6.3 The term "employment" means, in the case of a grantee of
an award under the Plan who is not an employee of the Company, the grantee's
association with the Company as a consultant, as an employee of a joint
venture or otherwise.
1.6.4 A grantee shall be deemed to have a "termination
of employment" upon ceasing to be employed by the Company and all
of its subsidiaries. The Committee may in its discretion deter-
-7-
<PAGE>
mine (a) whether any leave of absence constitutes a termination of employment
for purposes of the Plan, (b) the impact, if any, of any such leave of
absence on awards theretofore made under the Plan, and (c) when a change in a
non-employee's association with the Company constitutes a termination of
employment for purposes of the Plan. The Committee shall have the right to
determine whether the termination of a grantee's employment is a dismissal
for cause and the date of termination in such case, which date the Committee
may retroactively deem to be the date of the action that is cause for
dismissal. Such determinations of the Committee shall be final, binding and
conclusive.
ARTICLE II
AWARDS UNDER THE PLAN
2.1 Agreements Evidencing Awards
Each award granted under the Plan (except an award of
unrestricted stock) shall be evidenced by a written agreement ("Plan
Agreement") which shall contain such provisions as the Committee may in its
sole discretion deem necessary or desirable. By accepting an award pursuant
to the Plan, a grantee thereby agrees that the award shall be subject to all
of the terms and provisions of the Plan and the applicable Plan Agreement.
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<PAGE>
2.2 Grant of Stock Options, Stock Appreciation
Rights and Dividend Equivalent Rights
2.2.1 The Committee may grant incentive stock options and
nonqualified stock options (collectively, "options") to purchase shares of
Common Stock from the Company, to such key persons, and in such amounts and
subject to such terms and conditions, as the Committee shall determine in its
sole discretion, subject to the provisions of the Plan.
2.2.2 The Committee may grant stock appreciation rights to
such key persons, and in such amounts and subject to such terms and
conditions, as the Committee shall determine in its sole discretion, subject
to the provisions of the Plan. The terms of a stock appreciation right may
provide that it shall be automatically exercised for a cash payment upon the
happening of a specified event that is outside the control of the grantee,
and that it shall not be exercisable otherwise. Stock appreciation rights may
be granted in connection with all or any part of, or independently of, any
option granted under the Plan. A stock appreciation right granted in
connection with a nonqualified stock option may be granted at or after the
time of grant of such option. A stock appreciation right granted in
connection with an incentive stock option may be granted only at the time of
grant of such option.
2.2.3 The grantee of a stock appreciation right shall
have the right, subject to the terms of the Plan and the applica-
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<PAGE>
ble Plan Agreement, to receive from the Company an amount equal to (a) the
excess of the Fair Market Value of a share of Common Stock on the date of
exercise of the stock appreciation right over (b) the Fair Market Value of a
share of Common Stock on the date of grant (or over the option exercise price
if the stock appreciation right is granted in connection with an option),
multiplied by (c) the number of shares with respect to which the stock
appreciation right is exercised. Payment upon exercise of a stock
appreciation right shall be in cash or in shares of Common Stock (valued at
their Fair Market Value on the date of exercise of the stock appreciation
right) or both, all as the Committee shall determine in its sole discretion.
Upon the exercise of a stock appreciation right granted in connection with an
option, the number of shares subject to the option shall be reduced by the
number of shares with respect to which the stock appreciation right is
exercised. Upon the exercise of an option in connection with which a stock
appreciation right has been granted, the number of shares subject to the
stock appreciation right shall be reduced by the number of shares with
respect to which the option is exercised.
2.2.4 Each Plan Agreement with respect to an option shall set
forth the amount (the "option exercise price") payable by the grantee to the
Company upon exercise of the option evidenced thereby. The option exercise
price per share shall be determined by the Committee in its sole discretion;
provided,
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<PAGE>
however, that the option exercise price of an incentive stock option shall be
at least 100% of the Fair Market Value of a share of Common Stock on the date
the option is granted, and provided further that in no event shall the option
exercise price be less than the par value of a share of Common Stock.
2.2.5 Each Plan Agreement with respect to an option or stock
appreciation right shall set forth the periods during which the award
evidenced thereby shall be exercisable, whether in whole or in part. Such
periods shall be determined by the Committee in its sole discretion;
provided, however, that no incentive stock option (or a stock appreciation
right granted in connection with an incentive stock option) shall be
exercisable more than 10 years after the date of grant.
2.2.6 The Committee may in its sole discretion include in any
Plan Agreement with respect to an option, stock appreciation right or
performance shares a dividend equivalent right entitling the grantee to
receive amounts equal to the ordinary dividends that would be paid, during
the time such award is outstanding and unexercised, on the shares of Common
Stock covered by such award if such shares were then outstanding. In the
event such a provision is included in a Plan Agreement, the Committee shall
determine whether such payments shall be made in cash or in shares of Common
Stock, whether they shall be conditioned upon the exercise of the award to
which they relate, the time or times
-11-
<PAGE>
at which they shall be made, and such other terms and conditions as the
Committee shall deem appropriate.
2.2.7 To the extent that the aggregate Fair Market Value
(determined as of the time the option is granted) of the stock with respect
to which incentive stock options are first exercisable by any employee during
any calendar year shall exceed $100,000, or such higher amount as may be
permitted from time to time under section 422 of the Code, such options shall
be treated as nonqualified stock options.
2.2.8 Notwithstanding the provisions of Sections 2.2.4 and
2.2.5, an incentive stock option may not be granted under the Plan to an
individual who, at the time the option is granted, owns stock possessing more
than 10% of the total combined voting power of all classes of stock of his
employer corporation or of its parent or subsidiary corporations (as such
ownership may be determined for purposes of section 422(b)(6) of the Code)
unless (a) at the time such incentive stock option is granted the option
exercise price is at least 110% of the Fair Market Value of the shares
subject thereto and (b) the incentive stock option by its terms is not
exercisable after the expiration of 5 years from the date it is granted.
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<PAGE>
2.3 Exercise of Options and Stock Appreciation Rights
Subject to the provisions of this Article II, each
option or stock appreciation right granted under the Plan shall be
exercisable as follows:
2.3.1 Unless the applicable Plan Agreement otherwise provides,
an option or stock appreciation right shall become exercisable in four
substantially equal installments, the first of which shall become exercisable
on the first anniversary of the date of grant and the remaining three of
which shall become exercisable, respectively, on the second, third and fourth
anniversaries of the date of grant.
2.3.2 Unless the applicable Plan Agreement otherwise provides,
once an installment becomes exercisable, it shall remain exercisable until
expiration, cancellation or termination of the award.
2.3.3 Unless the applicable Plan Agreement otherwise provides,
an option or stock appreciation right may be exercised from time to time as
to all or part of the shares as to which such award is then exercisable. A
stock appreciation right granted in connection with an option may be
exercised at any time when, and to the same extent that, the related option
may be exercised.
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2.3.4 An option or stock appreciation right shall be exercised
by the filing of a written notice with the Company, on such form and in such
manner as the Committee shall in its sole discretion prescribe. In the case
of a grantee of a stock appreciation right whose transactions in Common Stock
are subject to Section 16(b) of the 1934 Act, an election to exercise a stock
appreciation right in whole or in part shall, to the extent required to
conform to applicable interpretations of Rule 16b-3, occur no sooner than six
months after the grant thereof, and shall be made irrevocably at least six
months prior to such exercise unless both the election and the exercise are
made in a single "window period" of 10 business days beginning on the third
day following release of the Company's quarterly or annual summary statement
of sales and earnings.
2.3.5 Any written notice of exercise of an option shall be
accompanied by payment for the shares being purchased. Such payment shall be
made: (a) by certified or official bank check (or the equivalent thereof
acceptable to the Company) for the full option exercise price; or (b) with
the consent of the Committee, by delivery of shares of Common Stock acquired
at least six months prior to the option exercise date and having a Fair
Market Value (determined as of the exercise date) equal to all or part of the
option exercise price and a certified or official bank check (or the
equivalent thereof acceptable to the Company) for any remaining portion of
the full option exercise
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price; or (c) at the discretion of the Committee and to the extent permitted
by law, by such other provision, consistent with the terms of the Plan, as
the Committee may from time to time prescribe.
2.3.6 Promptly after receiving payment of the full option
exercise price, or after receiving notice of the exercise of a stock
appreciation right for which payment will be made partly or entirely in
shares, the Company shall, subject to the provisions of Section 3.2, deliver
to the grantee or to such other person as may then have the right to exercise
the award, a certificate or certificates for the shares of Common Stock for
which the award has been exercised. If the method of payment employed upon
option exercise so requires, and if applicable law permits, an optionee may
direct the Company to deliver the certificate(s) to the optionee's
stockbroker.
2.3.7 No grantee of an option or stock appreciation right (or
other person having the right to exercise such award) shall have any of the
rights of a stockholder of the Company with respect to shares subject to such
award until the issuance of a stock certificate to such person for such
shares. Except as otherwise provided in Section 1.5.2, no adjustment shall be
made for dividends, distributions or other rights (whether ordinary or
extraordinary, and whether in cash, securities or other property) for which
the record date is prior to the date such stock certificate is issued.
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2.4 Termination of Employment; Death
2.4.1 Except to the extent otherwise provided in Section 2.4.2
or 2.4.3 or in the applicable Plan Agreement, all options and stock
appreciation rights not theretofore exercised shall terminate upon
termination of the grantee's employment for any reason (including death).
2.4.2 If a grantee's employment terminates for any reason
other than death or dismissal for cause, the grantee may exercise any
outstanding option or stock appreciation right on the following terms and
conditions: (a) exercise may be made only to the extent that the grantee was
entitled to exercise the award on the date of employment termination; and (b)
exercise must occur within three months after employment terminates, except
that the three-month period shall be increased to one year if the termination
is by reason of disability, but in no event after the expiration date of the
award as set forth in the Plan Agreement. In the case of an incentive stock
option, the term "disability" for purposes of the preceding sentence shall
have the meaning given to it by section 422(c)(7) of the Code.
2.4.3 If a grantee dies while employed by the Company or any
subsidiary, or after employment termination but during the period in which
the grantee's awards are exercisable pursuant to Section 2.4.2, any
outstanding option or stock appreciation right shall be exercisable on the
following terms and conditions:
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(a) exercise may be made only to the extent that the grantee was entitled to
exercise the award on the date of death; and (b) exercise must occur by the
earlier of the first anniversary of the grantee's death or the expiration
date of the award. Any such exercise of an award following a grantee's death
shall be made only by the grantee's executor or administrator, unless the
grantee's will specifically disposes of such award, in which case such
exercise shall be made only by the recipient of such specific disposition. If
a grantee's personal representative or the recipient of a specific
disposition under the grantee's will shall be entitled to exercise any award
pursuant to the preceding sentence, such representative or recipient shall be
bound by all the terms and conditions of the Plan and the applicable Plan
Agreement which would have applied to the grantee including, without
limitation, the provisions of Sections 3.2 and 3.7 hereof.
2.5 Grant of Restricted Stock
2.5.1 The Committee may grant restricted shares of Common
Stock to such key persons, in such amounts, and subject to such terms and
conditions as the Committee shall determine in its sole discretion, subject
to the provisions of the Plan. Restricted stock awards may be made
independently of or in connection with any other award under the Plan. A
grantee of a restricted stock award shall have no rights with respect to such
award unless such grantee accepts the award within such period as
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the Committee shall specify by executing a Plan Agreement in such form as the
Committee shall determine and, if the Committee shall so require, makes
payment to the Company by certified or official bank check (or the equivalent
thereof acceptable to the Company) in such amount as the Committee may
determine.
2.5.2 Promptly after a grantee accepts a restricted stock
award, the Company shall issue to the grantee a certificate or certificates
for the shares of Common Stock covered by the award. Upon the issuance of
such certificate(s), the grantee shall have the rights of a stockholder with
respect to the restricted stock, subject also to the nontransferability
restrictions and Company repurchase rights described in Sections 2.5.4 and
2.5.5, subject also in the Committee's discretion to a requirement that any
dividends paid on such shares shall be held in escrow until all restrictions
on such shares have lapsed, and subject also to any other restrictions and
conditions contained in the applicable Plan Agreement.
2.5.3 Unless the Committee shall otherwise determine, any
certificate issued evidencing shares of restricted stock shall remain in the
possession of the Company until such shares are free of any restrictions
specified in the applicable Plan Agreement.
2.5.4 Shares of restricted stock may not be sold,
assigned, transferred, pledged or otherwise encumbered or dis-
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posed of except as specifically provided in this Plan or the applicable Plan
Agreement. The Committee at the time of grant shall specify the date or dates
(which may depend upon or be related to the attainment of performance goals
and other conditions) on which the nontransferability of the restricted stock
shall lapse.
2.5.5 During the 90 days following termination of the
grantee's employment for any reason, the Company shall have the right to
require the return of any shares to which restrictions on transferability
apply, in exchange for which the Company shall repay to the grantee (or the
grantee's estate) any amount paid by the grantee for such shares. In the
event that the Company requires such a return of shares, it shall also have
the right to require the return of all dividends paid on such shares, whether
by termination of any escrow arrangement under which such dividends are held,
or otherwise.
2.6 Grant of Unrestricted Stock
The Committee may grant (or sell at a purchase price at least
equal to par value) shares of Common Stock free of restrictions under the
Plan, to such key persons and in such amounts as the Committee shall
determine in its sole discretion. Shares may be thus granted or sold in
respect of past services or other valid consideration.
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2.7 Grant of Performance Shares
2.7.1 The Committee may grant performance share awards to such
key persons, and in such amounts and subject to such terms and conditions, as
the Committee shall in its sole discretion determine, subject to the
provisions of the Plan. Such an award shall entitle the grantee to acquire
shares of Common Stock, or to be paid the value thereof in cash, as the
Committee shall determine, if specified performance goals are met.
Performance shares may be awarded independently of or in connection with any
other award under the Plan. A grantee shall have no rights with respect to a
performance share award unless such grantee accepts the award by executing a
Plan Agreement at such time and in such form as the Committee shall
determine.
2.7.2 The grantee of a performance share award will have the
rights of a shareholder only as to shares for which a certificate has been
issued pursuant to the award and not with respect to any other shares subject
to the award.
2.7.3 Except as may otherwise be provided by the Committee at
any time prior to termination of employment, the rights of a grantee of a
performance share award shall automatically terminate upon the grantee's
termination of employment for any reason.
2.7.4 At the discretion of the Committee, the applica-
ble Plan Agreement may set out the procedures to be followed in
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exercising a performance share award or it may provide that such exercise
shall be made automatically after satisfaction of the applicable performance
goals.
2.7.5 Except as otherwise specified by the Committee, (a) a
performance share award granted in tandem with an option may be exercised
only while the option is exercisable, (b) the exercise of a performance share
award granted in tandem with any other award shall reduce the number of
shares subject to such other award in the manner specified in the applicable
Plan Agreement, and (c) the exercise of any award granted in tandem with a
performance share award shall reduce the number of shares subject to the
latter in the manner specified in the applicable Plan Agreement.
ARTICLE III
MISCELLANEOUS
3.1 Amendment of the Plan; Modification of Awards
3.1.1 Except as otherwise provided herein, the Board
may from time to time suspend, discontinue, revise or amend the Plan in any
respect whatsoever, except that no such amendment shall materially impair any
rights or materially increase any obligations under any award theretofore
made under the Plan without the consent of the grantee (or, after the
grantee's death, the person having the right to exercise the award). For
purposes of this Section 3.1, any action of the Board or the
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Committee that alters or affects the tax treatment of any award shall not be
considered to materially impair any rights of any grantee.
3.1.2 Shareholder approval shall be required with respect to
any amendment which: (a) increases the aggregate number of shares which may
be issued pursuant to incentive stock options or changes the class of
employees eligible to receive such options; or (b) materially increases the
benefits under the Plan to persons whose transactions in Common Stock are
subject to Section 16(b) of the 1934 Act, materially increases the number of
shares which may be issued to such persons, or materially modifies the
eligibility requirements affecting such persons.
3.1.3 The Committee may amend any outstanding Plan Agreement,
including, without limitation, by amendment which would (a) accelerate the
time or times at which the award becomes unrestricted or may be exercised, or
(b) waive or amend any goals, restrictions or conditions set forth in the
Agreement, or (c) extend the scheduled expiration date of the award. However,
any such cancellation or amendment (other than an amendment pursuant to
Section 3.7.2) that materially impairs the rights or materially increases the
obligations of a grantee under an outstanding award shall be made only with
the consent of the grantee (or, upon the grantee's death, the person having
the right to exercise the award).
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3.2 Restrictions
3.2.1 If the Committee shall at any time determine that any
Consent (as hereinafter defined) is necessary or desirable as a condition of,
or in connection with, the granting of any award under the Plan, the issuance
or purchase of shares or other rights thereunder, or the taking of any other
action thereunder (each such action being hereinafter referred to as a "Plan
Action"), then such Plan Action shall not be taken, in whole or in part,
unless and until such Consent shall have been effected or obtained to the
full satisfaction of the Committee.
3.2.2 The term "Consent" as used herein with respect to any
Plan Action means (a) any and all listings, registrations or qualifications
in respect thereof upon any securities exchange or under any federal, state
or local law, rule or regulation, (b) any and all written agreements and
representations by the grantee with respect to the disposition of shares, or
with respect to any other matter, which the Committee shall deem necessary or
desirable to comply with the terms of any such listing, registration or
qualification or to obtain an exemption from the requirement that any such
listing, qualification or registration be made and (c) any and all consents,
clearances and approvals in respect of a Plan Action by any governmental or
other regulatory bodies.
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<PAGE>
3.3 Nonassignability
No award or right granted to any person under the Plan or
under any Plan Agreement shall be assignable or transferable other than by
will or by the laws of descent and distribution. All rights granted under the
Plan or any Plan Agreement shall be exercisable during the life of the
grantee only by the grantee or the grantee's legal representative.
3.4 Requirement of Notification of
Election Under Section 83(b) of the Code
If any grantee shall, in connection with the acquisition of
shares of Common Stock under the Plan, make the election permitted under
section 83(b) of the Code (i.e., an election to include in gross income in
the year of transfer the amounts specified in section 83(b)), such grantee
shall notify the Company of such election within 10 days of filing notice of
the election with the Internal Revenue Service, in addition to any filing and
notification required pursuant to regulations issued under the authority of
Code section 83(b).
3.5 Requirement of Notification Upon Disqualifying
Disposition Under Section 421(b) of the Code
Each Plan Agreement with respect to an incentive stock option
shall require the grantee to notify the Company of any disposition of shares
of Common Stock issued pursuant to the exercise of such option under the
circumstances described in
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section 421(b) of the Code (relating to certain disqualifying dispositions),
within 10 days of such disposition.
3.6 Withholding Taxes
3.6.1 Whenever cash is to be paid pursuant to an award under
the Plan, the Company shall be entitled to deduct therefrom an amount
sufficient in its opinion to satisfy all federal, state and other
governmental tax withholding requirements related to such payment.
3.6.2 Whenever shares of Common Stock are to be delivered
pursuant to an award under the Plan, the Company shall be entitled to require
as a condition of delivery that the grantee remit to the Company an amount
sufficient in the opinion of the Company to satisfy all federal, state and
other governmental tax withholding requirements related thereto. With the
approval of the Committee, which it shall have sole discretion to grant, the
grantee may satisfy the foregoing condition by electing to have the Company
withhold from delivery shares having a value equal to the amount of tax to be
withheld. Such shares shall be valued at their Fair Market Value on the date
as of which the amount of tax to be withheld is determined (the "Tax Date").
Fractional share amounts shall be settled in cash. Such a withholding
election may be made with respect to all or any portion of the shares to be
delivered pursuant to an award. To the extent required for such a withholding
of stock to qualify for the exemption avail-
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able under Rule 16b-3, such an election by a grantee whose transactions in
Common Stock are subject to Section 16(b) of the 1934 Act shall be: (a)
subject to the approval of the Committee in its sole discretion; (b)
irrevocable; (c) made no sooner than six months after the grant of the award
with respect to which the election is made; and (d) made at least six months
prior to the Tax Date unless such withholding election is in connection with
exercise of an option and both the election and the exercise occur prior to
the Tax Date in a "window period" of 10 business days beginning on the third
day following release of the Company's quarterly or annual summary statement
of sales and earnings.
3.7 Change in Control
3.7.1 For purposes of this Section 3.7, a "Change In Control"
shall be deemed to have occurred upon the happening of any of the following
events: (a) any "person," including a "group," as such terms are defined in
Sections 13(d) and 14(d) of the 1934 Act and the rules promulgated
thereunder, becomes the beneficial owner, directly or indirectly, whether by
purchase or acquisition or agreement to act in concert or otherwise, of 15%
or more of the outstanding shares of Common Stock of the Company; (b) a cash
tender or exchange offer for 50% or more of the outstanding shares of Common
Stock of the Company is commenced; (c) the shareholders of the Company
approve an agreement to merge, consolidate, liquidate, or sell all or
substantially all
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of the assets of the Company; or (d) two or more directors are elected to the
Board without having previously been nominated and approved by the members of
the Board incumbent on the day immediately preceding such election.
3.7.2 Upon the happening of a Change in Control:
(a) notwithstanding any other provision of this
Plan, any option or stock appreciation right then outstanding whose date of
grant was at least six months prior to the date of the Change in Control
shall become fully vested and immediately exercisable;
(b) to the extent permitted by law, the Committee
may, in its sole discretion, amend any Plan Agreement in such manner as it
deems appropriate, including, without limitation, by amendments that advance
the dates upon which any or all outstanding shares of restricted stock shall
become free of restrictions or upon which any or all outstanding performance
share awards shall become payable, or that advance the dates upon which any
or all outstanding awards of any type shall terminate.
3.7.3 Whenever deemed appropriate by the Committee, any action
referred to in Section 3.7.2(b) may be made conditional upon the consummation
of the applicable Change in Control transaction.
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3.8 Right of Discharge Reserved
Nothing in the Plan or in any Plan Agreement shall confer upon
any grantee the right to continue in the employ of the Company or affect any
right which the Company may have to terminate such employment.
3.9 Nature of Payments
3.9.1 Any and all grants of awards and issuances of shares of
Common Stock under the Plan shall be in consideration of services performed
for the Company by the grantee.
3.9.2 All such grants and issuances shall constitute a special
incentive payment to the grantee and shall not be taken into account in
computing the amount of salary or compensation of the grantee for the purpose
of determining any benefits under any pension, retirement, profit-sharing,
bonus, life insurance or other benefit plan of the Company or under any
agreement between the Company and the grantee, unless such plan or agreement
specifically provides otherwise.
3.10 Non-Uniform Determinations
The Committee's determinations under the Plan need not be
uniform and may be made by it selectively among persons who receive, or are
eligible to receive, awards under the Plan (whether or not such persons are
similarly situated). Without limiting the generality of the foregoing, the
Committee shall be
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entitled, among other things, to make non-uniform and selective
determinations, and to enter into non-uniform and selective Plan agreements,
as to (a) the persons to receive awards under the Plan, (b) the terms and
provisions of awards under the Plan, and (c) the treatment of leaves of
absence pursuant to Section 1.6.4.
3.11 Other Payments or Awards
Nothing contained in the Plan shall be deemed in any
way to limit or restrict the Company from making any award or
payment to any person under any other plan, arrangement or
understanding, whether now existing or hereafter in effect.
3.12 Section Headings
The section headings contained herein are for the purpose of
convenience only and are not intended to define or limit the contents of said
sections.
3.13 Effective Date and Term of Plan
3.13.1 The Plan was adopted by the Board on April 6, 1994,
subject to approval by the Company's shareholders. All awards under the Plan
prior to such shareholder approval are subject in their entirety to such
approval. If such approval is not obtained prior to the first anniversary of
the date of adoption of the Plan, the Plan and all awards thereunder shall
terminate on that date.
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3.13.2 Unless sooner terminated by the Board, the provisions
of the Plan respecting the grant of incentive stock options shall terminate
on the tenth anniversary of the adoption of the Plan by the Board, and no
incentive stock option awards shall thereafter be made under the Plan. All
such awards made under the Plan prior to its termination shall remain in
effect until such awards have been satisfied or terminated in accordance with
the terms and provisions of the Plan and the applicable Plan Agreements.
3.14 Governing Law
All rights and obligations under the Plan shall be construed
and interpreted in accordance with the laws of the State of New York, without
giving effect to principles of conflict of laws.
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EXHIBIT 10.9
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (this "Agreement") made this 22nd day of
April, 1994, between Mt. Pleasant Shopping Center, Angola Plaza and Shiloh
Plaza, each a Michigan co-partnership (collectively, the "Owner"), and AGREE
REALTY CORPORATION (the "Agent").
W I T N E S S E T H:
WHEREAS, Owner owns certain commercial properties in various areas
which are not being transferred to Agent pursuant to the transactions to be
entered into concurrently with Agent's initial public offering (the
"Formation");
WHEREAS, Owner is transferring to Agent as part of the Formation all
of the assets of the entity which prior to the Formation had provided
management services with respect to such properties; and
WHEREAS, Owner desires that Agent shall act as the management agent
for the Properties (as hereinafter defined), upon the terms and conditions
herein set forth, and Agent is willing to so act,
NOW, THEREFORE, in consideration of the mutual covenants and
conditions set forth herein, the parties agree as follows:
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<PAGE>
1. Appointment as Agent. Owner hereby appoints Agent as
the sole and exclusive management agent for the commercial properties
identified on Exhibit "A" attached hereto (the "Properties") for the term
of this Agreement.
2. Term. This Agreement shall remain in full force and
effect until the first to occur of the following events:
(a) Five (5) years from the date of the execution of this
Agreement, such agreement shall be automatically
renewed for an additional five-year term unless Agent
or Owner gives 90 days advance written notice to
terminate this Agreement.
(b) Owner sells or otherwise disposes of all of the
Properties.
(c) Agent, upon 30 days advance written notice to Owner,
elects to terminate this Agreement.
3. Management Functions. During the term of this Agreement,
Agent will provide the following services:
(a) Collect rents, including percentage rents and other
similar amounts to be paid by tenants of the Properties, and Agent
may give receipts for all amounts collected. Agent shall examine any
records of gross sales and any other reports submitted by tenants for
the purpose of computing the amounts of any percentage rents. Agent
shall have the right, in its own name or in the name of the Owner and
at the expense of Owner, to take any and all actions, which
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Agent deems advisable and which Owner might take, in the event of
breach by any tenant of any covenant, provision, or condition under
its lease with Owner. Agent shall not be required to institute legal
action against any tenant.
(b) Cause to be maintained (or cause the tenants to
maintain) the Properties and common areas thereof in good repair and
in a clean and orderly condition. Agent shall inform Owner in advance
of all anticipated, extraordinary expenditures in excess of $5,000
for any one item. Owner shall reimburse to Agent, pursuant to the
provisions of Section 5 hereof, all costs incurred by Agent in
performing its functions under this part (b) and Owner shall receive
credit for all rebates, commissions, discounts and allowances.
(c) Assist Owner in filling vacancies with new tenants and
obtain extensions and renewals of the leases of existing tenants. The
obligations of Agent and Owner under this part (c) shall extend to
the leasing of new space created by further improvement or
development of the Properties. Owner shall reimburse to Agent the
costs incurred by Agent in performing its functions under this part
(c).
(d) Maintain and prepare books and records showing all items
of income and expense in such detail and accuracy as will allow Owner
to prepare financial statements and tax returns in accordance with
generally accepted accounting principles consistently applied.
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<PAGE>
(e) Delegate its duties under this Agreement to such
employees or other agents as Agent may select, but no such delegation
shall relieve Agent of its obligation to perform such duties.
(f) Perform such other services as are necessary or
customary for proper management and maintenance supervision of the
Properties.
4. Agent's Fees. For the services rendered by Agent, Owner shall
pay to Agent an annual sum equal to three and one-half percent (3-1/2%) of
the fixed monthly rent (plus percentage rent becoming due and payable under
the leases of all of the Properties). Such fees shall be deductible by Agent,
pursuant to the provisions of Section 5 hereof, from the rents collected.
5. Remittances to Owner. All funds collected by Agent in its
management of the Properties shall be deposited in a separate bank account.
After deduction of all costs, expenses and payments chargeable to Owner
pursuant to this Agreement (including the fees or other amounts owed or
otherwise payable to Agent pursuant to Sections 3(b), 4 or 7 herein), Agent
shall remit any balance to Owner within 10 calendar days following each month
during the terms of this Agreement.
6. Notice to Owner. Agent shall promptly advise Owner in
writing of the service upon Agent of any summons, subpoena or
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other similar documents setting forth any claimed liability of Owner or the
Properties.
7. Professional Fees. The Owner shall pay all legal and
other professional fees reasonably incurred by Agent in the management and
operation of the Properties.
8. Right of First Refusal.
(a) If the Owner receives and is willing to accept an
arms-length, bona fide, written offer (the "Third Party Offer") from an
unaffiliated third party (the "Third Party") to purchase all or any part of
the Properties (the "Subject Properties"), Agent shall have a right of first
refusal to buy the Subject Properties on the same terms and conditions as the
Third Party Offer. Owner shall send a written notice of such Third Party
Offer to the Agent, to which notice a copy of the Third Party Offer shall be
attached (the date of receipt of such notice by Agent is referred to herein
as the "Notice Date"). Such right shall be exercised, if at all, by the Agent
sending a written notice to the Owner within 30 days of the Notice Date (the
"Exercise Period").
(b) If the right of first refusal provided for in paragraph
8(a) above is not exercised within the Exercise Period or the Agent does not
consummate the transaction with respect to the Subject Properties within 120
days from and including the Notice Date, then the Owner may, at any time
during the 120 day period following the later of (i) the Exercise Period or
(ii) the
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120 day period following the Notice Date, transfer all or any part of the
Subject Properties to the Third Party in accordance with the Third Party
Offer; provided, however, such transfer shall be made to the Third Party only
on the terms and conditions of the Third Party Offer.
9. Indemnification. Owner shall indemnify and hold harmless Agent
from and against any and all claims, losses, fees and expenses (including
reasonable attorneys' fees and expenses) and liabilities arising from the
performance of its functions under this Agreement or arising out of damage to
property or injury to or death of persons at the Properties; provided,
however, this indemnification shall not apply to acts of willful misconduct
or gross negligence of Agent. Owner agrees to cause Agent to be named as an
additional insured under all public liability and Workmen's Compensation
Insurance maintained in connection with the Properties.
10. Assignment and Binding Effect. Agent shall have the right to
assign its rights under this Agreement with the written consent of Owner,
which consent shall not be unreasonably withheld. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto, their
respective legal representatives, heirs, successors and permitted assigns.
11. Notices. All notices relating to this Agreement shall
be in writing and shall be deemed to have been given at the time
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when delivered personally or sent in the United States by registered or
certified mail, return receipt requested, in a postpaid envelope, addressed
to the other party at the address set forth below, or to such changed address
as the other party may have fixed by notice; provided, however, that any
notice of change of address shall be effective only upon receipt:
To Owner:
c/o Agree Realty Corporation
31850 Northwestern Highway
Farmington Hills, Michigan 48334
-copy to-
Kramer, Levin, Naftalis, Nessen,
Kamin & Frankel
919 Third Avenue
New York, New York 10022
Attn: David P. Levin
To Agent:
31850 Northwestern Highway
Farmington Hills, Michigan 48334
12. Severability; Survival. If any provision of this Agreement or
the application of any such provision to any party or circumstances shall be
determined by any court of competent jurisdiction to be invalid and
unenforceable to any extent, the remainder of this Agreement or the
application of such provision to such person or circumstances other than
those to which it is so determined to be invalid and unenforceable, shall not
be affected thereby, and each provision hereof shall be enforced to the
fullest extent permitted by law.
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13. Governing Law. This Agreement shall be governed and
construed in accordance with the internal laws of the State of Michigan
without regard to conflict of laws provisions.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement.
Mt. Pleasant Shopping Center
Angola Plaza
Shiloh Plaza,
each a Michigan co-partnership
By: its General Partner
/s/ Richard Agree
------------------------------
Richard Agree
AGENT:
AGREE REALTY CORPORATION
By: /s/ Kenneth Howe
-------------------------
Its Secretary
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EXHIBIT 10.10
CONTRIBUTION AGREEMENT
by and between
Edward Rosenberg and Richard Agree, as to property known as
Borman Center, Roseville, Michigan;
Capital Plaza Shopping Center, a Michigan Co-Partnership, as to property known
as Capital Plaza, Frankfort, Kentucky;
Charlevoix Commons, a Michigan Co-Partnership, as to property known as
Charlevoix Commons, Charlevoix, Michigan;
Chippewa Commons, a Michigan Co-Partnership, as to property known as
Chippewa Commons, Chippewa, Wisconsin;
Grayling Plaza, a Michigan Co-Partnership, as to property known as
Grayling Plaza, Grayling, Michigan;
Iron Mountain Plaza, a Michigan Co-Partnership, as to property known as
Iron Mountain Plaza, Iron Mountain, Michigan;
Ironwood Commons, a Michigan Co-Partnership, as to property known as
Ironwood Commons, Ironwood, Michigan;
Marshall Plaza Phase Two, a Michigan Co-Partnership, as to property known as
Marshall Plaza Phase Two, Marshall, Michigan;
North Lakeland Plaza, a Michigan Co-Partnership, as to property known as
North Lakeland Plaza, Lakeland, Florida;
Oscoda Plaza, a Michigan Co-Partnership, as to property known as
Oscoda Plaza, Oscoda, Michigan;
Perrysburg Plaza, an Ohio Partnership, as to property known as
Perrysburg Plaza, Perrysburg, Ohio;
Petoskey Town Center, a Michigan Co-Partnership, as to property known as
Petoskey Town Center, Petoskey, Michigan;
Plymouth Commons, a Michigan Co-Partnership, as to property known as
Plymouth Commons, Plymouth, Wisconsin;
Rapids Associates, a Michigan Co-Partnership, as to property known as
Rapids Associates, Big Rapids, Michigan;
Shawano Plaza, a Michigan Co-Partnership, as to property known as
Shawano Plaza, Shawano, Wisconsin;
West Frankfort Plaza, an Illinois Partnership, as to property known as
West Frankfort Plaza, West Frankfort, Illinois;
Winter Garden Plaza, a Michigan Co-Partnership, as to property known as
Winter Garden Plaza, Winter Garden, Florida
as Transferor
and
AGREE LIMITED PARTNERSHIP,
as Transferee
<PAGE>
TABLE OF CONTENTS
Section Page
- ------- ----
1. Conveyance of Property........................................... 2
2. Contribution Terms............................................... 2
3. Title............................................................ 2
4. Representations and Warranties of Transferor..................... 3
5. Assumption by Transferee......................................... 6
6. The Closing...................................................... 7
7. Notices.......................................................... 11
8. Miscellaneous.................................................... 11
EXHIBITS
- --------
EXHIBIT A - Legal Description
EXHIBIT B - Schedule of Permitted Exceptions
EXHIBIT C - Schedule of Legal Proceedings
EXHIBIT D - Schedule of Leases
EXHIBIT E - Schedule of Security Deposits
EXHIBIT F - Schedule of overnmental Notices
EXHIBIT G - Schedule of Environmental Reports
EXHIBIT H - Schedule of Service Contracts
EXHIBIT I - Schedule of Insurance and Insurance Certificates
EXHIBIT J - Schedule of Limited Partnership Interests
<PAGE>
CONTRIBUTION AGREEMENT
THIS CONTRIBUTION AGREEMENT is made and entered into as of April 21,
1994, by and between Edward Rosenberg and Richard Agree, as to property known
as Borman Center, Roseville, Michigan; Capital Plaza Shopping Center, a
Michigan Co-Partnership, as to property known as Capital Plaza, Frankfort,
Kentucky; Charlevoix Commons, a Michigan Co-Partnership, as to property known
as Charlevoix Commons, Charlevoix, Michigan; Chippewa Commons, a Michigan
Co-Partnership, as to property known as Chippewa Commons, Chippewa,
Wisconsin; Grayling Plaza, a Michigan Co-Partnership, as to property known
as Grayling Plaza, Grayling, Michigan; Iron Mountain Plaza, a Michigan
Co-Partnership, as to property known as Iron Mountain Plaza, Iron Mountain,
Michigan; Ironwood Commons, a Michigan Co-Partnership, as to property known
as Ironwood Commons, Ironwood, Michigan; Marshall Plaza Phase Two, a Michigan
Co-Partnership, as to property known as Marshall Plaza Phase Two, Marshall,
Michigan; North Lakeland Plaza, a Michigan Co-Partnership, as to property
known as North Lakeland Plaza, Lakeland, Florida; Oscoda Plaza, a Michigan
Co-Partnership, as to property known as Oscoda Plaza, Oscoda, Michigan;
Perrysburg Plaza, an Ohio Partnership, as to property known as Perrysburg
Plaza, Perrysburg, Ohio; Petoskey Town Center, a Michigan Co-Partnership, as
to property known as Petoskey Town Center, Petoskey, Michigan; Plymouth
Commons, a Michigan Co-Partnership, as to property known as Plymouth Commons,
Plymouth, Wisconsin; Rapids Associates, a Michigan Co-Partnership, as to
property known as Rapids Associates, Big Rapids, Michigan; Shawano Plaza, a
Michigan Co-Partnership, as to property known as Shawano Plaza, Shawano,
Wisconsin; West Frankfort Plaza, an Illinois Partnership, as to property
known as West Frankfort Plaza, West Frankfort, Illinois; Winter Garden Plaza,
a Michigan Co-Partnership, as to property known as Winter Garden Plaza,
Winter Garden, Florida (collectively, "Transferors" and each, a
"Transferor"), and AGREE LIMITED PARTNERSHIP, a Delaware limited partnership
("Transferee").
WITNESSETH:
WHEREAS, Transferors desire to convey to Transferee, and Transferee
desires to acquire from Transferors, certain land and improvements located
thereon as set forth above and as more particularly described in the legal
descriptions attached hereto as Exhibit A, together with all personal
property owned by any Transferor and located at and used in connection with
the operation of such real property as more fully described below (such
properties are sometimes hereinafter referred to collectively as the
"Portfolio Properties");
WHEREAS, the conveyance contemplated hereunder is in connection with
a proposed public offering by Agree Realty Corporation, a Maryland
corporation ("Agree Corp."), the sole general partner of Transferee. Agree
Corp. intends to qualify as a real estate investment trust for Federal income
tax purposes and will control the Portfolio Properties through its general
partnership interest in Transferee. The formation of Agree Corp. and
Transferee, the conveyance of the Portfolio Properties and the public
offering by Agree Corp., all as more particularly described in the
Registration Statement on Form S-11 for Agree Corp. (Registration. No.
33-73858), as amended and supplemented (the "S-11"), are hereinafter referred
to collectively as the "REIT Transaction." The consummation of the
contribution
<PAGE>
hereunder and all of the other elements of the REIT Transaction are referred
to herein as the "Closing"; and
WHEREAS, Transferors desire to contribute the Property (as defined
below) to Transferee in exchange for the consideration stated herein, subject
to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree
as follows:
1. Conveyance of Property. Upon the terms and conditions set forth
herein, each Transferor agrees to grant and convey to Transferee, and
Transferee agrees to acquire from such Transferor, such Transferor's interest
in the real property described in the legal description attached hereto as
Exhibit A applicable to such Transferor, together with the appurtenances
thereto, including, but not limited to, any appurtenances, easements, rights
of way, licenses and privileges belonging or appurtenant to such real
property; all mineral, oil and gas rights, water rights, sewer rights and
other utility rights allocated to such real property and belonging to each
such Transferor; all right, title and interest of each such Transferor in and
to any roads, streets and ways, public and private, serving such real
property, including all rights to the development of such real property
granted by governmental entities having jurisdiction over such real property
(collectively, the "Real Property"); together with all improvements,
buildings and structures located on or attached to the Real Property
(collectively, the "Improvements"); together with all fixtures, equipment,
systems, machinery and other items of personal property owned by each such
Transferor and located at and used in connection with the operation of the
Real Property and Improvements (collectively, the "Personal Property");
together with all rights, title and interest of each such Transferor under
the Leases (as hereinafter defined); and together with all intangible
property related to or used in connection with the Real Property,
Improvements or Personal Property, including, without limitation, all
trademarks, trade and business names, service contracts, guarantees,
licenses, permits, certificates, approvals, authorizations, variances,
consents, warranties, and goodwill (the "Intangibles"). The Real Property,
the Improvements, the Personal Property, the Intangibles and all other rights
and interests described above are collectively referred to herein as the
"Property."
2. Contribution Terms. In exchange for the conveyance of the Property
by Transferors to Transferee hereunder, Transferee will issue limited
partnership interests in Transferee (the "Partnership Interests"), or the
right to receive such Partnership Interests, which at the direction of
Transferors shall be issued to, or for the benefit of, Richard Agree, Edward
Rosenberg and Joel Weiner as set forth on Exhibit J. Such Partnership
Interests and the covenants and agreements of Transferee contained herein
shall be the sole consideration for the contribution of the Property.
3. Title. Title to the Property shall be good and marketable and
shall be conveyed in fee simple, by covenant deed (or such comparable form of
deed as may be the customary means of conveyance in the jurisdiction in which
the Property is located), except for the Real Property known as Borman Center
and Perrysburg Plaza, which shall be
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conveyed by an assignment of a leasehold interest, in each case free and
clear of any and all liens, mortgages, security interests, leases,
restrictions, easements, options, claims, unrecorded agreements or other
encumbrances of any kind whatsoever, except for (i) the deed(s) of trust,
mortgage(s) and other security instruments, if any, identified on Exhibit B
attached hereto (the "Security Instruments"); (ii) the Leases (as hereinafter
defined); and (iii) those other exceptions to title identified on Exhibit B
attached hereto or as approved by Transferee and listed on any title
insurance policy or "marked up" title commitment to be delivered to
Transferee at Closing (the Security Instruments and such other exceptions
shown on Exhibit B being hereinafter referred to collectively as the
"Permitted Exceptions").
4. Representations and Warranties of Transferor. Each Transferor
hereby makes the following representations and warranties to Transferee, as
to itself and the Property to be conveyed by such Transferor hereunder only,
all of which are made and shall be true as of the date of the Closing:
(a) Transferor is the owner and holder of good and marketable fee
simple title to the Property, or in the case of the Real Property known as
Borman Center and Perrysburg Plaza, a valid leasehold interest, in each case
free and clear of any and all liens, mortgages, security interests, leases,
restrictions, easements, options, claims, unrecorded agreements and other
encumbrances of any kind whatsoever, except for the Leases (as hereinafter
defined) and the Permitted Exceptions.
(b) Transferor is not a "foreign person" as that term is used in
the federal Foreign Investment in Real Property Tax Act of 1980 and the 1981
Tax Reform Act, as amended.
(c) The execution, delivery and performance of this Contribution
Agreement by Transferor (i) does not require any further action, consent,
order, registration, filing, declaration or approval in order to make this
Contribution Agreement a binding and enforceable obligation of Transferor or
for Transferor to consummate the transaction contemplated hereby, except as
otherwise disclosed in the S-11 and (ii) does not, and will not with notice
or the passage of time, conflict with or breach, in any manner which would
have a material and adverse effect upon Transferor or the Property, any
agreement or instrument to which Transferor is a party or by which Transferor
or the Property is bound or to which Transferor or the Property is subject,
or any applicable regulation of any governmental agency, or any judgment,
order or decree of any court having jurisdiction over Transferor or the
Property.
(d) The persons executing this Contribution Agreement on behalf
of Transferor have been duly authorized to do so by all necessary partnership
action, and this Contribution Agreement has been duly executed by Transferor
and constitutes a legal, valid and binding obligation of Transferor and is
enforceable against Transferor in accordance with its terms, subject to
principles of equity and applicable bankruptcy, insolvency and other laws
affecting the rights of creditors generally.
(e) In each case except for the Real Property known as Borman
Center, Transferor is a general partnership, duly formed, validly existing,
and in good standing under
3
<PAGE>
the laws of the state set forth in the preamble to this Agreement, and is
duly qualified to transact business in the jurisdiction in which the Property
is located, except where the failure to be so qualified does not have a
material adverse effect on the Transferor.
(f) There are no lawsuits nor any other legal or governmental
proceedings pending or, to the best of Transferor's actual knowledge,
threatened that concern, involve, affect or are brought in connection with
Transferor's interest in the Property, the Leases (as hereinafter defined) or
the Property, except as identified on Exhibit C attached hereto.
(g) The Property shall be conveyed subject to existing tenancies,
leaseholds and rights of occupancy affecting the Property pursuant to the
leases identified on the rent roll attached hereto as Exhibit D
(collectively, the "Leases"). Exhibit D contains a true, correct and complete
list of all Leases, including any and all amendments or supplements thereto,
and all information regarding the Leases which is included in such Exhibit D
is accurate in all material respects. Except as may otherwise be expressly
provided in the Leases, disclosed on Exhibit D or disclosed in the S-11, (i)
no portion of the Property is occupied or used in any manner by any person or
entity other than pursuant to the Leases; (ii) neither Transferor's interest
in the Leases nor the rents payable thereunder are currently assigned,
pledged or encumbered in any manner, except as collateral pursuant to the
Security Instruments; (iii) the Leases are in full force and effect; (iv) no
tenant under any of the Leases is in material default; (v) Transferor has not
received notice from any tenant under any of the Leases of any alleged
default or breach by Transferor under any such Leases and no such assertion
has been made to Transferor by any tenant under any of the Leases, nor has
any right to offset been exercised under any of the Leases; (vi) all
obligations of the landlord required to be performed under the Leases have
been fully performed and there are no agreements with any tenant under the
Leases for the performance of any work by Transferor, which work has not been
performed and/or paid for; (vii) no tenant has given Transferor notice of its
intention to vacate its demised premises prior to the end of the term, of its
lease; (viii) no tenant under any of the Leases is entitled to, nor has any
tenant claimed to Transferor that it is entitled to, any purchase option,
concession, allowance, set-off, rebate or refund or has prepaid rents or
other charges for more than the current month; and (ix) all security deposits
and letters of credit required under the Leases (collectively, the "Security
Deposits") have been paid to and are being held by Transferor in compliance
with the Leases and, to the best of Transferor's actual knowledge, applicable
law. Attached hereto as Exhibit E is a true, correct and complete list of the
Security Deposits.
(h) To the best of Transferor's actual knowledge, no Hazardous
Materials (as hereinafter defined) are located on or about the Property,
except (i) as may be described in the reports listed in or attached as
Exhibit G hereto, (ii) as may be used in connection with the operation and
maintenance of the Property in compliance with applicable law, and (iii) as
may be brought onto the Property, sold by tenants of the Property or used by
tenants of the Property in a manner customary with such tenant's business and
in compliance with applicable law. In addition, Transferor has not used the
Property for the storage, manufacture, treatment or disposal of Hazardous
Materials. As used in this Contribution Agreement, "Hazardous Materials"
shall mean and include all hazardous or toxic substances, wastes, or
materials, any pollutants or contaminants (including, without limitation,
asbestos and materials which include hazardous constituents), or any other
similar substances or materials which are
4
<PAGE>
included under or regulated by any local, state or federal laws, rules,
orders and regulations pertaining to environmental regulation, or the use,
processing, storage, disposal, generation or transportation of Hazardous
Materials, or any contamination, cleanup or disclosure related thereto
including, but not limited to, any "hazardous substances," "hazardous waste"
and "hazardous materials," as defined in the Comprehensive Environmental
Response Compensation and Liability Act of 1984, 42 U.S.C. Section 9601 et
seq., as amended, the Resource Conservation and Recovery Act of 1976, as
amended, and the Hazardous and Solid Waste Amendment of 1984, as amended, and
the regulations adopted pursuant thereto.
(i) No bankruptcy, receivership, insolvency, rearrangement or
similar action involving the Property, Transferor, whether voluntary or
involuntary, is pending and Transferor has no present intention of filing any
bankruptcy, insolvency, rearrangement or any similar action or proceeding.
(j) (i) All material consents, authorizations, variances,
certificates of occupancy for occupied space, waivers, licenses, permits and
approvals required for the occupancy, operation, maintenance and management
of the Property (collectively, the "Approvals") have been validly obtained
and are in full force and effect; and (ii) the Property is operated in
accordance with all applicable zoning, land use, environmental, building
code, fire code and other applicable laws and regulations, except where the
failure to do so would not have a material adverse effect on Transferor, the
Property or the Leases. Transferor has not received from any governmental
authority written notice of any revocation, suspension or violation of any of
the Approvals or violation of or non-compliance with any laws, ordinances,
regulations or orders relating to the Property that have not been fully
corrected and remedied, except as described in Exhibit F attached hereto.
(k) No governmental body has served upon Transferor or, to the
best of Transferor's knowledge, any of the tenants under the Leases any
notice (which notice remains, or relates to a proceeding which remains,
pending) of any condemnation, annexation or eminent domain proceeding with
respect to all or any portion of the Property. Transferor has no knowledge of
any pending, threatened, proposed or contemplated proceeding of the type
described in the immediately preceding sentence against the Property or any
part thereof.
(l) All brokerage, service, equipment, supply, management or
leasing agreements relating to the Property to which Transferor is a party
(collectively, "Service Contracts") are identified on Exhibit H attached
hereto. True and correct copies of the Service Contracts have been exhibited
to Transferee. There are no brokerage, service, management, supply or other
leasing commissions due or payable in connection with any of the Leases or
any new or renewal leases or amendments of the Leases or any other agreements
to which Transferor is subject, and there are no defaults by Transferor or
the other parties to such contracts thereunder, except as set forth on
Exhibit H.
(m) Exhibit I contains a correct and complete description of
the insurance policies currently maintained by Transferor with respect to the
Property. Transferor has not received any notices of non-renewal or
cancellation of any such policies or notice of any
5
<PAGE>
material increase in the cost of current insurance or of any defects or
inadequacies which, if not corrected, would result in termination of any
insurance coverage or a material increase in the cost thereof. Exhibit I also
contains a correct and complete list of all insurance maintained by tenants
under the Leases under which Transferor is a named insured.
(n) There is ingress and egress to and from the Property
either by easement or direct access from a duly opened and dedicated public
road. Transferor has no knowledge of any pending or threatened restriction or
denial of such access, governmental or otherwise, and Transferor has no
knowledge of any federal, state or local plans to change the highway or road
system in the immediate vicinity of the Property in any manner which would
have a material adverse effect on the Property.
(o) To the best of Transferor's actual knowledge, the Property
and the present use and condition thereof do not violate any applicable
easement, deed restrictions or other covenants, restrictions or agreements,
in any manner which would have a material adverse effect on the Property. The
Property and the present use and condition thereof do not violate any site
plan approvals, zoning or subdivision regulations or urban redevelopment
plans applicable to the Property, as modified by any duly issued variances,
in any manner which would have a material adverse effect on the Property.
(p) Except for real and personal property taxes and
assessments for the current year which are not yet due and payable, all real
and personal property taxes and assessments relating to the Property have
been paid. There are no special assessments affecting the Property and
Transferor has no notice of any threatened special assessments affecting the
Property or any contemplated improvements to the Property which may result in
special assessments affecting the Property. Transferor has no notice of any
proposed change in the assessed value of all or any portion of the Property.
(q) (i) The roofs of the buildings comprising the Improvements
are water tight and free of leaks; (ii) the foundations of the buildings
compromising the Improvements are free of defects; (iii) all mechanical
systems, including air conditioning, plumbing, heating, ventilating, sewage,
drainage and electrical systems are free of material defects and in good
repair and condition, and are adequate to service the requirements of the
Improvements and the Property; and (iv) the Improvements are free of any
structural defect.
(r) Transferor is not in default under any of the Security
Instruments, all required payments thereunder have been made, and the
transfer of the Property as contemplated in this Contribution Agreement will
not cause a default under any of the Security Instruments.
5. Assumption by Transferee. Transferee acknowledges and agrees that
Transferee shall take title to the Property subject to and assume the
obligations of Transferors in, to, under or with respect to the Leases, the
Security Deposits and the Service Contracts which accrue from and after the
Closing. In addition, Transferee shall take title to the Property subject to,
and, if required, assume the obligations of Transferors under, the Security
Instruments from and after the Closing. The foregoing shall be evidenced by
such other documents as may be necessary or appropriate to implement the
terms hereof.
6
<PAGE>
6. The Closing.
(a) At Closing, Transferee shall execute such documents as may
be necessary or appropriate to evidence the contribution of the Property to
Transferee and the granting of the Partnership Interests.
(b) At Closing, Transferors shall execute, acknowledge and
deliver to Transferee covenant or similar deeds or assignments of leasehold
interest, as appropriate, an assignment of Transferors' interest as lessor in
the Leases, a bill of sale and other documents necessary or appropriate to
convey all of Transferors' right, title and interest in and to the Property
and all of Transferors' interests therein to Transferee, in form and
substance reasonably satisfactory to Transferee.
(c) Possession of the Property shall be delivered to
Transferee immediately upon consummation of the Closing, subject to the
rights of the tenants under the Leases.
(d) Transferors shall also deliver to Transferee at the
Closing:
(i) the original or copies, as appropriate, of all
licenses, permits, applications, and the like pertaining to the occupation
and operation of the Property;
(ii) the originals or copies, as appropriate, of all
guaranties or warranties relating to the Property or any part thereof;
(iii) the originals or copies, as appropriate, of all
Leases (including all addenda, amendments and modifications thereto) and the
Security Deposits and any guaranties relating to the Leases;
(iv) a certificate of insurance evidencing coverage
in favor of Transferee and Agree Corp. for all insurance policies maintained
by Transferors with respect to the Property as described in Exhibit I,
together with copies of all such policies, all insurance certificates or
other evidence in Transferors' possession of insurance or self-insurance
maintained by tenants with respect to the Property for the benefit of
Transferors, and Service Contracts;
(v) all plans, specifications, soil reports,
drawings, surveys, parking covenants, common area maintenance agreements,
reciprocal operating agreements, and all other agreements of any kind
affecting the Property and all engineering, inspection and structural reports
that were prepared for Transferors or are in Transferors' possession relating
to the Property;
(vi) copies of all other documents, materials, books
and records in Transferors' possession relating to the Property;
(vii) a written certificate in form reasonably
satisfactory to Transferee certifying that each Transferor is not a person
or entity subject to withholding under the
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<PAGE>
Foreign Investment in Real Property Tax Act and containing such Transferor's
tax identification number and address;
(viii) to the extent the Property is subject to an
existing lien which is to be paid following Closing as identified in the
S-11, a pay-off letter dated not earlier than 30 days prior to the date of
Closing indicating the total amount required to satisfy such lien as of the
date of the letter and reflecting the additional amount for each day after
the date of such letter necessary to satisfy all obligations secured by such
lien together with the appropriate release of lien;
(ix) to the extent the Property is subject to an
existing lien which is to be modified or otherwise to remain in place
following Closing as identified in the S-ll, copies of all loan modification
documents and consents to the transfer of the Property by the lender to the
extent required by the Security Instruments affecting the Property;
(x) an owner policy of title insurance (the "Title
Policy") issued as of the date of Closing or title commitment "marked-up" as
of the date of closing by a title insurer reasonably acceptable to Transferee
containing no exceptions to title except the Permitted Exceptions and such
exceptions as Transferee has agreed to and with such endorsements as
Transferors and Transferee may agree and insuring Transferee in the amount
allocated to the Property by Transferors and Transferee.
(e) Transferee shall pay all recording and transfer taxes,
closing costs, costs and fees for title examination and title insurance and
endorsements, recording charges and attorneys' fees in connection with the
Closing, except that Transferors shall pay any recording and transfer taxes,
costs and fees for title examination and title insurance and endorsements,
and recording charges to the extent the same exceed in the aggregate for all
of the Portfolio Properties the amount of $500,000.
(f) Rents, interest, operating expense escalations, utility
charges, real estate taxes, common area maintenance costs, merchants'
association dues and promotion fees, if any, security charges and all other
costs and expenses relating to the ownership, operation or maintenance of the
Property shall be prorated or apportioned as set forth below or as otherwise
set forth in the closing statement executed by Transferors and Transferee at
Closing.
(i) Rents.
(a) Minimum Rents - Minimum rents for the month
of closing shall be treated as received on
the date due. The rent receivable, if any,
on the date of closing shall belong to
Transferors. Monthly rent shall be prorated
on the actual number of days in the month of
closing. Transferee shall receive a credit
for the number of days from and including
the day of transfer.
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<PAGE>
With respect to April 1994 rents paid in
arrears (i.e., percentage rents paid in lieu
of minimum rent), a post-closing adjustment
will be made with a payment to Transferee
for the pro rata portion of such rent to but
not including the day of transfer.
(b) Percentage Rents - Percentage rents, except
as set forth in (a) above, will be a
post-closing adjustment to be made at the
end of the lease year of each tenant paying
percentage rents or from time to time as may
otherwise be agreed by the parties.
Transferee shall pay to Transferors the pro
rata share of percentage rents for the lease
year of the tenant using a 365 day year and
the actual number of days to but not
including the day of transfer.
(ii) Common Area Maintenance ("CAM")
CAM expense shall have an April 1, 1994 cutoff
date. All CAM expense for work done prior to April
1, 1994 shall be paid by the Transferors. CAM
expense for work done after April 1, 1994 shall be
paid for by Transferee. Accounts receivable or
collections made for CAM billings to tenants for
work done prior to April 1, 1994 shall belong to
Transferors. Collections made for CAM billings
after April 1, 1994 shall be credited to
Transferee.
(iii) Insurance - Property and casualty insurance has
been paid in advance through October 31, 1994. The
amount of premiums allocated to each project shall
be pro rated for the period of coverage (November
1, 1993 - October 31, 1994) and Transferors shall
receive a credit for the portion of the premium
from and after the
date of Closing.
Tenant reimbursements and accounts receivable for
tenant reimbursements shall belong to Transferors.
Transferee shall receive a credit for the pro rata
portion of the tenant billing of the premium from
and after the date of Closing to October 31, 1994.
(iv) Interest Expense.
(a) Transferors shall pay the interest to the
day of payoff as set forth in the payoff
statements for all loans being discharged
following Closing. Transferors shall pay the
interest on the Nationwide loans to the date
of Closing directly to Nationwide.
(b) Bonds being paid off on May 1, 1994 with
respect to the Real Property known as
Grayling Plaza and Oscoda Plaza:
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The applicable Transferors shall pay the
interest on the bond through but not
including the date of closing. Transferee
shall pay the interest from and after the
date of Closing until May 1, 1994 or the
date the bonds are paid off.
The current amounts in the bond funds as of
the date of Closing prior to any funding with
respect to each bond shall be used to pay the
applicable Transferor's share of the interest and
the balance thereof shall belong to the applicable
Transferor.
(c) AUL, Traveler's and Michigan National Bank
with respect to the Real Property known as
Perrysburg Plaza: interest shall be prorated
to but not including the date of Closing.
(d) With respect to the Real Property known as
North Lakeland Plaza: Transferee shall pay
Michigan National Bank $1,570,000.00 in
payment of the bridge loan from Michigan
National Bank to Perrysburg Plaza used to
pay down the Travelers loan prior to
Closing. Perrysburg Plaza shall pay the
interest on the bridge loan for the period
from the date of paydown to the date of
Closing
(v) Taxes
(a) Amounts collected by Transferors in advance
will be credited to Transferee.
(b) Where Transferors have paid the tax and
billed the tenants in arrears, Transferors
will retain the account receivable.
(c) Short fall - Where the tenants have not
reimbursed 100% of the tax, the net short
fall shall be based on the 1993 net property
tax expense amount. Transferee shall receive
a credit using the net property tax expenses
for 1993 and prorating over the calendar
year 1994 to the day of closing. A
post-closing adjustment based on 1994 actual
expense will be made prior to April 30,
1995.
(g) Each Transferor shall execute and deliver to the title
company that will be issuing an owner's title insurance policy to Transferee
affidavits and indemnity agreements in the form customary in the jurisdiction
in which the applicable Property is located certifying (i) the absence of
claims which would give rise to mechanics' and materialmen's liens, (ii) that
such Transferor and the tenants under the Leases are the only parties in
possession of the Property, (iii) that there are no outstanding judgments
against the Property, and (iv) such other matters as the title company may
reasonably require. Transferors shall deliver to such title company such
evidence as it may require with respect to the authority of the person
executing the deeds of conveyance and assignments of leasehold interest.
10
<PAGE>
7. Notices. Whenever any notice is required or permitted
hereunder, such notice shall be in writing and either (i) sent by certified
mail, postage prepaid, return receipt requested, or (ii) hand delivered, at
the addresses set forth below:
As to Transferor: Addressed to the applicable
Transferor at:
31850 Northwestern Highway
Farmington Hills, MI 48334
As to Transferee:
Agree Limited Partnership
c/o Agree Realty Corporation
31850 Northwestern Highway
Farmington Hills, MI 48334
Notices which are mailed shall be deemed effective upon deposit into the U.S.
Postal Service. Notices which are hand-delivered (which shall include
delivery by Federal Express or other overnight courier service) shall be
deemed effective upon delivery.
8. Miscellaneous.
(a) The terms and conditions of this Contribution Agreement
shall be binding upon, and shall inure to the benefit of, the parties hereto
and their respective heirs, successors, legal representatives and assigns.
(b) No amendment to this Contribution Agreement shall be
binding on either of the parties to this Contribution Agreement unless such
amendment is in writing and executed by each of the parties hereto.
(c) Except with respect to issues relating to the conveyance
of the Property, which shall be governed by the laws of the jurisdiction in
which the Property is located, this Contribution Agreement and all
transactions hereunder shall be governed by the laws of the State of
Michigan.
(d) Subject to the limitations set forth in that certain
Indemnity Agreement among Richard Agree, Edward Rosenberg, Agree Realty
Corp., Agree Limited Partnership and others dated as of April 22, 1994, all
representations, warranties, covenants and indemnities contained in this
Contribution Agreement shall survive the Closing for a period of one (1)
year.
(e) If any term, covenant or condition of this Contribution
Agreement is held to be invalid or unenforceable in any respect, such
invalidity or unenforceability shall not affect any other provision hereof,
and this Contribution Agreement shall be construed as if such invalid or
unenforceable provision had never been contained herein.
11
<PAGE>
(f) The exhibits and schedules attached hereto are made a part
hereof as if fully set forth herein.
(g) This Contribution Agreement may be executed in any number
of counterparts, each of which counterpart shall be deemed an original, and
all of which counterparts taken together shall constitute but one and the
same instrument.
IN WITNESS WHEREOF, the parties have caused this Contribution
Agreement to be duly executed as of the date first above written.
WITNESS: TRANSFEROR:
By: /s/ Kenneth Howe
------------------------------
Name: Kenneth Howe /s/ Richard Agree
-----------------------------------
RICHARD AGREE
/s/ Edward Rosenberg
-----------------------------------
EDWARD ROSENBERG
CAPITAL PLAZA SHOPPING CENTER
By: /s/ Richard Agree
------------------------------
Name: Richard Agree, partner
By: /s/ Edward Rosenberg
------------------------------
Name: Edward Rosenberg, partner
CHARLEVOIX COMMONS
By: /s/ Richard Agree
------------------------------
Name: Richard Agree, partner
By: /s/ Edward Rosenberg
------------------------------
Name: Edward Rosenberg, partner
12
<PAGE>
CHIPPEWA COMMONS
By: /s/ Richard Agree
------------------------------
Name: Richard Agree, partner
By: /s/ Edward Rosenberg
------------------------------
Name: Edward Rosenberg, partner
GRAYLING PLAZA
By: /s/ Richard Agree
------------------------------
Name: Richard Agree, partner
By: /s/ Edward Rosenberg
------------------------------
Name: Edward Rosenberg, partner
IRON MOUNTAIN PLAZA
By: /s/ Richard Agree
------------------------------
Name: Richard Agree, partner
By: /s/ Edward Rosenberg
------------------------------
Name: Edward Rosenberg, partner
IRONWOOD COMMONS
By: /s/ Richard Agree
------------------------------
Name: Richard Agree, partner
By: /s/ Edward Rosenberg
------------------------------
Name: Edward Rosenberg, partner
13
<PAGE>
MARSHALL PLAZA PHASE TWO
By: /s/ Richard Agree
------------------------------
Name: Richard Agree, partner
By: /s/ Edward Rosenberg
------------------------------
Name: Edward Rosenberg, partner
NORTH LAKELAND PLAZA
By: /s/ Richard Agree
------------------------------
Name: Richard Agree, partner
By: /s/ Edward Rosenberg
------------------------------
Name: Edward Rosenberg, partner
OSCODA PLAZA
By: /s/ Richard Agree
------------------------------
Name: Richard Agree, partner
By: /s/ Edward Rosenberg
------------------------------
Name: Edward Rosenberg, partner
PERRYSBURG PLAZA
By: /s/ Richard Agree
------------------------------
Name: Richard Agree, partner
By: /s/ Edward Rosenberg
------------------------------
Name: Edward Rosenberg, partner
14
<PAGE>
PETOSKEY TOWN CENTER
By: /s/ Richard Agree
------------------------------
Name: Richard Agree, partner
By: /s/ Edward Rosenberg
------------------------------
Name: Edward Rosenberg, partner
PLYMOUTH COMMONS
By: /s/ Richard Agree
------------------------------
Name: Richard Agree, partner
By: /s/ Edward Rosenberg
------------------------------
Name: Edward Rosenberg, partner
RAPIDS ASSOCIATES
By: /s/ Richard Agree
------------------------------
Name: Richard Agree, partner
By: /s/ Edward Rosenberg
------------------------------
Name: Edward Rosenberg, partner
SHAWANO PLAZA
By: /s/ Richard Agree
------------------------------
Name: Richard Agree, partner
By: /s/ Edward Rosenberg
------------------------------
Name: Edward Rosenberg, partner
15
<PAGE>
WEST FRANKFORT PLAZA
By: /s/ Richard Agree
------------------------------
Name: Richard Agree, partner
By: /s/ Edward Rosenberg
------------------------------
Name: Edward Rosenberg, partner
WINTER GARDEN PLAZA
By: /s/ Richard Agree
------------------------------
Name: Richard Agree, partner
By: /s/ Edward Rosenberg
------------------------------
Name: Edward Rosenberg, partner
ATTEST: TRANSFEREE:
By: AGREE REALTY CORPORATION,
its General Partner
By: /s/ Kenneth Howe By: /s/ Richard Agree
------------------------- -----------------------
Name: Kenneth Howe Name: Richard Agree
Title: Secretary Title: President
16
EXHIBIT 10.11
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT made this 22nd day of April, 1994,
by and between AGREE REALTY CORPORATION, a Maryland corporation (the
"Company"), and RICHARD AGREE (the "Executive").
W I T N E S S E T H :
WHEREAS, the Executive is expected to make certain
contributions to the financial strength of the Company;
WHEREAS, the Company desires to assure itself of the
continuity of management and desires to establish certain compensation rights
of certain of its key senior executive officers, including the Executive; and
WHEREAS, the Company desires to employ the Executive and the
Executive desires to accept such employment on the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants
hereinafter contained, the parties hereto hereby agree as follows:
1. Employment; Term. The Company hereby employs the Executive
as Chairman of the Board of Directors and President of the Company and the
Executive agrees to serve the Company in such capacity for the period
commencing the date hereof (the "Effective Date") and ending on the fifth
anniversary of the Effective Date (the "Initial Term").
<PAGE>
2. Termination. Subject to the terms and conditions set forth
herein, the Executive's employment may be terminated by either party hereto
upon thirty (30) days' written notice to the other party hereto.
3. Duties. The Executive shall be responsible for the
supervision, control and conduct of all the business and affairs of the
Company and shall have such additional duties and any additional
responsibilities as are normally assigned to a Chief Executive Officer and
President which may from time to time be reasonably designated by the Board
of Directors of the Company (the "Board"), provided that in no event shall
the scope of his duties and the extent of his responsibilities be
substantially different from the duties and responsibilities usually
associated with those positions in a corporation similar in size and function
to the Company. At all times, the Executive shall be subject to the direction
of the Board. During the period the Executive is employed by the Company (the
"Employment Period"), the Executive shall devote his full business time and
best efforts to the business and affairs of the Company and its subsidiaries,
except for any business activities rendered by the Executive in connection
with the partnerships listed on Schedule A.
4. Compensation. The Company shall pay the Executive a salary
at the rate of one hundred thousand dollars ($100,000.00) per annum during
the Employment Period, subject to the last sentence of this Section 4. Such
compensation shall be payable in accordance with the usual payroll practices
of the Company, as compensation to the Executive for the services rendered by
the Executive hereunder, including, but not limited to, all services rendered
by the Executive as an officer or director of the Company and its
subsidiaries. The Board shall review the Executive's salary immediately prior
to the end of each fiscal year during the Employment Period to determine
whether the Executive's salary shall be increased based on such criteria as
the Board or any committee thereof shall from time to
- 2 -
<PAGE>
time establish (for purposes of this Employment Agreement, the term "salary"
shall mean the amount established and adjusted from time to time pursuant to
this Section 4).
5. Benefits.
(a) The Company agrees to reimburse the Executive for
all reasonable and necessary travel, business entertainment and other
business expenses incurred by the Executive in connection with the
performance of his duties under this Employment Agreement. Such
reimbursements shall be made by the Company on a timely basis upon submission
by the Executive of vouchers, in accordance with the Company's standard
procedures. All such reimbursements shall be subject to limitations which may
from time to time be prescribed by the Board.
(b) The Executive shall be entitled to participate in
any and all life insurance, medical insurance, group health, disability
insurance, and other benefit plans which are made generally available during
the Employment Period by the Company to executives of the Company, including,
but not limited to, the Company's Stock Incentive Plan, Profit Sharing Plan
and Performance Bonus Plan (to the extent that the Executive qualifies under
the eligibility provisions of such plan or plans). Additionally, the
Executive shall be entitled to receive annual paid vacation and paid holidays
made available pursuant to Company policy to all of the senior executives of
the Company.
(c) In the event of the death or disability of the
Executive, the Executive's employment hereunder shall terminate and in
addition to any amounts payable at such time and in accordance with the terms
of Paragraph 4 hereof (appropriately pro-rated), the Company shall, for the
longer of (i) the remainder of the calendar year in which the
- 3 -
<PAGE>
Executive dies or becomes disabled or (ii) six (6) months, but in no event
longer than the remainder of the Initial Term, pay to the Executive or the
Executive's personal representative, as the case may be, the Executive's
salary at the date of such death or disability. For the purposes hereof, the
term "disability" shall mean the absence of the Executive, due to physical or
mental illness, on a full-time basis for one hundred twenty (120) consecutive
business days or for shorter periods which aggregate more than four months
during any consecutive twelve (12) month period.
(d) In the event the employment of the Executive is
terminated by the Company for any reason other than for cause (as defined
below), the Executive shall be entitled to all amounts payable during the
Initial Term (including, but not limited to, salary at the then applicable
rate) within ten (10) days of such termination and the Executive shall have
the right to continue to participate in all benefits plans made generally
available by the Company to its executives during the Initial Term. For
purposes of this Section 5(d) the term "cause" shall mean: (i) the
Executive's willful failure or refusal to perform specific reasonable written
directives of the Board, which directives are consistent with the scope and
nature of the Executive's duties and responsibilities under this Employment
Agreement, and which are not remedied by the Executive within sixty (60) days
after being notified, in writing, of his failure by the Board; (ii) the
Executive's conviction of a felony; (iii) any act of dishonesty involving the
Company which results in an unjust gain or enrichment to the Executive at the
expense of the Company; (iv) any act involving moral turpitude of the
Executive which adversely affects the business of the Company; or (v) a
material breach by the Executive of his obligations under Section 6 hereof.
- 4 -
<PAGE>
(e) In the event this Employment Agreement is
terminated by the Company for "cause," the Executive shall forfeit his right
to any and all benefits (other than any previously vested benefits,
including, without limitation, the Executive's salary through the date of
termination) which the Executive would otherwise have been entitled to
receive pursuant to the terms of this Employment Agreement.
6. Non-Competition. The Executive agrees that (a) at all
times during the Initial Term, if the Executive is terminated for "cause" or
voluntarily terminates his employment hereunder and (b) at all times during
the Employment Period, the Executive shall not engage in any business which
is competitive with the then current business of the Company or any of its
subsidiaries. For the purposes of this Paragraph 6, a business shall be
deemed competitive if it consists of or includes any type or line of business
engaged in by the Company or any of its subsidiaries at the time of such
termination and which is conducted, in whole or in part, within those states
where the Company then conducts business. The Executive shall be deemed,
directly or indirectly, to engage in a business if he participates in such
business as a director, officer, stockholder, employee, salesman, partner or
individual proprietor, or if he participates in such business as an investor
who has made advances on loan, contributions to capital or expenditures for
the purchase of stock, permits his name to be used by, acts as a paid
consultant or paid advisor to, or if the Executive exerts a controlling
influence over such business, provided that nothing herein contained shall be
deemed to preclude the purchase of securities of publicly owned companies
which securities are listed on a national securities exchange, but the total
holding of any such securities so listed shall be limited to five percent
(5%) of the amount of such securities outstanding.
- 5 -
<PAGE>
7. Confidentiality. The Executive shall not at any time
use or divulge, furnish or make accessible to anyone (other than in the
regular course of the business of the Company or any of its subsidiaries) any
knowledge or information of trade secrets and proprietary information which
has not otherwise become publicly available (including, but not limited to,
any information concerning customers or accounts) with respect to the
business affairs of the Company or any of its subsidiaries.
8. Notices. All notices relating to this Employment
Agreement shall be in writing and shall be deemed to have been given at the
time when delivered personally or sent in the United States by registered or
certified mail, return receipt requested, in a postpaid envelope, addressed
to the other party at the address set forth below, or to such changed address
as the other party may have fixed by notice; provided, however, that any
notice of change of address shall be effective only upon receipt:
To the Company: 31850 Northwestern Highway
Farmington Hills, Michigan 48334
-copy to-
Kramer, Levin, Naftalis, Nessen,
Kamin & Frankel
919 Third Avenue
New York, New York 10022
Attn: David P. Levin
To the Executive: 2455 Wendrick Court
West Bloomfield, Michigan 48322
9. Assignability, Binding Effect and Survival. This
Employment Agreement shall inure to the benefit of and be binding upon the
Company, its successors and assigns, including without limitation any
corporation which may acquire all or substantially all of the Company's
assets and business or with or into which the Company may be
- 6 -
<PAGE>
consolidated or merged, and shall inure to the benefit of and be binding upon
the Executive, his heirs, executors, administrators and legal
representatives, provided that the obligations of the Executive hereunder may
not be delegated.
10. Complete Understanding; Amendment; Waiver. This
Employment Agreement constitutes the complete understanding between the
parties with respect to the employment of the Executive hereunder, and no
statement, representation, warranty or covenant has been made by either party
with respect thereto except as expressly set forth herein. This Employment
Agreement shall not be altered, modified, amended or terminated except by
written instrument signed by each of the parties hereto. Waiver by either
party hereto of any breach hereunder by the other party shall not operate as
a waiver of any other breach, whether similar to or different from the breach
waived. No delay on the part of the Company or the Executive in the exercise
of any of their respective rights or remedies shall operate as a waiver
thereof, and no single or partial exercise by the Company or the Executive of
any such right or remedy shall preclude other or further exercise thereof.
11. Severability. If any provision of this Employment
Agreement or the application of any such provision to any party or
circumstances shall be determined by any court of competent jurisdiction to
be invalid and unenforceable to any extent, the remainder of this Employment
Agreement or the application of such provision to such person or
circumstances other than those to which it is so determined to be invalid and
unenforceable, shall not be affected thereby, and each provision hereof shall
be enforced to the fullest extent permitted by law.
- 7 -
<PAGE>
12. Governing Law. This Employment Agreement shall be
governed and construed in accordance with the internal laws of the State of
Michigan without regard to conflict of laws provisions.
13. Indemnification. The Company shall indemnify the
Executive against judgments, fines, amounts paid in settlement and reasonable
expenses, including attorneys' fees actually and necessarily incurred, in any
action or proceeding to which the Executive is made a party by reason of the
fact that he is or was an officer or director of the Company, to the fullest
extent permitted by law, the By-laws of the Company and the Articles of
Incorporation of the Company.
14. Counterparts. This Employment Agreement may be executed
in counterparts, all of which together shall constitute one agreement binding
on all parties hereto.
15. Titles and Captions. All paragraph, article or section
titles or captions in this Employment Agreement are for convenience only and
in no way define, limit, extend or describe the scope or intent of any
provisions hereof.
- 8 -
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has duly
executed this Employment Agreement as of the date first above written.
AGREE REALTY CORPORATION
By: /s/ Richard Agree
-----------------------------
Name: Richard Agree
Title: President
/s/ Richard Agree
-----------------------------
Richard Agree
- 9 -
EXHIBIT 10.12
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT made this 22nd day of April, 1994,
by and between AGREE REALTY CORPORATION, a Maryland corporation (the
"Company"), and EDWARD ROSENBERG (the "Executive").
W I T N E S S E T H :
WHEREAS, the Executive is expected to make certain
contributions to the financial strength of the Company;
WHEREAS, the Company desires to assure itself of the
continuity of management and desires to establish certain compensation rights
of certain of its key senior executive officers, including the Executive; and
WHEREAS, the Company desires to employ the Executive and the
Executive desires to accept such employment on the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants
hereinafter contained, the parties hereto hereby agree as follows:
1. Employment; Term. The Company hereby employs the Executive
as Senior Vice President of the Company and the Executive agrees to serve the
Company in such capacity for the period commencing the date hereof (the
"Effective Date") and ending on the third anniversary of the Effective Date
(the "Initial Term").
<PAGE>
2. Termination. Subject to the terms and conditions set forth
herein, the Executive's employment may be terminated by either party hereto
upon thirty (30) days' written notice to the other party hereto.
3. Duties. The Executive shall be responsible for the
supervision, control and conduct of all the business and affairs of the
Company and shall have such additional duties and any additional
responsibilities as are normally assigned to a Senior Vice President which
may from time to time be reasonably designated by the Board of Directors of
the Company (the "Board"), provided that in no event shall the scope of his
duties and the extent of his responsibilities be substantially different from
the duties and responsibilities usually associated with those positions in a
corporation similar in size and function to the Company. At all times, the
Executive shall be subject to the direction of the Board. During the period
the Executive is employed by the Company (the "Employment Period"), the
Executive shall devote his full business time and best efforts to the
business and affairs of the Company and its subsidiaries, except for any
business activities rendered by the Executive in connection with the
partnerships listed on Schedule A.
4. Compensation. The Company shall pay the Executive a salary
at the rate of seventy five thousand dollars ($75,000.00) per annum during
the Employment Period, subject to the last sentence of this Section 4. Such
compensation shall be payable in accordance with the usual payroll practices
of the Company, as compensation to the Executive for the services rendered by
the Executive hereunder, including, but not limited to, all services rendered
by the Executive as an officer or director of the Company and its
subsidiaries. The Board shall review the Executive's salary immediately prior
to the end of each fiscal year during the Employment Period to determine
whether the Executive's salary shall be increased
- 2 -
<PAGE>
based on such criteria as the Board or any committee thereof shall from time
to time establish (for purposes of this Employment Agreement, the term
"salary" shall mean the amount established and adjusted from time to time
pursuant to this Section 4).
5. Benefits.
(a) The Company agrees to reimburse the Executive
for all reasonable and necessary travel, business entertainment and other
business expenses incurred by the Executive in connection with the
performance of his duties under this Employment Agreement. Such
reimbursements shall be made by the Company on a timely basis upon submission
by the Executive of vouchers, in accordance with the Company's standard
procedures. All such reimbursements shall be subject to limitations which may
from time to time be prescribed by the Board.
(b) The Executive shall be entitled to participate
in any and all life insurance, medical insurance, group health, disability
insurance, and other benefit plans which are made generally available during
the Employment Period by the Company to executives of the Company, including,
but not limited to, the Company's Stock Incentive Plan, Profit Sharing Plan
and Performance Bonus Plan (to the extent that the Executive qualifies under
the eligibility provisions of such plan or plans). Additionally, the
Executive shall be entitled to receive annual paid vacation and paid holidays
made available pursuant to Company policy to all of the senior executives of
the Company.
(c) In the event of the death or disability of the
Executive, the Executive's employment hereunder shall terminate and in
addition to any amounts payable at such time and in accordance with the terms
of Paragraph 4 hereof (appropriately pro-rated),
- 3 -
<PAGE>
the Company shall, for the longer of (i) the remainder of the calendar year
in which the Executive dies or becomes disabled or (ii) six (6) months, but
in no event longer than the remainder of the Initial Term, pay to the
Executive or the Executive's personal representative, as the case may be, the
Executive's salary at the date of such death or disability. For the purposes
hereof, the term "disability" shall mean the absence of the Executive, due to
physical or mental illness, on a full-time basis for one hundred twenty (120)
consecutive business days or for shorter periods which aggregate more than
four months during any consecutive twelve (12) month period.
(d) In the event the employment of the Executive is
terminated by the Company for any reason other than for cause (as defined
below), the Executive shall be entitled to all amounts payable during the
Initial Term (including, but not limited to, salary at the then applicable
rate) within ten (10) days of such termination and the Executive shall have
the right to continue to participate in all benefits plans made generally
available by the Company to its executives during the Initial Term. For
purposes of this Section 5(d) the term "cause" shall mean: (i) the
Executive's willful failure or refusal to perform specific reasonable written
directives of the Board, which directives are consistent with the scope and
nature of the Executive's duties and responsibilities under this Employment
Agreement, and which are not remedied by the Executive within sixty (60) days
after being notified, in writing, of his failure by the Board; (ii) the
Executive's conviction of a felony; (iii) any act of dishonesty involving the
Company which results in an unjust gain or enrichment to the Executive at the
expense of the Company; (iv) any act involving moral turpitude of the
Executive which adversely affects the business of the Company; or (v) a
material breach by the Executive of his obligations under Section 6 hereof.
- 4 -
<PAGE>
(e) In the event this Employment Agreement is
terminated by the Company for "cause," the Executive shall forfeit his right
to any and all benefits (other than any previously vested benefits,
including, without limitation, the Executive's salary through the date of
termination) which the Executive would otherwise have been entitled to
receive pursuant to the terms of this Employment Agreement.
6. Non-Competition. The Executive agrees that (a) at all
times during the Initial Term, if the Executive is terminated for "cause" or
voluntarily terminates his employment hereunder and (b) at all times during
the Employment Period, the Executive shall not engage in any business which
is competitive with the then current business of the Company or any of its
subsidiaries. For the purposes of this Paragraph 6, a business shall be
deemed competitive if it consists of or includes any type or line of business
engaged in by the Company or any of its subsidiaries at the time of such
termination and which is conducted, in whole or in part, within those states
where the Company then conducts business. The Executive shall be deemed,
directly or indirectly, to engage in a business if he participates in such
business as a director, officer, stockholder, employee, salesman, partner or
individual proprietor, or if he participates in such business as an investor
who has made advances on loan, contributions to capital or expenditures for
the purchase of stock, permits his name to be used by, acts as a paid
consultant or paid advisor to, or if the Executive exerts a controlling
influence over such business, provided that nothing herein contained shall be
deemed to preclude the purchase of securities of publicly owned companies
which securities are listed on a national securities exchange, but the total
holding of any such securities so listed shall be limited to five percent
(5%) of the amount of such securities outstanding.
- 5 -
<PAGE>
7. Confidentiality. The Executive shall not at any time
use or divulge, furnish or make accessible to anyone (other than in the
regular course of the business of the Company or any of its subsidiaries) any
knowledge or information of trade secrets and proprietary information which
has not otherwise become publicly available (including, but not limited to,
any information concerning customers or accounts) with respect to the
business affairs of the Company or any of its subsidiaries.
8. Notices. All notices relating to this Employment
Agreement shall be in writing and shall be deemed to have been given at the
time when delivered personally or sent in the United States by registered or
certified mail, return receipt requested, in a postpaid envelope, addressed
to the other party at the address set forth below, or to such changed address
as the other party may have fixed by notice; provided, however, that any
notice of change of address shall be effective only upon receipt:
To the Company: 31850 Northwestern Highway
Farmington Hills, Michigan 48334
-copy to-
Kramer, Levin, Naftalis, Nessen,
Kamin & Frankel
919 Third Avenue
New York, New York 10022
Attn: David P. Levin
To the Executive: 6986 Pebble Creek Woods
West Bloomfield, Michigan 48033
9. Assignability, Binding Effect and Survival. This
Employment Agreement shall inure to the benefit of and be binding upon the
Company, its successors and assigns, including without limitation any
corporation which may acquire all or substantially all of the Company's
assets and business or with or into which the Company may be
- 6 -
<PAGE>
consolidated or merged, and shall inure to the benefit of and be binding upon
the Executive, his heirs, executors, administrators and legal
representatives, provided that the obligations of the Executive hereunder may
not be delegated.
10. Complete Understanding; Amendment; Waiver. This
Employment Agreement constitutes the complete understanding between the
parties with respect to the employment of the Executive hereunder, and no
statement, representation, warranty or covenant has been made by either party
with respect thereto except as expressly set forth herein. This Employment
Agreement shall not be altered, modified, amended or terminated except by
written instrument signed by each of the parties hereto. Waiver by either
party hereto of any breach hereunder by the other party shall not operate as
a waiver of any other breach, whether similar to or different from the breach
waived. No delay on the part of the Company or the Executive in the exercise
of any of their respective rights or remedies shall operate as a waiver
thereof, and no single or partial exercise by the Company or the Executive of
any such right or remedy shall preclude other or further exercise thereof.
11. Severability. If any provision of this Employment
Agreement or the application of any such provision to any party or
circumstances shall be determined by any court of competent jurisdiction to
be invalid and unenforceable to any extent, the remainder of this Employment
Agreement or the application of such provision to such person or
circumstances other than those to which it is so determined to be invalid and
unenforceable, shall not be affected thereby, and each provision hereof shall
be enforced to the fullest extent permitted by law.
- 7 -
<PAGE>
12. Governing Law. This Employment Agreement shall be
governed and construed in accordance with the internal laws of the State of
Michigan without regard to conflict of laws provisions.
13. Indemnification. The Company shall indemnify the
Executive against judgments, fines, amounts paid in settlement and reasonable
expenses, including attorneys' fees actually and necessarily incurred, in any
action or proceeding to which the Executive is made a party by reason of the
fact that he is or was an officer or director of the Company, to the fullest
extent permitted by law, the By-laws of the Company and the Articles of
Incorporation of the Company.
14. Counterparts. This Employment Agreement may be executed
in counterparts, all of which together shall constitute one agreement binding
on all parties hereto.
15. Titles and Captions. All paragraph, article or section
titles or captions in this Employment Agreement are for convenience only and
in no way define, limit, extend or describe the scope or intent of any
provisions hereof.
- 8 -
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has duly
executed this Employment Agreement as of the date first above written.
AGREE REALTY CORPORATION
By: /s/ Richard Agree
----------------------------
Name: Richard Agree
Title: President
/s/ Edward Rosenberg
----------------------------
Edward Rosenberg
- 9 -
EXHIBIT 10.13
AGREE REALTY CORPORATION PROFIT-SHARING PLAN
Effective April 22, 1994
- 1 -
<PAGE>
TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS
1.1 Account.............................................. I-1
1.2 Administrator........................................ I-1
1.3 Affiliate............................................ I-1
1.4 Appropriate Form..................................... I-2
1.5 Beneficiary.......................................... I-2
1.6 Board of Directors................................... I-2
1.7 Break in Service..................................... I-2
1.8 Company.............................................. I-3
1.9 Compensation......................................... I-3
1.10 Date of Hire......................................... I-4
1.11 Disability........................................... I-4
1.12 Eligible Employee.................................... I-4
1.13 Employee............................................. I-4
1.14 Employer............................................. I-4
1.15 Entry Date........................................... I-5
1.16 Fund................................................. I-5
1.17 Hour of Service...................................... I-5
1.18 Investment Adjustments............................... I-5
1.19 Investment Fund...................................... I-5
1.20 Member............................................... I-5
1.21 Normal Retirement Date............................... I-5
1.22 Plan................................................. I-5
1.23 Plan Year............................................ I-6
1.24 Reemployment Date.................................... I-6
1.25 Service.............................................. I-6
1.26 Severance Date....................................... I-6
1.27 Severance Period..................................... I-7
1.28 Spouse............................................... I-7
1.29 Spousal Consent...................................... I-7
1.30 Termination of Employment............................ I-8
1.31 Trust Agreement...................................... I-8
1.32 Trustee.............................................. I-8
1.33 Valuation Date....................................... I-8
1.34 Vested Percentage.................................... I-9
1.35 Year of Service...................................... I-9
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ARTICLE II MEMBERSHIP
2.1 In General........................................... II-1
2.2 Transfers............................................ II-2
2.3 Reemployment......................................... II-3
ARTICLE III CONTRIBUTIONS
3.1 Source of Contributions.............................. III-1
3.2 Amount of Contributions.............................. III-1
3.3 Contributions Conditional............................ III-1
3.4 Maximum Limitation................................... III-1
3.5 Application.......................................... III-3
3.6 Limitation Year...................................... III-5
ARTICLE IV ACCOUNTS
4.1 Account.............................................. IV-1
4.2 Eligibility to Share in
Contributions and Forfeitures...................... IV-1
4.3 Allocation of Contributions and
Forfeitures........................................ IV-1
4.4 Investment of Account Balances....................... IV-1
4.5 Designation of Investment Funds
for Future Contributions........................... IV-2
4.6 Designation of Investment Funds
for Existing Account Balances...................... IV-2
4.7 Valuation of Investment Funds........................ IV-3
4.8 Correction of Error.................................. IV-3
4.9 Allocation Shall Not Vest Title...................... IV-4
4.10 Statement of Accounts................................ IV-4
ARTICLE V VESTING AND DISTRIBUTION OF BENEFITS
5.1 Vesting.............................................. V-1
5.2 Distribution on Termination of
Employment......................................... V-2
5.3 Payment of Benefits in General....................... V-2
5.4 Forfeitures.......................................... V-3
5.5 Payment of Death Benefits............................ V-4
5.6 Distribution at Age 70-1/2........................... V-7
5.7 Delay of Payment..................................... V-7
5.8 Qualified Domestic Relations Orders.................. V-8
5.9 Direct Rollover of Eligible
Rollover Distributions............................. V-10
ARTICLE VI ADMINISTRATION OF THE PLAN
6.1 Fiduciary............................................ VI-1
6.2 The Administrator.................................... VI-1
6.3 Advisers............................................. VI-3
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6.4 Service in Multiple Capacities....................... VI-3
6.5 Limitation of Liability; Indemnity................... VI-3
6.6 Reliance on Information.............................. VI-4
6.7 Funding Policy....................................... VI-5
6.8 Proper Proof......................................... VI-5
6.9 Genuineness of Documents............................. VI-5
ARTICLE VII THE TRUST AGREEMENT
7.1 The Trust Agreement.................................. VII-1
7.2 Rights of the Company................................ VII-1
7.3 Duties and Responsibilities of
the Trustee........................................ VII-2
7.4 Company as Agent..................................... VII-2
ARTICLE VIII AMENDMENT
8.1 Right of the Company to Amend
the Plan........................................... VIII-1
8.2 Plan Merger.......................................... VIII-1
8.3 Amendments Required by Law........................... VIII-1
ARTICLE IX DISCONTINUANCE OF CONTRIBUTIONS
AND TERMINATION OF THE PLAN
9.1 Right to Terminate the Plan or
Discontinue Contributions.......................... IX-1
9.2 Manner of Termination................................ IX-1
9.3 Effect of Termination................................ IX-1
9.4 Distribution of the Fund............................. IX-2
9.5 Expenses of Termination.............................. IX-2
ARTICLE X MISCELLANEOUS PROVISIONS
10.1 Plan Not a Contract of
Employment......................................... X-1
10.2 Source of Benefits................................... X-1
10.3 Spendthrift Clause................................... X-1
10.4 Merger............................................... X-2
10.5 Claims Procedure..................................... X-2
10.6 Inability to Locate Distributee...................... X-2
10.7 Payment to a Minor or
Incompetent........................................ X-3
10.8 Doubt as to Right to Payment......................... X-4
10.9 Estoppel of Members and
Beneficiaries...................................... X-4
10.10 Separability......................................... X-5
10.11 Captions............................................. X-5
10.12 Usage................................................ X-6
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ARTICLE XI LEASED EMPLOYEES
11.1 Definitions.......................................... XI-1
11.2 Treatment of Leased Employees........................ XI-1
11.3 Exception for Employees Covered
by Plans of Leasing Organization................... XI-2
11.4 Construction......................................... XI-2
ARTICLE XII "TOP-HEAVY" PROVISIONS
12.1 Determination of "Top-Heavy"
Status............................................. XII-1
12.2 Provisions Applicable in
"Top-Heavy" Years.................................. XII-5
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AGREE REALTY CORPORATION PROFIT-SHARING PLAN
ARTICLE I
Definitions
1.1 Account. An Account maintained for a Member pursuant
to Section 4.1.
1.2 Administrator. The Administrator appointed by the
Board of Directors to administer the Plan pursuant to Article VIII.
1.3 Affiliate.
1.3.1 Controlled Group Affiliate. Any corporation or
other trade or business (other than an Employer) which, at the time
of reference, controls, is controlled by or under common control with
an Employer within the meaning of section 414(b) or 414(c) of the
Code, including any division of an Employer not participating in the
Plan; provided, however, that for purposes of Sections 3.4 and 3.5,
the provisions of section 415(h) of the Code shall also apply.
1.3.2 Affiliated Service Groups, etc. Any (a) member
of an affiliated service group, within the meaning of section 414(m)
of the Code, that includes an Employer, or (b) organization
aggregated with an Employer pursuant to section 414(o) of the Code,
to the extent and for the purposes required by such sections and the
regulations thereunder (e.g., for purposes of Articles XI and XII).
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1.4 Appropriate Form. The form or other means of
communication prescribed by the Administrator for a particular purpose
specified in the Plan.
1.5 Beneficiary. A person or persons entitled pursuant
to the Plan to receive any benefits payable upon or after the death of a
Member.
1.6 Board of Directors. The Board of Directors of the
Company.
1.7 Break in Service. A Severance Period of not less than
twelve (12) consecutive months. The first 12-consec-utive-month period after
a Severance Date in the case of an absence from work for maternity or
paternity reasons shall not be included in a Break in Service. For purposes
of this Section 1.8, an absence from work for maternity or paternity reasons
means an absence (a) by reason of the pregnancy of the individual, (b) by
reason of the birth of a child of the individual, (c) by reason of the
placement of a child with the individual in connection with the adoption of
such child by such individual, or (d) for purposes of caring for such child
for a period beginning immediately following such birth or placement.
1.8 Company. Agree Realty Corporation, a Maryland
corporation.
1.9 Compensation. Gross annual cash compensation paid by
an Employer in any Year to an Eligible Employee while he is a Member of the
Plan. Compensation shall be determined before giving effect to any salary
reduction agreement pursuant to any cash or deferred arrangement described in
section 401(k) of the Code or any cafeteria
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plan within the meaning of section 125 of the Code. Compensation shall not
include any expense reimbursements or allowances. Compensation taken into
account under the Plan for any Plan Year shall not exceed $150,000 as
adjusted from time to time in accordance with section 401(a)(17) of the Code.
In determining the Compensation of a Member for purposes of this limitation,
the family aggregation rules of section 414(q)(6) of the Code shall apply,
except that in applying such rules, the term "family" shall include only the
spouse of the Member and any lineal descendants of the Member who have not
attained age 19 before the close of the year. If, as a result of the
application of such rules, the limitation is exceeded, then (except as may be
otherwise required under applicable regulations), the limitation shall be
prorated among the affected individuals on the basis of each such
individual's Compensation determined under this Section 1.9 prior to the
application of the limitation.
1.10 Date of Hire. The date on which an Employee first
completes an Hour of Service.
1.11 Disability. A physical or mental condition which
would, upon proper application, entitle the Member to disability benefits
under the Social Security Act.
1.12 Eligible Employee. Any person employed by the Company
or by any other Employer, subject to such terms and conditions as may apply
to such other Employer pursuant to Section 1.12; but excluding in each case
any employee who is employed primarily to render services within the
jurisdiction of a union and whose compensation, hours of work, or
conditions of employment are determined by collective bargaining with such
union, unless the applicable collective bargaining agreement expressly
provides that
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such employee shall be eligible to participate in this Plan, in which event,
however, he shall be entitled to participate in this Plan only to the extent
and on the terms and conditions specified in such collective bargaining
agreement.
1.13 Employee. An individual who is an employee of an
Employer or Affiliate.
1.14 Employer. The Company and any subsidiary or affiliate
of the Company which has adopted the Plan with the approval of the Company,
subject to such terms and conditions as may be imposed by the Company upon
the participation in the Plan of such adopting Employer.
1.15 Entry Date. April 22, 1994 and each subsequent
January 1 and July 1.
1.16 Fund. The Fund created by the Trust Agreement
pursuant to Section 9.1.
1.17 Hour of Service. An hour for which an Employee is
paid or entitled to payment for the performance of services for an Employer or
Affiliate.
1.18 Investment Adjustments. The net realized and
unrealized gains, losses, income and expenses attributable to a Member's
Account as a result of its investment in one or more Investment Funds.
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1.19 Investment Fund. A portion of the Fund which is
separately invested as provided in Section 4.4.
1.20 Member. Every individual who shall have become a
Member pursuant to Article II hereof and who has an Account under the Plan
holding an undistributed balance.
1.21 Normal Retirement Date. The 65th anniversary of a
Member's date of birth.
1.22 Plan. The Agree Realty Corporation Profit-Sharing
Plan, as from time to time in effect.
1.23 Plan Year. The 12-month period beginning each
January 1.
1.24 Reemployment Date. The date on which an Employee
first completes an Hour of Service after a Severance Date.
1.25 Service. The aggregate of the following:
1.25.1 Each period from an Employee's Date of Hire
(or Reemployment Date) to the Employee's next Severance Date; and
1.25.2 If an Employee has a Reemployment Date within
twelve (12) months of a Severance Date, the period from such Severance Date
to such Reemployment Date; and
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1.25.3 In the case of an Employee who leaves
employment to enter service with the armed forces of the United States, the
period of such military service, provided that the Employee resumes
employment with the Employer or Affiliate within the period during which
reemployment rights are protected by applicable law.
1.26 Severance Date. The earliest of:
1.26.1 The date on which an Employee quits, retires,
is discharged or dies;
1.26.2 The first anniversary of the first date of a
period in which an Employee remains absent from service with an Employer or
Affiliate (with or without pay) for any reason (such as vacation, holiday,
sickness, disability or layoff) other than resignation, retirement,
discharge, death or approved leave of absence; or
1.26.3 The date on which an approved leave of
absence without pay began if the Employee fails to return to active
employment upon the expiration of such leave.
1.27 Severance Period. Each period from a Severance Date
to the next Reemployment Date.
1.28 Spouse. The individual to whom a Member is legally
married.
1.29 Spousal Consent. Written consent by a Member's Spouse
to an election, beneficiary designation or similar action by the Member. A
Spousal Consent shall be ineffective unless it acknowledges the effect of
such election, beneficiary designation or
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action and is witnessed by a notary public and, with respect to Spousal
Consent pertaining to a beneficiary designation, unless such designation
specifically identifies the Member's beneficiaries (and alternate
beneficiaries, if any) by name or class. If the Administrator is satisfied
that such Spousal Consent cannot be obtained because there is no Spouse,
because the Spouse cannot be located, because the Member can show by court
order that the Spouse has abandoned the Member, or because of other
circumstances which may be permitted under applicable law, Spousal Consent
shall be deemed to have been given. Any consent or deemed consent with
respect to a Spouse which satisfies the foregoing requirements shall be
effective only with respect to the Spouse by whom given (or deemed to be
given), and may not be revoked by such Spouse with respect to the election,
beneficiary designation or other action to which such consent pertains.
1.30 Termination of Employment. A Member's employment
shall be treated as terminated when he incurs a Severance Date.
1.31 Trust Agreement. The agreement by and between the
Company and the Trustee under which this Plan is funded, as from time to time
amended.
1.32 Trustee. The trustee or trustees from time to time
designated under the Trust Agreement.
1.33 Valuation Date. The last day of each calendar
quarter, and any other date as of which the Administrator determines in his
sole discretion that a valuation and adjustment of Accounts is necessary or
desirable; provided, that if any portion of an Account is invested in shares
of a mutual fund for which the mutual fund sponsor determines a daily
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value, the Valuation Date for such portion in the event of a distribution
shall be the date as of which the mutual fund sponsor values the shares to be
surrendered in respect of such distribution, the Valuation Date in the event
of a forfeiture shall be the date as of which the forfeiture occurs, and the
Valuation Date for purposes of allocating the Investment Adjustment pursuant
to Section 4.7 shall be each day for which the mutual fund sponsor determines
a value for such shares.
1.34 Vested Percentage. The percentage of a Member's
Account which is nonforfeitable.
1.35 Year of Service. Three hundred sixty-five (365) days
of Service.
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ARTICLE II
Membership
2.1 In General. An Eligible Employee who has not
previously become a Member shall become a Member on the first Entry Date
coincident with or next following the later of his reaching age 21 or his
completing one Year of Service, provided he is then an Eligible Employee.
2.2 Transfers.
2.2.1 Transfer to Eligible Employment. An Employee
who transfers to employment as an Eligible Employee from employment
as other than an Eligible Employee shall become a Member on the later
of the date of such transfer or the first Entry Date on which he
satisfies the requirements of Section 2.1.
2.2.2 Transfer to Affiliate or Ineligible
Employment. If a Member transfers to employment as other than an
Eligible Employee with an Affiliate or Employer, he shall not be
deemed to have thereby terminated employment. Subject to Section 4.2,
such a Member shall be eligible to share in the contribution and
forfeitures under the Plan for the Plan Year of such transfer, but he
shall not be eligible to share in contributions or forfeitures for
subsequent Plan Years unless and until he returns to employment as an
Eligible Employee.
2.2.3 Eligibility to Share in Contributions and
Forfeitures. Notwithstanding any other provision of this Plan, a
Member shall be eligible to share in contributions and forfeitures
under the Plan only with respect to Compensation paid
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by an Employer for service as an Eligible Employee (as distinguished
from service for any Affiliate or for an Employer in a position other
than as an Eligible Employee).
2.3 Reemployment. If a Member whose Vested Percentage is
zero terminates employment and is subsequently rehired as an Eligible
Employee after a Break in Service of five or more years, he shall upon rehire
be treated as a new Employee for all purposes of this Plan. In all other
cases, a Member who terminates employment and is subsequently rehired as an
Eligible Employee shall resume membership in this Plan immediately upon
rehire.
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ARTICLE III
Contributions
3.1 Source of Contributions. All contributions to the
Fund shall be made by the Employers. There shall be no contributions by
Members. The Company may, in its discretion, make the contribution to the
Fund required of any other Employer hereunder, as agent for such Employer.
3.2 Amount of Contributions. For each Plan Year that the
Plan is in effect, each Employer shall contribute to the Fund such amount (if
any) as the board of directors of such Employer shall determine in its sole
discretion, subject to the limitations set forth in sections 404 and 415 of
the Code. Such amounts shall be transferred by each Employer to the Trustee
in cash no later than the due date (including extensions) for filing the
Employer's federal income tax return for such Year.
3.3 Contributions Conditional. Notwithstanding any other
provisions of the Plan or the Trust Agreement, all contributions under the
Plan are conditioned on the deductibility of such contributions under section
404(a) of the Code for the taxable year for which contributed, and on initial
qualification of the Plan under section 401(a) of the Code.
3.4 Maximum Limitation.
3.4.1 Annual Addition. For purposes of this
Section 3.4, "Annual Addition" means the sum for any Plan Year of (a)
employer contributions and forfeitures allocable to a Member under
all plans (or portions thereof) subject to
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section 415(c) of the Code maintained by an Employer or an Affiliate,
(b) the Member's employee contributions under all such plans (or
portions thereof), and (c) amounts described in section 419A(d)(2) of
the Code (relating to post-retirement medical benefits of key
employees) or allocated to a pension plan individual medical account
described in section 415(1) of the Code to the extent includible for
purposes of section 415(c)(2) of the Code. The employee contributions
described in clause (b) shall be determined without regard to (i) any
rollover contributions, (ii) any repayments of loans, or (iii) any
prior distributions repaid upon the exercise of buyback rights.
Employer and employee contributions taken into account as Annual
Additions shall include "excess contributions" as defined in section
401(k)(8)(B) of the Code, "excess aggregate contributions" as defined
in section 401(m)(6)(B) of the Code, and "excess deferrals" as
described in section 402(g) of the Code (to the extent such "excess
deferrals" are not distributed to the Member before the end of his
taxable year in which they were made), regardless of whether such
amounts are distributed or forfeited.
3.4.2 Earnings. "Earnings" for any Plan Year means
compensation (as defined in Section 415(c)(3) of the Code) actually
paid or made available by all Employers and Affiliates, but
determined after giving effect to any salary reduction agreement
under any cash or deferred arrangement within the meaning of section
401(k) of the Code or to any similar reduction agreement pursuant to
any cafeteria plan within the meaning of section 125 of the Code.
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3.4.3 Limitation on Annual Additions. The aggregate
Annual Addition in respect of any Member, to this Plan and all other
defined contribution plans maintained by all Employers and Affiliates
for any Plan Year, shall not exceed the lesser of (a) $30,000 (or, if
greater, 25 percent of the amount in effect under section
415(b)(1)(A) of the Code pursuant to applicable regulations), or (b)
25 percent of the Member's Earnings for such Year.
3.4.4 Coverage by Defined Benefit Plan. If a Member
has at any time been covered by a defined benefit plan maintained by
an Employer or an Affiliate, the limitations set forth in this
Section 3.4 shall be further reduced if and to the extent necessary
to comply with section 415(e) of the Code.
3.5 Application. If the allocations to a Member's Account
otherwise required under this Plan for any Plan Year would cause the
limitations set forth in Section 3.4 to be exceeded for that Plan Year,
contributions otherwise required with respect to such Member under this
Article III shall be reduced to the extent necessary to comply with those
limitations. If such reduction is not effected in time to prevent such
allocations for any Limitation Year (as defined in Section 3.6) from
exceeding such limitations, such excess shall be used to reduce contributions
for such Member in the next Limitation Year and each succeeding Limitation
Year if necessary; provided, that if the Member is not covered by the Plan at
the end of the current Limitation Year, the portion exceeding the limitations
set forth in Section 3.4 shall be held unallocated in a suspense account for
such Limitation Year and shall be allocated and reallocated to the Accounts
of all Members in the next Limitation Year before any other Annual Additions
are allocated to the Accounts of such Members. The
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suspense account will reduce future contributions for all remaining Members
in the next Limitation Year, and each succeeding Limitation Year if
necessary. If a suspense account is in existence at any time during the
Limitation Year pursuant to this Section 3.5, it will participate in the
allocation of the Fund's investment gains and losses. In the event of a
termination of the Plan, unallocated amounts held in such suspense account
shall be allocated to the extent possible under this Article III for the
Limitation Year of termination. Any amount remaining in such suspense account
upon termination of the Plan shall then be returned to the Employer,
notwithstanding any other provision of the Plan or Trust Agreement.
Reductions in benefits under this Article III arising by reason of a Member's
participation in multiple plans shall be effected as follows: (a) benefits
and Annual Additions under continuing plans shall be reduced before benefits
under any terminated plan, and (b) benefits and Annual Additions under
continuing plans shall be reduced in the reverse order in which benefits or
Annual Additions would otherwise accrue, except as any such plan may
otherwise expressly provide.
3.6 Limitation Year. All determinations under Sections
3.4 and 3.5 shall be made by reference to the Plan Year.
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ARTICLE IV
Accounts
4.1 Account. The Administrator shall maintain an Account
for each Member, to which shall be credited contributions and forfeitures
allocated to the Member pursuant to Section 4.3.
4.2 Eligibility to Share in Contributions and
Forfeitures. Notwithstanding any other provision of this Plan, a Member shall
be eligible to share in contributions or forfeitures for a Plan Year (a
"Participating Member") only if he is an employee of an Employer or a
Controlled Group Affiliate as of the last day of such Year, or ceased to be
so employed during such Plan Year by reason of death or Disability or on or
after attainment of his Normal Retirement Date.
4.3 Allocation of Contributions and Forfeitures. As of
the last day of each Plan Year, the contribution and forfeitures for that
Plan Year shall be allocated to the Accounts of Participating Members. Such
contribution and forfeitures shall be allocated to the Account of each
Participating Member in the same ratio that the Compensation of the
Participating Member bears to the total Compensation of all Participating
Members for such Plan Year.
4.4 Investment of Account Balances. The Fund shall be
divided into such three or more Investment Funds as the Trustee may from time
to time establish, in which each Member's Account shall be invested according
to such Member's instructions
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pursuant to Sections 4.5 through 4.7. Notwithstanding its stated primary
investment objectives, any Investment Fund may make or retain investments of
such nature, or such cash balances, as may be necessary or appropriate in
order to effect distributions or to meet other administrative requirements of
the Plan.
4.5 Designation of Investment Funds for Future
Contributions. Each Member may, by giving notice to the Administrator on the
Appropriate Form, designate the proportion of his share of the Employer
contribution and forfeitures for each Plan Year that is to be allocated to
each Investment Fund. Such designation shall be made at such time as the
Administrator shall prescribe, and shall be effective on the first day for
which it can be given effect under the Administrator's procedures. If a
Member fails to make such a designation, all contributions and forfeitures
allocated to such Member's Account shall be invested in the Investment Fund
expected to have the least volatility of principal value. Any designation
under this Section 4.5 shall continue in effect until changed by the filing
of a new designation under this Section 4.5.
4.6 Designation of Investment Funds for Existing Account
Balances. A Member may designate the proportion of the then existing balance
of his Account to be invested in each Investment Fund by giving notice to the
Administrator on the Appropriate Form at such time as the Administrator shall
prescribe. Following a Member's death and pending distribution of his
Account, his Beneficiary may exercise the rights provided under this Section
4.6 with respect to the portion of the Account from which such Beneficiary
will
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receive a distribution. Such designation shall be effective on the first day
for which it can be given effect under the Administrator's procedures.
4.7 Valuation of Investment Funds. As of each Valuation
Date, the Administrator shall determine the net fair market value of the
assets of each Investment Fund, and shall allocate the Investment Adjustment
among the Members' Accounts in proportion to the value of their Accounts as
of the preceding Valuation Date; provided, however, that no Account shall
share in such allocation after the Valuation Date established for
distribution thereof. A Member's interest in each Investment Fund shall be
reduced by the amount of distributions or withdrawals therefrom (including
transfers to any other Investment Fund) and shall be increased by the amount
of any transfers thereto from any other Investment Fund, in such manner as
the Administrator may deem appropriate.
4.8 Correction of Error. The Administrator may adjust
any or all Accounts in order to correct errors or rectify omissions, in such
manner as he believes will best result in the equitable and nondiscriminatory
administration of the Plan.
4.9 Allocation Shall Not Vest Title. The fact that
allocation is made and amounts credited to a Member's Account shall not vest
in such Member any right, title or interest in and to any assets except at
the time or times and upon the terms and conditions expressly set forth in
this Plan, nor shall the Trustee be required to segregate physically the
assets of the Fund by reason thereof.
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4.10 Statement of Accounts. The Administrator shall
distribute to each Member a statement showing his interest in the Fund at
least annually.
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ARTICLE V
Vesting and Distribution of Benefits
5.1 Vesting.
5.1.1 Full Vesting. Upon a Member's Termination of
Employment on account of death or Disability, or upon his attainment
of his Normal Retirement Date (or any higher age) while employed by
an Employer or an Affiliate, his Account shall have a Vested
Percentage of 100%.
5.1.2 Vesting Schedule. Upon a Member's Termination
of Employment for a reason other than death, Disability or retirement
on or after his Normal Retirement Date, he shall be entitled to
receive the Vested Percentage of the balance in his Account,
determined on the basis of the Member's Years of Service, as follows:
Years of Service Vested Percentage
---------------- -----------------
Less than 2 0%
2 but less than 3 20%
3 but less than 4 40%
4 but less than 5 60%
5 but less than 6 80%
6 or more 100%
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5.2 Distribution on Termination of Employment.
5.2.1 When a Member's employment terminates for any
reason, the Vested Percentage of the balance of his Account
shall be distributed to him or, if distribution is being made
by reason of death (or after his death following Termination
of Employment), to his Beneficiary. Such distribution shall be
made in accordance with the further provisions of this Article
V.
5.2.2 The amount to be distributed pursuant to this
Section 5.2 shall be determined by a valuation of the Member's
Account on the Valuation Date coinciding with or immediately
preceding the date of distribution.
5.3 Payment of Benefits in General. Any amount
distributable with respect to a Member whose employment terminates for any
reason other than death shall be paid in cash in a single sum as soon as
administratively practicable following Termination of Employment. Any amount
allocated as of the last day of a Plan Year to the Account of a Member who
terminated employment during such Year on account of death or Disability or
on or after attainment of his Normal Retirement Date shall be paid to the
Member or his Beneficiary as soon as administratively practicable after such
allocation. Notwithstanding the foregoing, if the nonforfeitable balance of
the Member's Account on the Valuation Date referred to in Section 5.2.2
exceeds $3,500 (or if it exceeded $3,500 at the time of any prior
distribution), (a) such Member's benefit shall not be so distributed prior to
his Normal
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Retirement Date without the Member's written consent, and (b) if such consent
is not given within such time as the Administrator shall prescribe, such
benefit shall instead be distributed after the Member's Normal Retirement
Date, as if he had terminated employment on that date. Distribution shall in
all events commence no later than 60 days after the close of the Plan Year in
which occurs the later of the Member's Normal Retirement Date or most recent
Termination of Employment. If distribution is deferred until the Member's
Normal Retirement Date, he shall have the right to give investment directions
pursuant to Section 4.6 and his Account shall be credited or charged with
applicable Investment Adjustments through the Valuation Date preceding or
coinciding with his Normal Retirement Date. For purposes of the Plan, if the
nonforfeitable balance of a Member's Account is zero, the Member shall be
deemed to have received a single-sum distribution of such nonforfeitable
balance upon his Termination of Employment. The nonvested portion of the
Account of a Member who is deemed to have received a single-sum distribution
of his nonforfeitable balance under this Section 5.4 shall be forfeited
pursuant to Section 5.4.
5.4 Forfeitures.
5.4.1 Forfeitures. The nonvested portion of a
terminated Member's Account shall be valued and forfeited as of the
Valuation Date coincident with or next following his Termination of
Employment. All amounts forfeited pursuant to this Section 5.4 shall
be reallocated to the Accounts of Participating Members as of the
last day of each Plan Year as provided in Section 4.3; provided, that
if a Member is reemployed by the Company or an Affiliate prior to the
last day of the
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Plan Year in which he incurs a Termination of Employment, no portion
of his Account shall be forfeited or reallocated.
5.4.2 Reemployment. The forfeited portion of a
Member's Account shall be restored if he is reemployed by the
Company, another Employer or an Affiliate before he incurs a Break in
Service of five years or more.
5.5 Payment of Death Benefits.
5.5.1 In General. In the event of the death of a
Member prior to his Termination of Employment, the balance in his
Account shall be distributed to his Beneficiary in a single payment
as soon as administratively practicable after the date of death. If
the Beneficiary is the Member's Spouse, such distribution shall be
made or begin as soon as practicable and, if the Member had attained
Normal Retirement Age prior to death, not later than 60 days
following the close of the Plan Year in which death occurs. Any
amounts allocated to the deceased Member's Account as of the last day
of the Plan Year in which he dies shall be distributed to his
Beneficiary as soon as administratively practicable thereafter.
5.5.2 Designation of a Beneficiary. A Member's
sole Beneficiary shall be his Spouse (if the Member has a surviving
Spouse) unless the Member has designated another Beneficiary with
Spousal Consent. A Beneficiary designation shall be effective when
duly executed and delivered to the Administrator. It may be revoked
by filing with the Administrator a subsequent designation or a
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written instrument of revocation in the form prescribed by him, but
any such designation or revocation which has the effect of naming a
person other than the Member's Spouse as sole Beneficiary is subject
to the Spousal Consent requirement.
5.5.3 Distribution to Minor or Incompetent. Any
death benefit distributable to a minor or incompetent shall be
distributed pursuant to Section 10.7.
5.5.4 Absence of a Beneficiary. If a Member has
failed effectively to designate a Beneficiary, or a Beneficiary
previously designated has predeceased the Member and no alternative
designation has become effective, benefits payable on the Member's
death shall be distributed to his surviving Spouse, if any, or if no
Spouse survives, to the Member's estate.
5.5.5 Proof of Death. The Administrator may
require such proof of death and such evidence of the right of any
person to receive all or part of the death benefit of a deceased
Member as the Administrator may deem desirable. The Administrator's
determination of the fact of death of a Member and of the right of
any person to receive a distribution as a result thereof shall be
conclusive upon such Member and all persons having or claiming any
right in the Fund on account of such Member.
5.5.6 Undistributed Balance of Terminated Member.
In the event that a Member shall terminate employment with a vested
balance in his Account and shall die prior to the complete
distribution of such vested balance, the undistribut-
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ed portion of such vested balance shall be distributed to his
Beneficiary in the manner provided for in this Section 5.5.
Notwithstanding the foregoing, the Administrator and Trustee shall be
fully protected in making distribution in the name of any such Member
prior to the Trustee's receiving actual notice of the death of such
Member, and no Beneficiary of a deceased Member shall have any
interest in such Member's vested Account balance to the extent that
any such distribution shall have been made.
5.5.7 Discharge of Liability. If distribution in
respect of a Member's Account is made to a person reasonably believed
by the Administrator (taking into account any document purporting to
be a valid Spousal Consent or any representation by the Member that
he is not married) to properly qualify as the Member's Beneficiary
under the provisions of this Section 5.5, the Plan shall have no
further liability with respect to such Account (or the portion
thereof so distributed).
5.6 Distribution at Age 70-1/2. The Account balance of a
Member who attains age 70-1/2 shall be distributed to him in a single sum no
later than the first day of April following the calendar year in which such
Member attains age 70-1/2, even if he is still employed. Any amount
subsequently allocated to the Member's Account under the Plan shall be
distributed to the Member as soon as practicable following the date of such
allocation (or, in the event the Member is still employed, as soon as
practicable after the end of the Plan Year in respect of which the allocation
is made).
5.7 Delay of Payment. Notwithstanding any provisions to
the contrary contained in this Plan, in the event that the amount of a payment
required to commence on
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the date otherwise determined under this Plan cannot be ascertained by such
date, or if it is not possible to make such payment on such date because the
Administrator has been unable to locate the Member (or, in the case of a
deceased Member, his Beneficiary) after making reasonable efforts to do so, a
payment retroactive to such date may be made no later than 60 days after the
earliest date on which the amount of such payment can be ascertained under
this Plan or the date on which the Member (or Beneficiary) is located,
whichever is applicable.
5.8 Qualified Domestic Relations Orders.
5.8.1 Definition. For purposes of this Section
5.8.1, "Qualified Domestic Relations Order" means any judgment,
decree or order (including approval of a property settlement) made
pursuant to a state domestic relations law (including a community
property law) which relates to the provision of child support,
alimony payments or marital property rights to a Spouse, former
Spouse, child or other dependent of a Member and which creates or
recognizes the existence of a right of (or assigns a right to) such
Spouse, former Spouse, child or other dependent (the "Alternate
Payee") to receive all or a portion of the benefits payable with
respect to a Member under the Plan. A Qualified Domestic Relations
Order must clearly specify the amount or percentage of the Member's
benefits to be paid to such Alternate Payee by the Plan (or the
manner in which such amount or percentage is to be determined) and
the number of payments or period to which such order applies. A
Qualified Domestic Relations Order may not require the Plan (a) to
provide any form or type of
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benefits or any option not otherwise provided under the Plan, (b) to
pay benefits to an Alternate Payee under such order which are
required to be paid to another Alternate Payee under another such
order previously filed with the Plan, or (c) to provide increased
benefits (determined on the basis of actuarial equivalents);
provided, however, that if the Participant has reached age 50, or the
Alternate Payee and the Administrator have entered into an agreement
providing for distribution, payment of benefits to the Alternate
Payee under the order may be made (x) at any time after the date of
the order, (y) as if the Member had retired on the date on which such
payment is to begin under such order (taking into account only the
benefits in which the Participant is then vested) and (z) in any form
in which such benefits may be paid to the Member.
5.8.2 Distributions. The Administrator shall
recognize and honor any judgment, decree or order entered on or after
January 1, 1985 under a state domestic relations law which the
Administrator determines to be a Qualified Domestic Relations Order
in accordance with such reasonable procedures to determine such
status as the Administrator shall establish. Without limitation of
the foregoing, the Administrator shall notify a Member and the person
entitled to benefits under a judgment, decree or order which purports
to be a Qualified Domestic Relations Order of (a) the receipt
thereof, (b) the Plan's procedures for determining whether such
judgment, decree or order is a Qualified Domestic Relations Order and
(c) any determination made with respect to such status. During any
period during which the Administrator is determining whether any
judgment, decree or order is a Qualified
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<PAGE>
Domestic Relations Order, any amount which would have been payable to
any person pursuant to such order shall be separately accounted for
(and adjusted to reflect its appropriate share of the Investment
Adjustments as of each Valuation Date pursuant to Article IV) pending
payment to the proper recipient thereof. Any such amount, as so
adjusted, shall be paid to the person entitled to such payment under
any such judgment, decree or order if the Administrator determines
such judgment, decree or order to be a Qualified Domestic Relations
Order within 18 full calendar months commencing with the date on
which the first payment would be required to be made under such
judgment, decree or order. If the Administrator is unable to make
such a determination within such time period, payment under the Plan
shall be as if such judgment, decree or order did not exist and any
such determination made after such time period shall be applied
prospectively only.
5.9 Direct Rollover of Eligible Rollover Distributions.
Notwithstanding any provisions of this Plan that would otherwise limit a
Distributee's election under this Section 5.9, a Distributee may elect, at
the time and in the manner prescribed by the Administrator, to have any
portion of an Eligible Rollover Distribution paid in a Direct Rollover
directly to an Eligible Retirement Plan specified by the Distributee.
5.9.1 Definitions. For purposes of this
Section 5.9, the following terms shall have the meanings specified
below.
5.9.1.1 Eligible Rollover Distribution.
Any distribution of all or any portion of the balance to the credit
of a Distributee under the Plan,
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except that an Eligible Rollover Distribution does not include: any
distribution that is one of a series of substantially equal periodic
payments (not less frequent than annual) made for the life (or life
expectancy) of the Distributee or the joint lives (or life
expectancies) of the Distributee and the Distributee's Beneficiary,
or for a specified period of ten years or more; any distribution to
the extent such distribution is required under section 401(a)(9) of
the Code; and the portion of any distribution that is not includible
in gross income.
5.9.1.2 Eligible Retirement Plan.
An individual retirement account described in section 408(a) of the
Code, an individual retirement annuity described in section 408(b) of
the Code, an annuity plan described in section 403(a) of the Code, or
another employer's qualified trust described in section 401(a) of the
Code, that accepts a Distributee's Eligible Rollover Distribution.
However, in the case of an Eligible Rollover Distribution to the
surviving Spouse, an Eligible Retirement Plan is only an individual
retirement account or individual retirement annuity.
5.9.1.3 Distributee. A Member, a
Member's surviving Spouse or a Member's Spouse or former Spouse who
is the Alternate Payee under a Qualified Domestic Relations Order (as
defined in section 414(p) of the Code).
5.9.1.4 Direct Rollover. A payment by
the Plan to an Eligible Retirement Plan specified by a Distributee,
in the manner prescribed by the Administrator.
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<PAGE>
5.9.2 Limitation. No more than one Direct
Rollover may be elected by a Distributee for each Eligible Rollover
Distribution.
5.9.3 Default Procedure. If, upon Termination of
Employment, the value of a Members Account does not exceed $3,500
(and did not exceed $3,500 at the time of any prior distribution
under the Plan), and such Member does not make a timely election
under this Section 5.9 to make a Direct Rollover, the Member's
Accounts shall be distributed to the Member in accordance with
Section 5.3.
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ARTICLE VI
Administration of the Plan
6.1 Fiduciary. The named fiduciary under the Plan shall
be the Administrator, who shall have authority to control and manage the
operation and administration of the Plan, except that he shall have no
authority or responsibility with respect to those matters which under any
applicable trust agreement, insurance policy or similar contract are the
responsibility, or subject to the authority, of the Trustee, any insurance
company or similar organization. The named fiduciary under the Plan shall
have the right, by written instrument executed by him, to designate persons
other than the named fiduciary to carry out fiduciary responsibilities under
the Plan.
6.2 The Administrator.
6.2.1 Appointment of Administrator. The Board of
Directors shall appoint an Administrator to administer the Plan,
without regard to whether or not he is an officer or employee of an
Employer or a Member of the Plan, or whether or not he is serving as
a Trustee of the Plan, and he shall serve at the pleasure of the
Board of Directors. The Administrator may resign by delivering his
written resignation to the Board of Directors. Any vacancy in the
position of Administrator, arising for any reason whatsoever, shall
be filled by the Board of Directors. If the Administrator is also a
Member of this Plan, he shall not exercise discretion in any matter
relating solely to himself. In the event no Administrator is then
serving, or if the Administrator is incapable of taking action with
respect to any matter (because the
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<PAGE>
matter relates solely to himself, or for any other reason), the Board
of Directors shall administer the Plan as if it were the
Administrator.
6.2.2 Duties. The Administrator shall administer
the Plan and may make such rules as he may deem necessary in order to
effectuate its provisions, and with the approval of the Board of
Directors may employ such persons as he shall deem necessary or
desirable to assist in the administration of the Plan. The
Administrator shall have the power and discretion to determine any
question arising in the administration, interpretation, and
application of the Plan, and shall have the power to correct defects,
supply omissions and reconcile inconsistencies to the extent
necessary to effectuate the Plan. The determination of the
Administrator shall be conclusive and binding on all persons. All
distributions of the assets of the Fund shall be made by the Trustee
at the written direction of the Administrator. All expenses of the
Administrator shall be paid by the Company, and such expenses shall
include any expenses authorized by the Board of Directors as
necessary or desirable in the administration of the Plan.
6.3 Advisers. Any named fiduciary under the Plan, and
any fiduciary designated by a named fiduciary to whom such power is granted
by a named fiduciary under the Plan, may employ one or more persons to render
advice with regard to any responsibility such fiduciary has under the Plan.
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<PAGE>
6.4 Service in Multiple Capacities. Any person or group
of persons may serve in more than one fiduciary capacity with respect to the
Plan.
6.5 Limitation of Liability; Indemnity.
6.5.1 Delegation of Duty. Except as otherwise
provided by law, if any duty or responsibility of a named fiduciary
has been allocated or delegated to any other person in accordance
with any provision of this Plan, then such named fiduciary shall not
be liable for any act or omission of such person in carrying out such
duty or responsibility.
6.5.2 Limitation of Liability. Except as
otherwise provided by law, no person who is a named fiduciary, or any
employee, director or officer of any Employer or Affiliate, shall
incur any liability whatsoever on account of any matter connected
with or related to the Plan or the administration of the Plan, unless
such person shall have acted in bad faith or been guilty of willful
misconduct or gross negligence in respect of his duties, actions or
omissions in respect of the Plan. The allocation of a Member's (or
Beneficiary's) Account, and contributions allocable thereto, among
Investment Funds shall be the responsibility of the Member or
Beneficiary in accordance with Article IV and the Administrator shall
not be deemed a fiduciary with respect to such allocation.
6.5.3 Indemnity. The Company shall indemnify and
save harmless each employee, director or officer of any Employer or
Affiliate who serves
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<PAGE>
in a fiduciary or any other capacity under or with respect to the
Plan, from and against any and all loss, liability, claim, damage,
cost and expense which may arise by reason of, or be based upon, any
matter connected with or related to the Plan or the administration of
the Plan (including, but not limited to, any and all expenses
whatsoever reasonably incurred in investigating, preparing or
defending against any litigation, commenced or threatened, or in
settlement of any such claim whatsoever) to the fullest extent
permitted under the Company's Certificate of Incorporation and
By-Laws, unless such person shall have acted in bad faith or been
guilty of willful misconduct or gross negligence in respect of his
duties, actions or omissions in respect of the Plan.
6.6 Reliance on Information. The Administrator and any
Employer and its officers, directors and employees shall be entitled to rely
upon all tables, valuations, certificates, opinions and reports furnished by
any accountant, trustee, insurance company, counsel or other expert who shall
be engaged by an Employer or the Administrator, and the Administrator and any
Employer and its officers, directors and employees shall be fully protected
in respect of any action taken or suffered by them in good faith in reliance
thereon, and all action so taken or suffered shall be conclusive upon all
persons affected thereby.
6.7 Funding Policy. The funding policy and method of the
Plan shall consist of the receipt of contributions and the investment thereof
pursuant to the provisions of the Plan.
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<PAGE>
6.8 Proper Proof. In any case in which an Employer or the
Administrator shall be required under the Plan to take action upon the
occurrence of any event, they shall be under no obligation to take such
action unless and until proper and satisfactory evidence of such occurrence
shall have been received by them.
6.9 Genuineness of Documents. The Administrator, and any
Employer and its respective officers, directors and employees, shall be
entitled to rely upon any notice, request, consent, letter, telegram or other
paper or document believed by them or any of them to be genuine, and to have
been signed or sent by the proper person, and shall be fully protected in
respect of any action taken or suffered by them in good faith in reliance
thereon.
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<PAGE>
ARTICLE VII
The Trust Agreement
7.1 The Trust Agreement. The Company, on behalf of itself
and each other Employer, shall enter into a Trust Agreement with the Trustee
providing for the establishment of a Fund hereunder consisting of all
contributions to the Plan and earnings and profits thereon. The Trust
Agreement shall be deemed to form a part of this Plan, and any and all rights
which may accrue to any person under this Plan shall be subject to all the
terms and provisions of such Trust Agreement. Copies of the Trust Agreement
shall be filed with the Administrator and, upon reasonable application and
notice, shall be made available for inspection by any Member.
7.2 Rights of the Company. Except as otherwise expressly
provided in the Trust Agreement, upon the transfer by an Employer of any
money or assets to the Fund, all interest of the Employer therein shall cease
and terminate, legal title to such Fund shall be vested absolutely in the
Trustee and no part of the Fund or income therefrom shall be used for or
diverted to purposes other than the exclusive benefit of the Members and
their Beneficiaries as provided herein; provided, however, that:
(a) A contribution that is made by an Employer by a
mistake of fact may be returned to the Employer upon its request
within one year after the payment of the contribution;
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<PAGE>
(b) A contribution that is conditioned upon its
deductibility under section 404(a) of the Code may be returned to the
Employer upon its request, to the extent that the contribution is
disallowed as a deduction, within one year after such disallowance;
and
(c) A contribution that is conditioned on initial
qualification of the Plan under section 401(a) of the Code may, if
the Plan does not so qualify, be returned (together with any earnings
thereon) to the contributing Employer within one year after the date
of denial of qualification of the Plan.
7.3 Duties and Responsibilities of the Trustee. The
Trustee will hold and invest all funds as provided herein and in the Trust
Agreement. The Trustee will make, at the written direction of the
Administrator, all payments to Members and their Beneficiaries.
7.4 Company as Agent. The Company is authorized to act
as agent for all other Employers in dealings with the Trustee under the Plan.
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<PAGE>
ARTICLE VIII
Amendment
8.1 Right of the Company to Amend the Plan. The Company
shall have the right at any time and from time to time to amend any or all of
the provisions of this Plan, by resolution of the Board of Directors. Except
as provided in Section 8.3, no such amendment shall authorize or permit any
part of the Fund to be used for or diverted to purposes other than the
exclusive benefit of the Members and their Beneficiaries, nor shall any
amendment reduce any amount then credited to the Account of any Member,
reduce any Member's vested interest in his Account, or affect the rights,
duties and responsibilities of the Trustee without the Trustee's written
consent.
8.2 Plan Merger. In the case of any merger or
consolidation with, or transfer of assets or liabilities to, any other plan,
each Member shall be entitled to a benefit immediately after the merger,
consolidation, or transfer (if such other plan then terminated) which is
equal to or greater than the benefit he would have been entitled to receive
immediately before the merger, consolidation or transfer (if the Plan had
then been terminated).
8.3 Amendments Required by Law. All provisions of this
Plan, and all benefits and rights granted hereunder, are subject to any
amendments, modifications or alterations which are necessary from time to
time, (a) to qualify the Plan under section 40l(a) of the Code and the
regulations and rulings thereunder, (b) to continue the Plan as so qualified,
or (c) to comply with any other provision of law. Accordingly,
notwithstanding any other provision of this Plan, the Company may, by
resolution of the Board of Directors,
VIII-1
<PAGE>
amend, modify or alter the Plan, with or without retroactive effect, in any
respect or manner necessary to qualify the Plan under section 40l(a) of the
Code, to continue the Plan as so qualified, to meet the aforementioned
statutory requirements or to comply with any other provision of applicable
law.
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<PAGE>
ARTICLE IX
Discontinuance of Contributions
and Termination of the Plan
9.1 Right to Terminate the Plan or Discontinue Con-
tributions. The Employers have established the Plan with the bona fide
intention and expectation that from year to year they will be able to and
will deem it advisable to make contributions as herein provided. However, the
board of directors of an Employer may determine that circumstances make it
impossible or inadvisable for such Employer to make a contribution in respect
of a given Plan Year. The failure of such board of directors to authorize a
contribution in respect of a Plan Year shall not constitute a termination of
the Plan. However, the Company reserves the right in its discretion to
terminate the Plan or completely discontinue contributions thereto at any
time, with respect to any or all Employers.
9.2 Manner of Termination. The Board of Directors shall
have the power in its discretion to terminate the Plan by appropriate
resolution. A certified copy of such resolution or resolutions shall be
delivered to the Administrator, and as soon as possible thereafter the
Administrator shall deliver to the Trustee a copy of the resolution or
resolutions and shall give appropriate notice to the Members.
9.3 Effect of Termination. In the event of the complete
or partial termination (within the meaning of section 4ll(d)(3) of the Code)
of the Plan or a complete discontinuance of contributions by the Employers,
the rights of all affected Members to their Accounts as of the date of such
termination or such complete discontinuance of contributions
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<PAGE>
shall be fully vested and nonforfeitable (within the meaning of section 4ll
of the Code and regulations thereunder). After the date of a complete
termination specified in the resolution or resolutions adopted by the Board
of Directors, the Employers shall make no further contributions under the
Plan. In the event of a complete discontinuance of contributions without a
termination of the Plan, all provisions of the Plan and of the Trust
Agreement shall remain in force which are necessary in the opinion of the
Administrator, other than the provisions for contributions.
9.4 Distribution of the Fund. In the event of a
termination of the Plan, the Trustee shall apply each Member's Account to the
benefit of such Member (or his Beneficiary) in accordance with the
instructions of the Administrator.
9.5 Expenses of Termination. In the event of the complete
or partial termination of the Plan, the expenses incident thereto shall be a
prior claim and lien upon the assets of the Trust Fund, and shall be paid or
provided for prior to the distribution of any benefits pursuant to such
termination.
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<PAGE>
ARTICLE X
Miscellaneous Provisions
10.1 Plan Not a Contract of Employment. Neither the
establishment of the Plan, nor any amendment thereof, nor the creation of the
Fund or any Account, nor the payment of any benefits thereunder, shall be
construed as giving to any Member or other person any legal or equitable
right against any Employer, any officer or employee thereof, the Board of
Directors or any member thereof, the Administrator, or any Trustee, except as
provided herein, and under no circumstances shall the terms of employment of
any Member be in any way affected hereby.
10.2 Source of Benefits. All benefits payable under the
Plan shall be paid or provided for solely from the Fund and the Employers
assume no liability or responsibility therefor. The Employers are under no
legal obligation to make any contributions to the Fund. No action or suit
shall be brought by any Member or Beneficiary, or by any Trustee, against any
Employer for any such contribution.
10.3 Spendthrift Clause. Except as may be otherwise
required by a Qualified Domestic Relations Order (as defined in section
5.8.1) or other applicable law, no benefit or payment under the Plan shall be
subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance or charge, whether voluntary or involuntary,
and no attempt so to anticipate, alienate, sell, transfer, assign, pledge,
encumber or charge the same shall be valid, nor shall any such benefit or
payment be in any way liable for or subject to the debts, contracts,
liabilities, engagements or torts of any person entitled to such
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benefit or payment, or subject to attachment, garnishment, levy, execution or
other legal or equitable process.
10.4 Merger. The merger or consolidation of the Company
with any other company or the transfer of the assets of the Company to any
other company by sale, exchange, liquidation or otherwise or the merger of
this Plan with any other retirement plan shall not in and of itself result in
the termination of the Plan or be deemed a Termination of Employment of any
Employee.
10.5 Claims Procedure. The Administrator shall establish a
claims procedure in accordance with applicable law, under which any Member or
Beneficiary whose claim for benefits has been denied shall have a reasonable
opportunity for a full and fair review of the decision denying such claim.
10.6 Inability to Locate Distributee. Notwithstanding any
other provision of the Plan, in the event that the Administrator cannot
locate any person to whom a payment or distribution is due under the Plan,
and no other payee has become entitled thereto pursuant to any provision of
the Plan, the Account in respect of which such payment or distribution is to
be made shall be forfeited at the close of the third Plan Year following the
Plan Year in which such payment or distribution first became due (but in all
events prior to the time such Account would otherwise escheat under any
applicable state law); provided, that any Account so forfeited shall be
reinstated if such person subsequently makes a valid claim for such benefit.
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<PAGE>
10.7 Payment to a Minor or Incompetent. If any amount is
payable to a minor or other legally incompetent person, such amount may be
paid in any of the following ways, as the Administrator in his sole
discretion shall determine:
(a) To the legal representatives of such minor or
other incompetent person;
(b) Directly to such minor or other incompetent
person;
(c) To a parent or guardian of such minor, or to a
custodian for such minor under the Uniform Gifts to Minors Act (or
similar statute) of any jurisdiction or to the person with whom such
minor shall reside.
Payment to such minor or incompetent person, or to such other person as may
be determined by the Administrator, as above provided, shall discharge all
Employers, the Administrator, the Trustees and any insurance company or other
person or corporation making such payment pursuant to the direction of the
Administrator, and none of the foregoing shall be required to see to the
proper application of any such payment to such person pursuant to the
provisions of this Section 10.7.
10.8 Doubt as to Right to Payment. If at any time any
doubt exists as to the right of any person to any payment hereunder or as to
the amount or time of such payment (including, without limitation, any doubt
as to identity, or any case in which any notice has been received from any
other person claiming any interest in amounts payable hereunder, or any case
in which a claim from other persons may exist by reason of commu-
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<PAGE>
nity property or similar laws) the Administrator shall be entitled, in its
discretion, to direct the Trustee (or any insurance company) to hold such sum
as a segregated amount in trust until such right or amount or time is
determined or until order of a court of competent jurisdiction, or to pay
such sum into court in accordance with appropriate rules of law in such case
then provided, or to make payment only upon receipt of a bond or similar
indemnification (in such amount and in such form as is satisfactory to the
Administrator).
10.9 Estoppel of Members and Beneficiaries. The Employers,
Administrator and Trustee may rely upon any certificate, statement or other
representation made to them by any Employee, Member or Beneficiary with
respect to age, length of service, leave of absence, date of cessation of
employment or other fact required to be determined under any of the
provisions of the Plan, and shall not be liable on account of the payment of
any benefits or the doing of any act in reliance upon any such certificate,
statement or other representation. Any such certificate, statement or other
representation made by an Employee or Member shall be conclusively binding
upon such Employee or Member and his Beneficiary and estate, and such
Employee, Member, Beneficiary and estate shall thereafter and forever be
estopped from disputing the truth and correctness of such certificate,
statement or other representation. Any such certificate, statement or other
representation made by a Beneficiary shall be conclusively binding upon such
Beneficiary, and such Beneficiary shall thereafter and forever be estopped
from disputing the truth and correctness of such certificate, statement or
other representation.
X-4
<PAGE>
10.10 Separability. If any provision of the Plan or the
Trust Agreement is held invalid or unenforceable, its invalidity or
unenforceability shall not affect any other provisions of the Plan and/or the
Trust Agreement, and the Plan and Trust Agreement shall be construed and
enforced as if such provision had not been included therein.
10.11 Captions. The captions contained herein are inserted
only as a matter of convenience and for reference and in no way define,
limit, enlarge or describe the scope or intent of the Plan nor in any way
shall affect the Plan or the construction of any provision thereof.
10.12 Usage. Whenever applicable, the masculine gender,
when used in the Plan, shall include the feminine or neuter gender, and the
singular shall include the plural.
X-5
<PAGE>
ARTICLE XI
Leased Employees
11.1 Definitions. For purposes of this Article XI, the
term "Leased Employee" means any person (a) who performs or performed
services for an Employer or Affiliate (hereinafter referred to as the
"Recipient") pursuant to an agreement between the Recipient and any other
person (hereinafter referred to as the "Leasing Organization"), (b) who has
performed such services for the Recipient or for the Recipient and related
persons (within the meaning of section 144(a)(3) of the Code) on a
substantially full-time basis for a period of at least one year, and (c)
whose services are of a type historically performed by employees in the
business field of the Recipient.
11.2 Treatment of Leased Employees. For purposes of this
Plan, a Leased Employee shall be treated as an employee of an Affiliate whose
service for the Recipient (including service during the one-year period
referred to in Section 11.1) is to be taken into account in determining
compliance with the service requirements of the Plan relating to
participation. However, the Leased Employee shall not be entitled to share in
contributions or forfeitures under the Plan with respect to any service or
compensation attributable to the period during which he is a Leased Employee,
and shall not be eligible to become a Member eligible to accrue benefits
under the Plan unless and except to the extent that he shall at some time,
either before or after his service as a Leased Employee, qualify as an
Eligible Employee without regard to the provisions of this Article XI (in
which event, status as a Leased Employee shall be determined without regard
to clause (b) of Section 11.1, to the extent required by applicable law).
XI-1
<PAGE>
11.3 Exception for Employees Covered by Plans of Leasing
Organization. Section 11.2 shall not apply to any Leased Employee if such
employee is covered by a money purchase pension plan of the Leasing
Organization meeting the requirements of section 414(n)(5)(B) of the Code and
Leased Employees do not constitute more than 20% of the aggregate "nonhighly
compensated work force" (as defined in Section 414(n)(5)(C)(ii) of the Code)
of all Employers and Affiliates.
11.4 Construction. The purpose of this Article XVI is to
comply with the provisions of section 4l4(n) of the Code. All provisions of
this Article shall be construed consistently therewith, and, without limiting
the generality of the foregoing, no individual shall be treated as a Leased
Employee except as required under such section.
XI-2
<PAGE>
ARTICLE XII
"Top-Heavy" Provisions
12.1 Determination of "Top-Heavy" Status.
12.1.1 Applicable Plans. For purposes of this
Article XII, "Applicable Plans" shall include (a) each plan of an
Employer or Affiliate in which a Key Employee (as defined in Section
12.1.2 for this Plan, and as defined in section 416(i) of the Code
for each other Applicable Plan) participates during the five-year
period ending on such plan's "determination date" (as described in
Section 12.1.4) and (b) each other plan of an Employer or Affiliate
which, during such period, enables any plan in clause (a) of this
sentence to meet the requirements of sections 401(a)(4) and 410 of
the Code. Any plan not required to be included under the preceding
sentence may also be included, at the option of the Company, provided
that the requirements of sections 401(a)(4) and 410 of the Code
continue to be satisfied for the group of Applicable Plans after such
inclusion. Applicable Plans shall include terminated plans, frozen
plans, and to the extent that benefits are provided with respect to
service with an Employer or an Affiliate, multiemployer plans
(described in section 414(f) of the Code) and multiple employer plans
(described in section 413(c) of the Code) to which an Employer or an
Affiliate makes contributions.
12.1.2 Key Employee. For purposes of this
Article XII, "Key Employee" shall mean an employee (including a
former employee, whether or not
XII-1
<PAGE>
deceased) of an Employer or Affiliate who, at any time during a given
Year or any of the four preceding Plan Years, is one or more of the
following:
(a) An officer of an Employer or Affiliate
having compensation within the meaning of section 414(q)(7) of
the Code ("Top-Heavy Earnings") of more than 50% of the dollar
amount in effect under section 415(b)(1)(A) of the Code for
any such Plan Year; provided, that the number of employees
treated as officers shall be no more than 50 or, if fewer, the
greater of three employees or 10% of the employees (including
Leased Employees as described in Section 11.1 and excluding
employees described in section 414(q)(8) of the Code).
(b) One of the 10 employees (i) having
Top-Heavy Earnings from the Employer or Affiliate of more than
the dollar amount described in Section 3.4 and (ii) owning (or
considered as owning, within the meaning of section 416(i) of
the Code), the largest percentage interests in value of an
Employer or Affiliate, provided that such percentage interest
exceeds 0.5% in value. If two employees have the same interest
in the Employer or Affiliate, the employee having greater
Top-Heavy Earnings shall be treated as having a larger
interest.
(c) A person owning (or considered as
owning, within the meaning of section 416(i) of the Code),
more than 5% of the outstanding stock of an Employer or
Affiliate, or stock possessing more than 5% of the
XII-2
<PAGE>
total combined voting power of all stock of the Employer or
Affiliate (or having more than 5% of the capital or profits
interest in any Employer or Affiliate that is not a
corporation, determined under similar principles).
(d) A 1% owner of an Employer or Affiliate
having Top-Heavy Earnings of more than $150,000. A "1% owner"
means any person who would be described in Section 12.1.2(c)
if "1%" were substituted for "5%" in each place where it
appears in Section 12.1.2(c).
12.1.3 "Top-Heavy" Condition. In any Year during
which the sum, for all Key Employees (as defined in Section 12.1.2
for this Plan and in section 416(i) of the Code for each other
Applicable Plan), of the present value of the cumulative accrued
benefits under all Applicable Plans which are defined benefit plans
(determined based on the actuarial assumptions set forth in the
"top-heavy" provisions of such plans) and the aggregate of their
accounts under all Applicable Plans which are defined contribution
plans, exceeds 60% of a similar sum determined for all members in
such plans (but excluding members who are former Key Employees), the
Plan shall be deemed "Top-Heavy."
12.1.4 Determination Date. The determination as
to whether this Plan is "Top-Heavy" for a given Plan Year shall be
made on the last day of the preceding Plan Year (the "Determination
Date"); and other plans shall be included in determining whether this
Plan is "Top-Heavy" based on the determination date as
XII-3
<PAGE>
defined in Code section 416(g)(4)(c) for each such plan which occurs
in the same calendar year as such Determination Date for this Plan.
12.1.5 Valuation. The value of account balances
and the present value of accrued benefits for each Applicable Plan
will be determined, subject to Code section 416 and the regulations
thereunder, as of the most recent Valuation Date occurring within the
12-month period ending on the applicable determination date for such
plan.
12.1.6 Distributions within Five Years. Subject to
Section 12.1.7, distributions from the Plan or any other Applicable
Plan during the five-year period ending on the applicable
Determination Date shall be taken into account in determining whether
the Plan is "Top-Heavy."
12.1.7 No Services within Five Years. Benefits and
distributions shall not be taken into account with respect to any
individual who has not rendered any services to any Employer or
Affiliate at any time during the five-year period ending on the
applicable determination date.
12.1.8 Compliance with Code Section 416. The
calculation of the "Top-Heavy" ratio, and the extent to which
distributions, rollovers and transfers from this Plan or any other
Applicable Plan are taken into account, shall be made in accordance
with Code section 416 and applicable regulations thereunder.
XII-4
<PAGE>
12.1.9 Beneficiaries. The terms "Key Employee,"
"Member" and member include their beneficiaries.
12.1.10 Accrued Benefit Under Defined Benefit
Plans. Solely for purposes of determining whether this Plan or any
other Applicable Plan is "Top-Heavy" for a given Plan Year, the
accrued benefit under any defined benefit plan of a Member other than
a Key Employee shall be determined under (a) the method, if any, that
uniformly applies for accrual purposes under all defined benefit
plans maintained by the Employer or an Affiliate, or (b) if there is
no such method, as if such benefit accrued not more rapidly than at
the slowest accrual rate permitted under the fractional accrual rule
of section 411(b)(1)(C) of the Code.
12.2 Provisions Applicable in "Top-Heavy" Years. For any
Plan Year in which the Plan is deemed to be "Top-Heavy," the following
provisions shall apply to any Member who has not terminated employment before
such Plan Year.
12.2.1 Required Allocation. The amount of Employer
contributions and forfeitures which shall be allocated to the account
of any Member who (a) is employed by an Employer or Affiliate on the
last day of the Year and (b) is not a Key Employee shall be (i) at
least 3% of such Member's "total compensation" (as that term is
defined in section 415(c)(3) of the Code) for such Year, or, (ii) if
less, an amount equal to such total compensation multiplied by the
highest allocation rate for any Key Employee. For purposes of the
preceding sentence, the allocation rate for each individual Key
Employee shall be determined by dividing the Employer
XII-5
<PAGE>
contributions and forfeitures allocated to such Key Employee's
account under all Applicable Plans considered together, by his total
compensation; provided, however, that clause (ii) does not apply if
this Plan enables a defined benefit plan required to be aggregated
with this Plan under Section 12.1.1 to meet the requirements of
section 401(a)(4) or 410 of the Code. The minimum-allocation
provisions of this Section 12.2.1 shall, to the extent necessary, be
satisfied by special Employer contributions made by the Employer for
that purpose. Notwithstanding the foregoing, the minimum allocations
otherwise required by this Section 12.2.1 shall not be required to be
made for any Member if such Member is covered under a defined benefit
plan maintained by an Employer or an Affiliate which provides the
minimum benefit required under section 416(c)(1) of the Code, and/or
to the extent that the minimum allocation otherwise required by this
Section 12.2.1 is made under another defined contribution plan
maintained by an Employer or an Affiliate. In addition, any minimum
allocation required to be made for a Member who is not a Key Employee
shall be deemed satisfied to the extent of the benefits provided by
any other qualified plan maintained by an Employer or an Affiliate.
12.2.2 Multiplier. Except as otherwise provided by
law, "1.00" shall be substituted for the multiplier "1.25" required
by section 415(e)(2)(B)(i) and (3)(B)(i) of the Code, unless the
following conditions are met:
(a) the percentage described in Section
12.1.3 does not exceed 90%; and
XII-6
<PAGE>
(b) "4%" is substituted for "3%" in Section
12.2.1.
Notwithstanding any other provision of this Plan, if the sum
of the combined limitation fractions described in section 415(e)(2)
and (3) of the Code as applied to this Plan, calculated by
substituting "1.00" for "1.25" in applying section 415(e)(2)(B)(i)
and (3)(B)(i) of the Code, for any Member exceeds 100% for the last
Plan Year before the Plan becomes "Top-Heavy," such fractions shall
be adjusted, in accordance with applicable regulations, so that their
sum does not exceed 100% for such Year.
12.2.3 Vesting. Any Member shall be vested in his
account on a basis at least as favorable as is provided under the
following schedule:
Years of Service Vested Percentage
---------------- -----------------
Less than 2 0%
2 but less than 3 20%
3 but less than 4 40%
4 but less than 5 60%
5 but less than 6 80%
6 or more 100%
In any Plan Year in which the Plan is not deemed to be
"Top-Heavy," the minimum Vested Percentage of any Account shall be no
less than that which was determined as of the last day of the last
Plan Year in which the Plan was deemed to be "Top-Heavy." The minimum
vesting schedule set out above shall apply to all benefits
XII-7
<PAGE>
within the meaning of Code section 411(a)(7) except those
attributable to employee contributions, including benefits accrued
before the effective date of this Article XII and benefits accrued
before the Plan became "Top-Heavy." Any vesting schedule change
caused by alterations in the Plan's "Top-Heavy" status shall be
deemed to result from a Plan amendment giving rise to the right of
election required by Code section 411(a)(10)(B).
12.2.4 Bargaining Unit Employees. The provisions
of Sections 12.2.1 and 12.2.3 shall not apply to any employee
included in a unit of employees covered by a collective bargaining
agreement if, within the meaning of section 416(i)(4) of the Code,
retirement benefits were the subject of good faith bargaining.
XII-8
<PAGE>
IN WITNESS WHEREOF, AGREE REALTY CORPORATION has caused
this instrument to be executed by its duly authorized officer, and its
corporate seal to be hereunto affixed, this 22nd day of April, 1994.
AGREE REALTY CORPORATION
By /s/ Richard Agree
---------------------
Title: President
ATTEST:
/s/ Kenneth Howe
- ----------------------
Secretary
XII-9
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