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EXHIBIT 99.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
AMERICAN REALTY TRUST, INC.
(ART)
AND
ART NEWCO, LLC
(NEWCO)
AND
BASIC CAPITAL MANAGEMENT, INC.
(BCM)
AND
EQK REALTY INVESTORS I
(EQK)
AND
EQUITABLE REALTY PORTFOLIO MANAGEMENT, INC.
(ERPM)
AND
COMPASS RETAIL, INC.
(COMPASS)
DATED AS OF DECEMBER 23, 1997
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TABLE OF CONTENTS
PAGE
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ARTICLE I
THE MERGER
1.01. The Merger . . . . . . . . . . . . . . . . . . . . 1
1.02. Effective Time . . . . . . . . . . . . . . . . . . 1
1.03. Effect of the Merger . . . . . . . . . . . . . . . 1
1.04. Declaration of Trust . . . . . . . . . . . . . . . 2
1.05. Trustees' Regulations . . . . . . . . . . . . . . 2
1.06. Additional Actions . . . . . . . . . . . . . . . . 2
1.07. Merger Consideration . . . . . . . . . . . . . . . 2
1.08. Merger Agent; Merger Fund . . . . . . . . . . . . 3
1.09. Successor Advisor; Additional Consideration . . . 3
1.10. ART Shares; Listing of ART Shares . . . . . . . . 4
1.11. EQK Shares . . . . . . . . . . . . . . . . . . . . 4
1.12. Property Manager . . . . . . . . . . . . . . . . . 4
1.14. Block Purchase . . . . . . . . . . . . . . . . . . 4
ARTICLE II
CLOSING
2.01. Closing . . . . . . . . . . . . . . . . . . . . . 5
2.02. Deliveries by EQK . . . . . . . . . . . . . . . . 5
2.03. Deliveries by Newco and ART . . . . . . . . . . . 5
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
3.01. Organization and Qualification of EQK . . . . . . 6
3.02. Power and Capacity; Charter Documents of EQK . . . 6
3.03. Subsidiaries . . . . . . . . . . . . . . . . . . . 6
3.04. Capitalization and Ownership of EQK . . . . . . . 7
3.05. No Conflicts . . . . . . . . . . . . . . . . . . . 7
3.06. Consents and Approvals . . . . . . . . . . . . . . 8
3.07. Absence of Certain Changes . . . . . . . . . . . . 8
3.08. EQK Information . . . . . . . . . . . . . . . . . 11
3.09. Redemptions of EQK Shares by EQK . . . . . . . . . 00
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0
XXXXX XX XXXXXXXX
(XXXX D)
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF NEWCO AND ART
4.01. Organization and Qualification - Newco . . . . . . . . . . . . 11
4.02. Organization and Qualification - ART . . . . . . . . . . . . . 11
4.03. Power and Capacity of Newco; Charter Documents of Newco. . . . 12
4.04. Power and Capacity of ART; Charter Documents of ART . . . . . 12
4.05. No Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.06. Consents and Approvals . . . . . . . . . . . . . . . . . . . . 13
4.07. No Material and Adverse Changes . . . . . . . . . . . . . . . 13
ARTICLE V
OTHER OBLIGATIONS OF THE PARTIES
5.01. Further Assurances . . . . . . . . . . . . . . . . . . . . . . 14
5.02. Conduct of Business Pending the Merger . . . . . . . . . . . . 14
5.03. Access and Information . . . . . . . . . . . . . . . . . . . . 14
5.04. Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.05. No Solicitation . . . . . . . . . . . . . . . . . . . . . . . 15
5.06. Governmental Filings . . . . . . . . . . . . . . . . . . . . . 15
5.07. Covenant to Satisfy Conditions . . . . . . . . . . . . . . . . 15
5.08. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . 16
5.09. Shareholder Meeting of EQK . . . . . . . . . . . . . . . . . . 16
5.10. Information Delivered to Shareholders . . . . . . . . . . . . 16
5.11. Resignation and Election of Trustees . . . . . . . . . . . . . 16
5.12. SEC Filings; Publicity . . . . . . . . . . . . . . . . . . . . 17
5.13. Compliance with Applicable Laws . . . . . . . . . . . . . . . 17
5.16. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE VI
CONDITIONS PRECEDENT
6.01. Conditions Precedent to Obligations of Newco and ART . . . . . 18
6.02. Conditions Precedent to Obligations of EQK . . . . . . . . . . 21
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TABLE OF CONTENTS
(CONT D)
PAGE
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ARTICLE VII
TERMINATION, AMENDMENT, WAIVER
7.01. Termination of Agreement . . . . . . . . . . . . . . . . . . . . 23
7.02. Procedure Upon Termination . . . . . . . . . . . . . . . . . . . 24
7.03. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.04. Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE VIII
MISCELLANEOUS
8.01. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.02. Acknowledgment by ART . . . . . . . . . . . . . . . . . . . . . 25
8.03. Commissions . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.04. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . 25
8.05. Definition of Knowledge . . . . . . . . . . . . . . . . . . . . 26
8.06. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . 26
8.07. No Third-Party Benefit . . . . . . . . . . . . . . . . . . . . . 26
8.08. Entire Agreement; Amendment . . . . . . . . . . . . . . . . . . 26
8.09. Reformation and Severability . . . . . . . . . . . . . . . . . . 26
8.10. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.11. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.12. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . 28
EXHIBITS:
Exhibit A- Form of Amended Declaration of Trust
Exhibit B-1- Form of Termination Agreement
Exhibit B-2- Form of New Advisory Agreement
Exhibit C- Copy of Articles of Amendment
Exhibit D-1- List of EQK Exceptions
Exhibit D-2- List of ART Exceptions
Exhibit E- Copy of Cost Sharing Agreement
Exhibit F- Form of Standstill Agreement
Exhibit G- Form of Registration Rights Agreement
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "AGREEMENT"), dated as of
December 23, 1997, is by and among American Realty Trust, Inc., a Georgia
corporation ("ART"), Basic Capital Management, Inc., a Nevada corporation
("BCM"), ART Newco, LLC, a Massachusetts limited liability company ("NEWCO"),
EQK Realty Investors I, a Massachusetts business trust ("EQK" and sometimes the
"SURVIVING ENTITY"), Equitable Realty Portfolio Management, Inc., a Delaware
corporation ("ERPM") and Compass Retail, Inc., a Delaware corporation
("COMPASS").
INTRODUCTORY STATEMENTS
EQK, Newco and ART desire to effect the merger of Newco with and into
EQK, with EQK as the Surviving Entity, pursuant to the terms hereof (the
"MERGER").
Accordingly, for and in consideration of the foregoing and the mutual
agreements, representations, warranties, covenants and conditions herein set
forth, and other good, valid and binding consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, hereby agree as follows:
ARTICLE I
THE MERGER
1.01. The Merger. Upon the terms and subject to the conditions
hereof, the Merger shall be consummated in accordance with the
applicable laws of the Commonwealth of Massachusetts (the
"MASSACHUSETTS LAW") as soon as practicable following the
satisfaction or waiver of the conditions set forth in Article
VI hereof. At the Effective Time (as hereinafter defined) and
subject to and upon the terms and conditions of this Agreement
and the Massachusetts Law, Newco shall be merged with and into
EQK, the separate corporate existence of Newco shall cease,
and EQK shall continue as the Surviving Entity.
1.02. Effective Time. As promptly as practicable after the
satisfaction or waiver of the conditions set forth in Article
VI hereof, the parties hereto shall cause the Merger to be
consummated by filing a certificate of merger with the Office
of the State Secretary of the Commonwealth of Massachusetts in
such form as required by, and executed in accordance with the
relevant provisions of, the Massachusetts Law, which form
shall be mutually agreeable to ART and EQK. The Merger shall
become effective upon the filing of such certificate of merger
with the Office of the State Secretary of the Commonwealth of
Massachusetts (the "EFFECTIVE TIME").
1.03. Effect of the Merger. At the Effective Time, the effect of
the Merger in Massachusetts shall be as provided by
Massachusetts Law.
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1.04. Declaration of Trust. Immediately prior to the Effective
Time, the Second Amended and Restated Declaration of Trust of
ART Realty Investors I, as approved by EQK's current Board of
Trustees and by EQK's shareholders at the EQK Meeting (as
defined below), a copy of which is attached hereto as EXHIBIT
A, shall be filed in accordance with Massachusetts Law (the
"AMENDED DECLARATION OF TRUST"). The Amended Declaration of
Trust shall continue to be the declaration of trust of the
Surviving Entity until thereafter amended in accordance with
the provisions of the Amended Declaration of Trust and
Massachusetts Law.
1.05. Trustees' Regulations. The Trustees' Regulations of EQK, as
in effect immediately prior to the Effective Time, shall be
the Trustees' Regulations of the Surviving Entity until
thereafter amended in accordance with Massachusetts Law and
the Amended Declaration of Trust.
1.06. Additional Actions. If, at any time after the Effective Time,
the Surviving Entity shall consider or be advised that any
deeds, bills of sale, assignments, assurances, or any other
actions or things are necessary or desirable to vest, perfect
or confirm, of record or otherwise, in the Surviving Entity
its right, title or interest in, to or under any of the
rights, properties or assets of EQK or Newco acquired or to be
acquired by the Surviving Entity as a result of, or in
connection with, the Merger or otherwise to carry out this
Agreement, the officers and trustees of the Surviving Entity
shall be authorized to execute and deliver, in the name and on
behalf of EQK and Newco, all such deeds, bills of sale,
assignments and assurances and to take and do, in the name and
on behalf of EQK and Newco or otherwise, all such other
actions and things as may be necessary or desirable to vest,
perfect or confirm any and all right, title and interest in,
to and under such rights, properties or assets in the
Surviving Entity or otherwise to carry out this Agreement.
1.07. Merger Consideration. At the Effective Time, by virtue of the
Merger and without any action on the part of EQK, ART, Newco
or the holder of any of the following securities:
(a) Each holder of shares of beneficial interest of EQK
(each, an "EQK SHARE") issued and outstanding as of
the record date for the EQK Meeting (as defined in
Section 1.09) (the "RECORD DATE"), other than ART and
its affiliates, ERPM and Greenspring Fund Inc.
("GREENSPRING"), will be entitled to receive for each
EQK Share owned by such holder the following as
consideration for the Merger: (i) 0.0616 shares of
Series F Cumulative Convertible Preferred Stock, par
value $2.00 per share, of ART (the "ART SHARES") with
a stated liquidation value of $10.00 per share (the
"LIQUIDATION VALUE") and (ii) $0.256 in cash (the ART
Shares and such cash amount, with respect to each EQK
Share, the "EQK MERGER CONSIDERATION"). Each EQK
Share outstanding immediately prior to the Effective
Time shall remain outstanding without increase or
decrease.
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(b) As consideration for the Merger, ART will be entitled
to receive 4,804,761 newly-issued EQK Shares (the
"ART MERGER CONSIDERATION" and, together with the EQK
Merger Consideration, the "MERGER CONSIDERATION").
1.08. Merger Agent; Merger Fund.
(a) Prior to the Effective Time, ART and EQK shall
designate a bank or trust company to act as agent for
the holders (other than ART or its affiliates) of EQK
Shares (the "MERGER AGENT") to receive the funds and
the ART Shares necessary to transfer the EQK Merger
Consideration contemplated by Section 1.07(a) hereof.
(b) Immediately prior to the Effective Time, ART shall
distribute to the Merger Agent, for the benefit of
holders (other than ART or its affiliates) of the EQK
Shares the EQK Merger Consideration to be paid to
such holders pursuant to Section 1.07(a) (the "MERGER
FUND"). As soon as practicable after the Effective
Time, the Merger Agent shall, pursuant to irrevocable
instructions, pay the EQK Merger Consideration out of
the Merger Fund to each holder of record (other than
ART or its affiliates) of EQK Shares. The Merger
Agent may invest all or portions of the Merger Fund
consisting of cash as EQK shall direct. Any net
profit resulting from, or interest or income produced
by the investment of the cash portion of the Merger
Fund, shall be paid to the Surviving Entity.
(c) At the Effective Time, there shall be no further
registration of transfers of interests in Newco
("NEWCO INTERESTS") created prior to the Merger on
the records of Newco or the Surviving Entity. At the
Effective Time all Newco Interests shall be canceled.
(d) Any unclaimed EQK Merger Consideration shall be
disbursed by the Merger Agent in accordance with the
applicable provisions of Massachusetts Law.
1.09. Termination of Advisor; Successor Advisor; Additional
Consideration. ERPM currently serves as an advisor to EQK
pursuant to the terms and conditions of an advisory agreement
(the "ADVISORY AGREEMENT") between ERPM and EQK. On the
Closing Date, ERPM, EQK and ART will terminate the Advisory
Agreement pursuant to a termination agreement (the
"TERMINATION AGREEMENT") in substantially the form attached
hereto as EXHIBIT B-1. Upon such termination of the Advisory
Agreement, BCM shall become the new advisor to EQK under a new
advisory agreement (the "NEW ADVISORY AGREEMENT"), in
substantially the form attached hereto as EXHIBIT B-2, having
substantially the same terms and conditions as the Advisory
Agreement, subject to the approval of the New Advisory
Agreement by the New EQK Board (as defined below) and the
approval of the New Advisory Agreement by the holders of
three-quarters of the outstanding EQK Shares at the next
meeting of shareholders of EQK (the "EQK MEETING"). In its
capacity as
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successor advisor to EQK, BCM shall be entitled to receive an
advisory fee equal to the advisory fee of ERPM under the
Advisory Agreement, with the exception that if the Harrisburg
East Mall is sold, BCM will be limited to a disposition fee of
1% of the sales price. Pursuant to the Termination Agreement,
ART will agree to pay to ERPM on the Closing Date (as
hereinafter defined), in the form of ART Shares valued at the
Liquidation Value, an amount equal to $1,975,000 (197,500 ART
Shares). In addition on the first Business Day (as defined
below) following the third anniversary of the Closing Date
(the "DEFERRED PAYMENT DATE"), ART will pay to ERPM in the
form of ART Shares valued at the Liquidation Value, an amount
equal to $1,360,000 (136,000 ART Shares) (the "DEFERRED ART
SHARES"). As used herein, the term "BUSINESS DAY" shall mean
any day other than a Saturday, a Sunday or any day on which
banks in the State of Texas are permitted or required by law
to be closed. ERPM hereby releases EQK, effective as of the
Closing Date, from any obligation under the Advisory
Agreement, including without limitation for deferred fees or
disposition fees, other than deferred portfolio advisory fees
and deferred refinancing fees in the amount of $303,465 as of
November 1, 1997, plus additional amounts that accrue but are
not paid in accordance with the terms of the Advisory
Agreement through the Closing Date, which fees and additional
amounts shall remain an obligation of EQK.
1.10. ART Shares; Listing of ART Shares. The ART Shares will be
issued pursuant to the Articles of Amendment of the Articles
of Incorporation of ART (the "ARTICLES OF AMENDMENT"), a copy
of which is attached hereto as EXHIBIT C and shall have the
designations, preferences and rights set forth in the Articles
of Amendment. Following the execution of this Agreement by
EQK, ART will promptly take such actions as are necessary and
within its control to cause the ART Shares to become listed,
and thereafter to continue to be listed, for trading on the
New York Stock Exchange (the "NYSE").
1.11. Deferred ART Shares; Listing of Deferred ART Shares. The
Deferred ART Shares will also be issued pursuant to the
Articles of Amendment and shall have the designations,
preferences and rights set forth in the Articles of Amendment.
Pursuant to the terms and conditions of a Registration Rights
Agreement dated of even date herewith (the "REGISTRATION
RIGHTS AGREEMENT"), a copy of which is attached hereto as
EXHIBIT G, ART will agree, upon the demand of ERPM, to (i)
file a shelf registration statement on Form S-3 ("SHELF
REGISTRATION STATEMENT") with respect to the Deferred ART
Shares and cause such Shelf Registration Statement to be
declared effective by the Commission on or as soon as
practicable following the Deferred Payment Date, and (ii) take
such actions as are necessary and within its control to cause
the Deferred ART Shares to become listed, and thereafter to
continue to be listed, for trading on the NYSE.
1.12. EQK Shares. The ART Merger Consideration shall be issued
pursuant to the Amended Declaration of Trust. As of the date
of this Agreement, there are 9,264,344
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issued and outstanding EQK Shares and such shares are
currently listed on the NYSE under the trading symbol "EKR".
1.13. Property Manager. Compass Retail, Inc. ("COMPASS") currently
acts as property manager for EQK under the terms of a property
management agreement (the "PROPERTY MANAGEMENT AGREEMENT")
between Compass and EQK. Upon consummation of the Merger,
Compass shall continue to act as property manager for EQK
under the terms of the Property Management Agreement.
1.14. Name of Surviving Entity. Pursuant to the Amended Declaration
of Trust, the name of the Surviving Entity shall be changed to
"ART Realty Investors I".
1.15. Block Purchase. Immediately prior to the Merger, ART will
purchase an aggregate of 2,269,356 EQK Shares from ERPM and
Greenspring pursuant to the terms of stock purchase agreements
(the "BLOCK PURCHASE"), which shall also require ERPM and
Greenspring to vote in favor of all matters voted upon at the
EQK Meeting.
ARTICLE II
CLOSING
2.01. Closing. The Closing of the transactions contemplated hereby
(the "CLOSING") shall, subject to the provisions of Article VI
hereof, take place within two Business Days after approval of
the Merger by the EQK's shareholders at the offices of Xxxxxxx
& Xxxxx L.L.P., 0000 Xxx Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxx
00000 or at such other date, time and place as EQK, ART and
Newco mutually agree. The date on which the Closing actually
occurs is referred to herein as the "CLOSING DATE".
2.02. Deliveries by EQK. At the Closing, EQK shall deliver, or
cause to be delivered, to Newco and ART (unless delivered
previously) the following:
(a) the Officers' Certificate referred to in Section
6.01(d) hereof;
(b) the Certificate of the Secretary of EQK referred to
in Section 6.01(e) hereof;
(c) the opinions of counsel referred to in Section
6.01(f) hereof;
(d) executed counterparts of any consents required to be
obtained by EQK pursuant to Section 5.04 hereof;
(e) the certificate regarding non-foreign status referred
to in Section 6.01(i) hereof; and
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(f) all other previously undelivered documents,
instruments and writings required to be delivered by
EQK to Newco or ART at or prior to the Closing
pursuant to this Agreement or otherwise required in
connection herewith.
2.03. Deliveries by Newco and ART. At the Closing, Newco and ART
shall deliver, or cause to be delivered, to EQK (unless
delivered previously) the following:
(a) the Officers' Certificates referred to in Section
6.02(d) hereof;
(b) the Secretary's Certificates referred to in Section
6.02(e) hereof,
(c) the opinions of counsel referred to in Section
6.02(f) hereof;
(d) all other previously undelivered documents,
instruments and writings required to be delivered by
Newco or ART to EQK at or prior to the Closing
pursuant to this Agreement or otherwise required in
connection herewith.
Furthermore, ART shall deliver, or cause to be delivered, the
Merger Fund to the Merger Agent. The cash portion of the
Merger Fund shall be delivered by wire transfer in immediately
available funds.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF EQK
EQK hereby represents and warrants to Newco and ART as follows:
3.01. Organization and Qualification of EQK. EQK is (a) a business
trust duly organized, validly existing and in good standing
under the laws of the Commonwealth of Massachusetts and (b)
duly qualified to do business as a foreign business trust and
in good standing in each jurisdiction in which the character
of the properties and assets now owned or leased by it or the
nature of the business transacted by it requires it to be so
qualified, except where the failure to be so qualified,
individually or in the aggregate, would not materially and
adversely affect EQK or the consummation of the transactions
contemplated hereby. No jurisdiction in which EQK is not
qualified or licensed has claimed, in writing or otherwise,
that EQK is required to qualify or be licensed therein.
3.02. Power and Capacity; Charter Documents of EQK.
(a) Subject to the approval of the shareholders of EQK in
accordance with the terms of Massachusetts Law, the
Declaration of Trust and this Agreement, EQK has all
requisite power and authority to enter into, execute
and deliver this Agreement and perform its
obligations hereunder. EQK has the power
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and authority to carry on its business as now being
conducted and to own and lease its properties. This
Agreement has been duly authorized, executed and
delivered by EQK and is a valid and binding
obligation of EQK, enforceable in accordance with its
terms.
(b) Subject to approval of the Merger, the Amended
Declaration of Trust and the New Advisory Agreement
at the EQK Meeting and the filing of the Amended
Declaration of Trust in accordance with Massachusetts
Law, the execution, delivery and performance of this
Agreement and the consummation of the transactions
contemplated hereby by EQK will not result in a
violation or breach of or constitute a default under
any term or provision of the Declaration of Trust,
the Amended Declaration of Trust or the Trustee
Regulations.
3.03. Subsidiaries. EQK does not (i) own, beneficially or of
record, any shares of any other corporation or entity or any
interests in any partnerships or limited liability companies
or (ii) participate in any manner in any joint ventures,
corporate alliance agreements or corporate partnering
agreements. EQK has no interest in, and is not subject to,
any agreement, obligation or commitment to make any equity
investment in or loan or advance to, any other Person (as
defined herein).
3.04. Capitalization and Ownership of EQK. The capitalization of
EQK as of November 12, 1997 is as follows:
Authorized EQK Shares . . . . . . . . . . . . . . . . . 10,055,555
Issued and Outstanding EQK Shares . . . . . . . . . . . 9,264,344
Number of EQK Shares owned by each holder of 5% or
more of the Issued and Outstanding Shares:
ERPM . . . . . . . . . . . . . . . . . . . . . 1,685,556 (18.2%)
Tennessee Consolidated Retirement System . . . 1,250,000 (13.5%)
X.X. xxXxxx de Nemours Co. Inc. Trust Fund . . 906,600 (9.8%)
Greenspring Fund, Inc. . . . . . . . . . . . . 583,800 (6.3%)
All of the outstanding EQK Shares are validly issued, fully
paid and non-assessable. All such EQK Shares are owned free
and clear of any lien, claim or encumbrance of any type
whatsoever imposed by EQK or any other Person. There are no
outstanding options, warrants or other rights to acquire any
EQK Shares (other than warrants to purchase 367,868 EQK Shares
for $.0001 per EQK Share, which warrants (the
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"PRUDENTIAL WARRANTS") were issued to and are held by the
Prudential Insurance Company of America ("PRUDENTIAL")), there
are no outstanding securities authorized, granted or issued by
EQK that are convertible into or exchangeable for EQK Shares
and there are no phantom share rights, share appreciation
rights or similar rights regarding EQK.
3.05. No Conflicts. Subject to the exceptions listed on EXHIBIT D-1
attached hereto (the "LIST OF EXCEPTIONS"), the execution,
delivery and performance of this Agreement by EQK and the
consummation of the transactions contemplated hereby will not:
(a) result in the creation or imposition of any security
interest, lien, charge or other encumbrance against
the EQK Property (as defined herein), with or without
the giving of notice and/or the passage of time, or
(b) violate, conflict with, affect acceleration of, or
result in termination, cancellation or modification
of, or constitute a default under (i) any contract,
agreement or other instrument to which EQK is a party
or by which EQK or its assets is bound or (ii) any
note, bond, mortgage, indenture, deed of trust,
license, lease, contract, commitment, understanding,
arrangement, agreement or restriction of any kind or
character to which EQK is a party or by which EQK may
be bound or affected, or to which EQK may be subject,
or
(c) violate any statute or Law or any judgment, decree,
order, writ, injunction, regulation or rule of any
court or any local, state or federal governmental or
regulatory authority,
which violation, conflict, acceleration, requirement,
termination, modification or default described in (a), (b), or
(c) above could materially and adversely affect EQK or the
transactions contemplated by this Agreement.
3.06. Consents and Approvals. EQK is not required to obtain,
transfer or cause to be obtained or transferred any consent,
approval, license, permit or authorization of, or make any
declaration, filing or registration with, any third party or
any public body or authority in connection with (a) the
execution and delivery by EQK of this Agreement, or (b) the
consummation of the Merger and the other transactions
contemplated hereby, other than (i) the approval of the
Merger, the Amended Declaration of Trust, and the New Advisory
Agreement by its shareholders, (ii) a certificate of merger
pursuant to Massachusetts Law, (iv) the consent of its two
lenders, The Prudential Insurance Company of America and PNC
Bank as described in the List of Exceptions set forth on
EXHIBIT D-1 attached hereto, or (v) those that may be required
solely by reason of Newco's or ART's participation in the
transactions contemplated hereby.
3.07. Absence of Certain Changes. From September 30, 1997 through
the date hereof, except as may be reflected in filings with
the SEC, EQK has not:
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(a) suffered any material adverse effect in respect of
its business, operations, condition (financial or
otherwise), liabilities, EQK Property or earnings and
there has not been any event (whether occurring
before or after September 30, 1997) that could
reasonably be expected to have a material adverse
effect on the business, operations, condition
(financial or otherwise), liabilities, EQK Property
or earnings of EQK; or
(b) experienced any material decrease in the book value
of the EQK Property from the amounts reflected in
public filings with the Commission, other than
decreases resulting from depreciation in accordance
with accounting practices in effect at all times
since January 1, 1997; or
(c) except as set forth in the List of Exceptions set
forth in EXHIBIT D-1 attached hereto, incurred any
liabilities or obligations of any nature (whether
absolute, accrued, contingent or otherwise and
whether due or to become due), except liabilities or
obligations for items incurred in the ordinary course
of business of EQK and consistent with past practice,
none of which other items exceeds $25,000
(considering liabilities or obligations arising from
one transaction or a series of similar transactions,
and all periodic installments or payments under any
lease) or other agreement providing for periodic
installments or payments, as a single obligation or
liability); or
(d) increased (other than increases resulting from the
calculation of reserves in the ordinary course of
business and in a manner consistent with past
practice), or experienced any change in any
assumptions underlying or methods of calculating, any
bad debt, contingency or other reserves; or
(e) paid, discharged or satisfied any claims,
encumbrances, liabilities or obligations (whether
absolute, accrued, contingent or otherwise and
whether due or to become due) other than the payment,
discharge or satisfaction in the ordinary course of
business and consistent with past practice of
liabilities and obligations reflected or reserved
against in public filings with the Commission or
incurred in the ordinary course of business and
consistent with past practice since September 30,
1997; or
(f) permitted, allowed or suffered any of the EQK
Property (as defined herein) to be subjected to any
mortgage, pledge, lien, encumbrance, restriction or
charge of any kind (except for the Mortgage Note and
the Term Loan described in the Prospectus/Proxy
Statement (as defined in Section 5.06) and any liens
for Taxes not yet owing). "TAX RETURN" means any
report, statement, form, return or other document or
information required to be supplied to a taxing
authority in connection with Taxes. "TAX" or "TAXES"
means any United States or foreign federal, state, or
local tax, including without limitation income tax,
ad valorem tax, excise tax, sales tax, use tax,
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franchise tax, gross receipts tax, withholding tax,
social security tax, occupation tax, service tax,
license tax, payroll tax, transfer and recording tax,
severance tax, customs tax, import tax, export tax,
employment tax, or any similar or other tax,
assessment, duty, fee, levy or other governmental
charge, together with and including, without
limitation, any and all interest, fines, penalties,
assessments and additions to tax resulting from,
relating to, or incurred in connection with any such
tax or any contest or dispute thereof; or
(g) determined as collectible any notes or accounts
receivable or any portion thereof which were
previously considered uncollectible, or written off
as uncollectible any notes or accounts receivable or
any portion thereof, except for write-downs in the
ordinary course of business, consistent with past
practice, in accordance with GAAP consistently
applied; or
(h) canceled any material amount of indebtedness or
waived any material claims or rights; or
(i) sold, transferred or otherwise disposed of any EQK
Property except in the ordinary course of business
and consistent with past practice; or
(j) disposed of or permitted to lapse any right to the
use of any patent, trademark, assumed name, service
xxxx, trade name, copyright, license or application
therefor or disposed of or disclosed to any
corporation, association, partnership, organization,
business, individual, government or political
subdivision thereof or government agency (each, a
"PERSON") other than representatives of Newco and ART
any trade secret, formula, process or know-how not
theretofore a matter of public knowledge; or
(k) granted any increase in the salary, compensation,
rate of compensation, commissions or bonuses payable
to or to become payable by EQK to any officer or
trustee of EQK (including, without limitation, any
increase or change pursuant to any bonus, pension,
profit-sharing, retirement or other plan or
commitment); or
(l) paid, loaned or advanced any amount to any officer,
trustee, or shareholder of EQK, or sold, transferred
or leased any EQK Assets to, or entered into any
agreement (other than this Agreement) or arrangement
with, any officer, trustee, or shareholder of EQK
(except for agreements or arrangements made in the
ordinary course of business and consistent with past
practice); or
(m) except as set forth in the List of Exceptions set
forth in EXHIBIT D-1 attached hereto, made any single
capital expenditure or commitment in excess of
$10,000 for additions to property, plant, equipment
or for any other purpose
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or made aggregate capital expenditures or commitments
in excess of $25,000 for additions to property,
plant, equipment or for any other purpose; or
(n) made any change in any method of accounting or
accounting practice or policy; or
(o) suffered any casualty loss in excess of $10,000
(whether or not insured against) or suffered
aggregate casualty losses in excess of $25,000
(whether or not insured against); or
(p) issued any additional shares of beneficial interest
of EQK or any option, warrant, right or other
security exercisable for, convertible into or
exchangeable for EQK Shares; or
(q) paid dividends on or made other distributions or
payments in respect of the EQK Shares; or
(r) taken any other action not either in the ordinary
course of business and consistent with past practice
or provided for in this Agreement; or
(s) entered into or agreed to any transaction not in the
ordinary course of business or provided for in this
Agreement; or
(t) agreed, whether in writing or otherwise, to take any
of the actions set forth in this Section 3.07.
3.08. EQK Information. All information regarding EQK, ERPM or
Compass and their respective businesses and operations that is
included or incorporated by reference into the Registration
Statement (as defined in Section 4.06), as of the date thereof
and hereof, is true and accurate in all material respects, and
does not contain any untrue statement of a material fact, or
omit to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were
made, not misleading.
3.09. Redemptions of EQK Shares by EQK. There have been no
redemptions of EQK Shares by EQK in the past ten years.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
NEWCO AND ART
Newco and ART hereby jointly represent and warrant to EQK as follows:
4.01. Organization and Qualification - Newco. Newco is (a) a
limited liability company duly organized, validly existing and
in good standing under the laws of the State of Massachusetts
and (b) duly qualified to do business as a foreign limited
liability company and in good standing in each jurisdiction in
which the character of the properties and assets now owned or
leased by it or the nature of the business transacted by it
requires it to be so qualified, except where the failure to be
so qualified, individually or in the aggregate, would not
materially and adversely affect Newco or the consummation of
the transactions contemplated hereby.
4.02. Organization and Qualification - ART. ART is (a) a
corporation duly organized, validly existing and in good
standing under the laws of the State of Georgia and (b) duly
qualified to do business as a foreign corporation and in good
standing in each jurisdiction in which the character of the
properties and assets now owned or leased by it or the nature
of the business transacted by it requires it to be so
qualified, except where the failure to be so qualified,
individually or in the aggregate, would not materially and
adversely affect ART or the consummation of the transactions
contemplated hereby.
4.03. Power and Capacity of Newco; Charter Documents of Newco.
(a) Newco has all requisite power and authority
(corporate and otherwise) to enter into, execute and
deliver this Agreement and perform its obligations
hereunder. Newco has the corporate power and
authority to carry on its business as now being
conducted and to own and lease its properties. This
Agreement has been duly authorized, executed and
delivered by Newco and is a valid and binding
obligation of Newco, enforceable in accordance with
its terms.
(b) The execution, delivery and performance of this
Agreement and the consummation of the transactions
contemplated hereby by Newco will not result in a
violation or breach of or constitute a default under
any term or provision of the Certificate of
Organization or Operating Agreement of Newco. Newco
has delivered to EQK true and complete copies of the
Certificate of Organization and the Operating
Agreement of Newco, as in effect on the date hereof.
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4.04. Power and Capacity of ART; Charter Documents of ART.
(a) ART has all requisite power and authority (corporate
and otherwise) to enter into, execute and deliver
this Agreement and perform its obligations hereunder.
ART has the corporate power and authority to carry on
its business as now being conducted and to own and
lease its properties. This Agreement has been duly
authorized, executed and delivered by ART and is a
valid and binding obligation of ART, enforceable in
accordance with its terms.
(b) The execution, delivery and performance of this
Agreement and the consummation of the transactions
contemplated hereby by ART will not result in a
violation or breach of or constitute a default under
any term or provision of the Articles of
Incorporation or Bylaws of ART. ART has delivered to
EQK true and complete copies of the Articles of
Incorporation and the Bylaws of ART, as in effect on
the date hereof.
4.05. No Conflicts. The execution, delivery and performance of this
Agreement by Newco and ART and the consummation of the
transactions contemplated hereby will not:
(a) result in the creation or imposition of any security
interest, lien, charge or other encumbrance against
Newco's assets or ART's assets, with or without the
giving of notice and/or the passage of time, or
(b) violate, conflict with, affect acceleration of, or
result in termination, cancellation or modification
of, or constitute a default under (i) any contract,
agreement or other instrument to which Newco or ART
is a party or by which Newco or ART or their
respective assets is bound or (ii) any note, bond,
mortgage, indenture, deed of trust, license, lease,
contract, commitment, understanding, arrangement,
agreement or restriction of any kind or character to
which Newco or ART is a party or by which Newco or
ART may be bound or affected or to which any of their
respective assets may be subject, or
(c) violate any statute or law or any judgment, decree,
order, writ, injunction, regulation or rule of any
court or any local, state or federal governmental or
regulatory authority, which violation, conflict,
acceleration, requirement, termination, modification
or default described in (a), (b), or (c) above could
materially and adversely affect Newco or ART or the
transactions contemplated by this Agreement.
4.06. Consents and Approvals. Neither Newco nor ART is required to
obtain, transfer or cause to be transferred any consent,
approval, license, permit or authorization of, or make any
declaration, filing or registration with, any third party or
any public body or authority in connection with (a) the
execution and delivery by Newco and ART of this Agreement, or
(b) the consummation of the Merger and the other transactions
contemplated hereby or (c) the future conduct by the Surviving
Entity of EQK Business, other than (i) the filing by ART of a
registration statement on Form X-0
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(xxx "X-0 REGISTRATION STATEMENT") with the Securities &
Exchange Commission (the "COMMISSION") for registration of
453,552 ART Shares under the Securities Act of 1933, as
amended (the "SECURITIES ACT"), (ii) the filing by ART of a
registration statement on Form S-3 (the "S-3 REGISTRATION
STATEMENT" and, together with the S-4 Registration Statement,
the "REGISTRATION STATEMENTS") with the Commission for
registration of 617,331 ART Shares under the Securities Act in
connection with the Block Purchase and the termination of the
Advisory Agreement, (iii) the filing a certificate of merger,
or (iv) that may be required solely by reason of EQK's (as
opposed to any other third party's) participation in the
transactions contemplated hereby.
4.07. No Material and Adverse Changes. Since September 30, 1997,
except as may be reflected in filings with the SEC, there has
not been any material adverse change in the business,
operations, properties or financial condition of Newco or ART.
4.08. ART Information. All information regarding Newco and ART and
their respective businesses and operations that is included or
incorporated by reference into the Registration Statement, as
of the date thereof and hereof, is true and accurate in all
material respects, and does not contain any untrue statement
of a material fact, or omit to state a material fact necessary
to make the statements therein, in light of the circumstances
under which they were made, not misleading.
ARTICLE V
OTHER OBLIGATIONS OF THE PARTIES
5.01. Further Assurances.
(a) From the date hereof through the Closing, ART (on its
own behalf and on behalf of Newco) will take every
action reasonably required of it in order to satisfy
the conditions to closing set forth in this Agreement
and otherwise to ensure the prompt and expedient
consummation of the transactions substantially as
contemplated hereby, and will exert all reasonable
efforts to cause the Merger to be promptly
consummated, provided in all instances that the
covenants and agreements of EQK are honored and that
the conditions to the obligations of ART and Newco
set forth in this Agreement are satisfied or appear
capable of being satisfied.
(b) From the date hereof through the Closing Date, EQK
will take every action reasonably requested of it to
satisfy the conditions to closing set forth in this
Agreement and otherwise to ensure the prompt and
expedient consummation of the Merger, and will exert
all reasonable efforts to cause the Merger to be
consummated, provided in all instances that the
covenants and agreements of ART in this Agreement are
honored, subject at all times to the right and
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ability of the trustees of EQK to satisfy their
fiduciary obligations, if any, under Massachusetts
Law.
5.02. Conduct of Business Pending the Merger. EQK covenants and
agrees with ART that, prior to the Closing Date or the
termination of this Agreement pursuant to its terms, unless
ART shall otherwise consent in writing, EQK will conduct its
operations according to its ordinary and usual course of
business and will not (i) enter into or agree to any
transaction outside the ordinary course of business, (ii)
incur any additional indebtedness for borrowed money except
pursuant to existing lines of credit and in the ordinary
course of business, (iii) pay dividends on or make other
distributions or payments in respect of its capital stock,
(iv) issue any additional equity securities or rights therefor
(except upon the exercise of any outstanding warrants), (v)
increase or agree to increase the salary, compensation, bonus
or benefits of any officer, trustee or employee of EQK other
than in the ordinary course of business (except for reasonable
consideration to be granted to trustees upon their retirement
from the board of trustees) or (vi) sell or otherwise dispose
of any of its properties other than in the ordinary course of
business.
5.03. Access and Information. EQK shall afford to Newco and ART and
to ART's accountants, counsel, and other representatives
reasonable access during normal business hours throughout the
period prior to the Closing, to all of its properties, books,
contracts, commitments, records (including, but not limited
to, tax returns), and personnel and, during such period, EQK
shall promptly furnish to ART (1) all written communications
to its trustees or to its shareholders generally, (2) internal
monthly financial statements when and as available, and (3)
all other information concerning its business, properties, and
personnel as ART may reasonably request. Any such information
so obtained by ART will be subject to the terms of the
Confidentiality Agreement. ART and its representatives shall
assert their rights hereunder in such manner as to minimize
interference with the business of EQK, ERPM and Compass.
5.04. Consents. EQK agrees to use its reasonable efforts to obtain
prior to the Closing all consents necessary, in the reasonable
determination of Newco and ART, to consummate the transactions
contemplated hereby, including without limitation each of the
consents, approvals, licenses, permits and authorizations (and
the declarations, filings and registrations) listed or
referred to in Section 3.06. All such consents shall be in
writing and in form and substance reasonably satisfactory to
Newco and ART, and executed counterparts thereof shall be
delivered to Newco and ART promptly after receipt thereof by
EQK but in no event later than the Closing.
5.05. No Solicitation. Prior to the Closing or the termination of
this Agreement pursuant to its terms, EQK and those acting on
its behalf will not, and EQK will use its best efforts to
cause its officers, employees, agents, and representatives
(including any investment banker) to not, directly or
indirectly, solicit, encourage, or initiate any discussions
with, or negotiate or otherwise deal with, or provide any
information to,
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any person or entity other than ART and its officers,
employees, agents and advisers, concerning any merger, sale of
substantial assets, or similar transaction involving EQK, or
any sale of any of the EQK Shares (other than the sale by ERPM
and Greenspring of their respective EQK Shares to ART as
contemplated herein). EQK will notify ART immediately upon
receipt of any inquiry, offer, or proposal relating to any of
the foregoing. None of the foregoing shall prohibit any
conduct in a manner in keeping with the ordinary conduct of
EQK's business, providing information to others as required to
satisfy the fiduciary obligations of EQK's trustees, or
providing information to government authorities.
5.06. Governmental Filings. As soon as practicable after the date
this Agreement is executed by the parties hereto, EQK and ART
shall prepare and file the Registration Statement with the
SEC. A prospectus/proxy statement (the "PROSPECTUS/PROXY
STATEMENT") shall be filed as part of the Registration
Statement. ART shall use its best efforts to have the
Registration Statement declared effective by the SEC under the
Securities Act as promptly as practicable after such filing,
and will promptly thereafter make the Prospectus/Proxy
Statement available to the shareholders of EQK. EQK shall
furnish to ART, and ART shall furnish to EQK, such information
and assistance as the other party or parties may reasonably
request in connection with the preparation of the
Prospectus/Proxy Statement and the Registration Statement.
5.07. Covenant to Satisfy Conditions. EQK and ART shall each use
their reasonable efforts to insure that the conditions set
forth in Article VI hereof are satisfied, insofar as such
matters are within their respective control. ART hereby
guarantees the performance by Newco of its obligations
hereunder.
5.08. Confidentiality. All information exchanged between ART, Newco
and EQK and their respective representatives, as well as the
existence of negotiations regarding the Merger, shall be
subject to the terms of, and ART and EQK hereby acknowledge
and affirm their obligations regarding confidentiality set
forth in, their mutual confidentiality letters dated April 21,
1997 (the "CONFIDENTIALITY AGREEMENT"). No party shall
release any information regarding this Agreement or the
transactions contemplated hereby without the prior written
consent of each other party hereto, except as provided in the
Confidentiality Agreement.
5.09. Shareholder Meeting of EQK. EQK shall, at a meeting of its
shareholders duly called by its Board of Trustees to be held
as soon as practicable following execution of this Agreement,
submit this Agreement, the Amended Declaration of Trust and
the New Advisory Agreement to a vote of its shareholders in
accordance with the Declaration of Trust and Massachusetts
Law. ERPM shall vote in favor of the Merger, the Amended
Declaration of Trust and the New Advisory Agreement.
5.10. Information Delivered to Shareholders. EQK shall submit all
shareholder notices, proxy solicitation material, written
consents and other information (other than the proxy
solicitation material included as part of the Prospectus/Proxy
Statement) to
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Newco and ART for its written approval (which approval shall
not be unreasonably withheld) at least four days prior to
delivering such materials to EQK's shareholders. All such
materials (including the proxy solicitation material included
in the Prospectus/Proxy Statement) shall comply with the
Massachusetts Law and all applicable state and federal
securities Laws (including, without limitation, the anti-fraud
provisions thereof). Newco and ART shall be provided with the
opportunity to have one or more representatives attend
shareholder meetings, if any, of EQK.
5.11. Resignation and Election of Trustees. Upon consummation of
the Merger, pursuant to the terms of each Resignation
Agreement (as defined in Section 6.01(s)), ART shall direct
and EQK shall cause all of the members of EQK's current board
of trustees (other than Xx. Xxxxxx X. Xxxx) to resign and the
related vacancies shall be filled with (i) one person
designated by ART who is a "director independent of
management" as such term is used in Section 303.0 of the NYSE
Listed Company Manual (such person is referred to as the "ART
INDEPENDENT TRUSTEE"), (ii) three persons designated by ART
who may be affiliated with ART or its affiliates (such three
persons are referred to herein as the "ART AFFILIATED
TRUSTEES" and, together with the ART Independent Trustee, the
"ART DESIGNATED TRUSTEES"), (iii) Messrs. Xxxxxxx X.
Xxxxxxxxxx and Xxxxxxx X. Xxxxx Xx., or such other two persons
as are designated in writing by EQK (the "NON-ART AFFILIATED
TRUSTEES"), and (iv) one other person designated by ERPM who
is a "director independent of management" as such term is used
in Section 303.0 of the NYSE Listed Company Manual (such
person is referred to as the "NON-ART INDEPENDENT TRUSTEE"
and, together with the Non-ART Affiliated Trustees, the
"NON-ART DESIGNATED TRUSTEES"). The ART Designated Trustees
and the Non-ART Designated Trustees shall constitute the seven
person board of trustees of EQK (the "NEW EQK BOARD"). As
used herein, the term "New EQK Board" shall include the board
of any successor entity to EQK, including the Surviving
Entity. In addition, at the time the ART Designated Trustees
take office and at each election of EQK's board of trustees
until ART acquires more than 80% of the EQK Shares, ART agrees
to vote all of its EQK Shares for the election of the Non-ART
Designated Trustees. The composition of the New EQK Board
and the procedures pursuant to which the ART Designated
Trustees and Non-ART Designated Trustees are nominated and
elected, through filling vacancies or otherwise, shall be
consistent with the requirements of the Amended Declaration of
Trust (as the same may be amended from time to time),
including, without limitation, requirements related to
Unaffiliated Trustees (as defined in the Amended Declaration
of Trust).
5.12. SEC Filings; Publicity. Prior to the Closing, any filings
with the SEC or written news releases by either ART or EQK
pertaining to this Agreement or the Merger shall be submitted
to the other party for review and approval prior to filing or
release, as applicable, by that other party and shall be filed
or released only in a form approved by that other party,
provided, however, that in either case (1) the applicable
approval shall not be unreasonably withheld, and (2) such
review and approval shall not be required of releases by ART
or EQK if prior review and approval would
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prevent the timely and accurate dissemination of such SEC
filing or press release as required to comply, in the judgment
of counsel, with any applicable law, rule, or policy.
5.13. Compliance with Applicable Laws. To the extent legally
possible, EQK will take such actions as are reasonably
requested by ART so that EQK and the Merger is exempt from any
requirements of any state takeover law, whether by action of
EQK's Board of Trustees or otherwise.
5.14. Preservation of Net Operating Losses. ART will use its
reasonable efforts to take or refrain from taking such actions
(including, without limitation, giving its consent to the
amendment of EQK's Declaration of Trust, to implement
ownership restrictions therein) as are mutually agreeable
between EQK and ART to avoid impairing the availability of
EQK's net operating losses.
5.15. Listing of ART Shares. Following execution of this Agreement
by EQK, ART shall take such actions as are necessary and
within its control to cause the ART Shares to become listed,
and thereafter continue to be listed, for trading on the NYSE.
5.16. Expenses. The parties hereto agree that the expenses of the
Merger and the other transactions contemplated hereby shall be
borne by ART and EQK in accordance with the terms of the cost
sharing agreement attached hereto as EXHIBIT E (the "COST
SHARING AGREEMENT"). Notwithstanding anything to the contrary
in the Letter Agreement, each of ART and EQK shall be
responsible for the costs of any broker, finder or financial
advisor (other than Xxxx Xxxxx Xxxx Xxxxxx, Incorporated)
engaged by such party in connection with the Merger.
5.17. Continued Listing of EQK Shares. Following execution of this
Agreement by the parties hereto, EQK shall refrain from taking
any actions which would result in the deregistration of the
EQK Shares under the Securities Exchange Act of 1934, as
amended.
ARTICLE VI
CONDITIONS PRECEDENT
6.01. Conditions Precedent to Obligations of Newco and ART. The
obligations of Newco and ART under this Agreement are subject
to the satisfaction or, unless prohibited by law, the waiver
by Newco and ART, at or before the Closing, of each of the
following conditions:
(a) Representations and Warranties. The representations
and warranties of EQK contained herein shall be true,
complete and accurate in all material respects as of
the date when made and at and as of the Closing Date
(with such
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updating of the List of Exceptions set forth on
EXHIBIT D-1 as shall be necessary or appropriate) as
though such representations, warranties and
statements were made at and as of such date.
(b) Performance. EQK and ERPM shall have performed and
complied in all material respects with all
agreements, obligations and conditions required by
this Agreement to be so performed or complied with by
it at or prior to the Closing.
(c) No Injunction. On the Closing Date, there shall be
no effective injunction, writ, preliminary
restraining order or any order of any nature issued
by a court of competent jurisdiction restraining or
prohibiting the consummation of the Merger or the
other transactions contemplated hereby. There shall
not be threatened, instituted or pending any suit,
action, investigation, inquiry or other proceeding by
or before any court or governmental or other
regulatory or administrative agency or commission
requesting or looking toward an order, judgment or
decree that (i) restrains or prohibits the
consummation of the transactions contemplated hereby,
(ii) would adversely affect ART's ability to exercise
control over the Surviving Entity after the Closing,
or (iii) would materially and adversely affect the
business, operations, condition (financial or
otherwise), liabilities, EQK Property or earnings of
the Surviving Entity.
(d) Officers' Certificate. EQK shall have delivered to
Newco and ART a certificate, dated the Closing Date,
executed by its Chief Executive Officer and Chief
Financial Officer certifying the fulfillment of the
conditions specified in Section 6.01(a) and (b)
hereof.
(e) Secretary's Certificate. EQK shall have delivered to
Newco and ART a certificate, dated the Closing Date,
executed by its Secretary or an Assistant Secretary
and certifying as to EQK's Declaration of Trust,
Trustee Regulations, enabling resolutions, incumbency
of officers and other reasonably related matters.
(f) Opinions of Counsel. Newco and ART shall have
received an opinion, dated the Closing Date, of
Xxxxxx & Dodge, special Massachusetts counsel to EQK,
in a form and substance that is reasonably
satisfactory to Newco and ART.
(g) Documents. All documents to be delivered by EQK to
Newco and ART at the Closing shall be duly executed
and in form and substance reasonably satisfactory to
Newco and ART.
(h) Consents and Approvals. All licenses, permits,
consents, approvals and authorizations of all third
parties and governmental bodies and agencies
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(other than approvals from EQK's Board of Trustees
and shareholders, which are provided for elsewhere in
this Agreement) shall have been obtained which are
necessary, in the reasonable determination of counsel
to Newco and ART, in connection with (a) the
execution and delivery by each of the parties, as
appropriate, of this Agreement, (b) the consummation
by each of the parties of the transactions
contemplated hereby or thereby or (c) the conduct by
the Surviving Entity of the business of EQK (the "EQK
Business") substantially as conducted on the date
hereof.
(i) Non-Foreign Status. At or prior to Closing, EQK
shall have delivered to Newco and ART a statement
certifying that it is not a foreign person, which
statement shall comply with the requirements of
Treasury regulation Section 1.1445-2(b).
(j) Board Approval. The Board of Trustees of EQK shall
have duly approved the Merger, and the Amended
Declaration of Trust.
(k) Shareholder Approval. Shareholders of EQK
representing at least three-quarters of the issued
and outstanding EQK Shares shall have duly approved
this Agreement, the Amended Declaration of Trust and
the New Advisory Agreement.
(l) Dissenters Rights. At or prior to Closing, holders
of no more than 3% of the shareholders of outstanding
EQK Shares will have notified EQK that they intend to
seek to exercise dissenter's rights in connection
with the Merger.
(m) Block Purchase. At or prior to Closing, the Block
Purchase shall have been consummated.
(n) Standstill Agreements. At or prior to Closing, each
holder (other than ART or its affiliates) of five
percent (5%) or more of the EQK Shares (each, a "5%
Holder") shall have executed an agreement (a
"Standstill Agreement") in substantially the form
attached hereto as EXHIBIT F restricting the rights
of such 5% Holder to sell any of its EQK Shares or
purchase any additional EQK Shares for a period of 42
months after the Closing Date.
(o) EQK Share Options. At or prior to Closing, any
options or warrants (or other derivative or
convertible interests in the equity securities of
EQK) for EQK Shares (including the Prudential
Warrants) shall have been exercised in full or
terminated or otherwise canceled.
(p) Board Resignations. At or prior to Closing, ART
shall have received written resignations from all of
the members of EQK's current board of trustees, other
than Xx. Xxxxxx X. Xxxx.
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(q) NYSE Listing. The ART Shares shall have been
authorized for listing on the NYSE, subject to
official notice of issuance.
(r) No Legal Impediment; No Stop Order. No statute,
rule, regulation, order, injunction or decree shall
have been enacted, entered, promulgated or enforced
by any court, administrative agency or commission or
other governmental authority or instrumentality which
prohibits, restricts or makes illegal the
consummation of the Merger. The Registration
Statements shall have been declared effective by the
SEC and no stop order suspending the effectiveness
thereof shall have been issued.
(s) Governmental Authorizations. All required material
governmental authorizations, permits, consents,
orders or approvals which do not impose terms or
conditions that could reasonably be expected to have
a material adverse effect on EQK or ART have been
received.
(t) EQK Shares. The number of outstanding EQK Shares
being 9,264,344 and no additional EQK Shares or other
equity interests in EQK being issued since November
12, 1997 (except for any increase resulting from an
exercise of the Prudential Warrants).
(u) No Adverse Change. EQK operating in all respects in
its ordinary course of business without any material
adverse change in its business, properties or
financial condition subsequent to the date hereof.
(v) Termination Agreement. The Termination Agreement, in
form and substance satisfactory to EQK, ERPM and ART
shall have been duly executed by EQK, ERPM and ART.
(w) Other. Newco and ART shall have received such other
documents or certificates as Newco and ART may
reasonably have requested, including, without
limitation, certificates of good standing with
respect to EQK from the appropriate authority in its
jurisdiction of organization and certificates of good
standing with respect to EQK from the appropriate
authority in each jurisdiction in which it is
qualified to do business.
6.02. Conditions Precedent to Obligations of EQK. The obligations
of EQK under this Agreement are subject to the satisfaction
or, unless prohibited by law, the waiver by EQK at or before
the Closing, of each of the following conditions:
(a) Representations and Warranties. The representations
and warranties of Newco and ART contained herein
shall be true, complete and accurate in all material
respects as of the date when made and at and as of
the Closing Date (with such updating of the List of
Exceptions set forth on EXHIBIT D-2 as
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shall be necessary or appropriate) as though such
representations and warranties were made at and as of
such date.
(b) Performance. Newco and ART shall have performed and
complied in all material respects with all
agreements, obligations and conditions required by
this Agreement to be so performed or complied with by
them at or prior to the Closing.
(c) No Injunction. On the Closing Date, there shall be
no effective injunction, writ, preliminary
restraining order or any order of any nature issued
by a court of competent jurisdiction restraining or
prohibiting consummation of the Merger or the other
transactions contemplated hereby. There shall not be
threatened, instituted or pending any suit, action,
investigation, inquiry or other proceeding by or
before any court or governmental or other regulatory
or administrative agency or commission requesting or
looking toward an order, judgment or decree that
restrains or prohibits the consummation of the
transactions contemplated hereby.
(d) Officers' Certificates. Each of Newco and ART shall
have delivered to EQK a certificate, dated the
Closing Date and executed by its Chief Executive
Officer and Chief Financial Officer certifying the
fulfillment of the conditions specified in Sections
6.02(a) and (b) hereof.
(e) Secretary's Certificates. Each of Newco and ART
shall have delivered to EQK a certificate, dated the
Closing Date, executed by its Secretary or Assistant
Secretary and certifying as to its organizational
documents, enabling resolutions, incumbency of
officers and other related matters.
(f) Opinions of Counsel. EQK shall have received such
opinions, if any, as they have requested in writing
to Newco and ART regarding Newco and ART, in form and
substance satisfactory to EQK.
(g) Board Approval. The Board of Directors of ART and
the Board of Trustees of EQK shall have duly approved
the Merger, the Amended Declaration of Trust, the New
Advisory Agreement and the other transactions
contemplated hereby, and the Board of Trustees shall
not subsequently have made a determination (a
"Negative Determination") in the exercise of its
fiduciary duty that it can no longer recommend
approval of the Merger and the related transactions
to the holders of EQK Shares.
(h) Shareholder Approval. Shareholders of EQK
representing at least three-quarters of the issued
and outstanding EQK Shares shall have duly approved
this Agreement, the Amended Declaration of Trust and
the New Advisory Agreement.
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(i) Dissenters Rights. At or prior to Closing, holders of
no more than 3% of the outstanding EQK Shares will
have notified EQK that they intend to seek to exercise
dissenters rights in connection with the Merger.
(j) Member Approval. The members of Newco shall have
duly approved the Merger, and the other transactions
contemplated hereby.
(k) Documents. All documents to be delivered by each of
Newco and ART to EQK at the Closing shall be duly
executed and in form and substance reasonably
satisfactory to EQK.
(l) Consents and Approvals. All licenses, permits,
consents, approvals and authorizations of all third
parties and governmental bodies and agencies (other
than approvals from ART's Board of Directors and
Newco's members, which are provided for elsewhere in
this Agreement) shall have been obtained which are
necessary, in the reasonable determination of counsel
to EQK, in connection with (a) the execution and
delivery by each of the parties, as appropriate, of
this Agreement, (b) the consummation by each of the
parties of the transactions contemplated hereby or
thereby or (c) the conduct by the Surviving Entity of
the EQK Business substantially as conducted on the
date hereof.
(m) Block Purchase. At or prior to Closing, the Block
Purchase shall have been consummated.
(n) Registration Rights Agreement. The Registration
Rights Agreement, in form and substance reasonably
satisfactory to ERPM, shall have been duly executed
by ART and ERPM.
(o) No Legal Impediment; No Stop Order. No statute,
rule, regulation, order, injunction or decree shall
have been enacted, entered, promulgated or enforced
by any court, administrative agency or commission or
other governmental authority or instrumentality which
prohibits, restricts or makes illegal the
consummation of the Merger. The Registration
Statements shall have been declared effective by the
SEC and no stop order suspending effectiveness
thereof shall have been issued by the Commission.
(p) NYSE Listing. The ART Shares shall have been
authorized for listing on the NYSE, subject to
official notice of issuance.
(q) Governmental Authorizations. All required material
governmental authorizations, permits, consents,
orders or approvals which do not impose terms or
conditions that could reasonably be expected to have
a material adverse effect on EQK or ART have been
received.
-23-
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(r) No Adverse Change. ART, operating in all respects in
its ordinary course of business without any material
adverse change in its business, properties or
financial condition subsequent to the date hereof.
(s) Termination Agreement. The Termination Agreement, in
form and substance satisfactory to EQK, ERPM and ART
shall have been duly executed by EQK, ERPM and ART.
(t) Other. EQK shall have received such other documents
or certificates as EQK may reasonably have requested,
including, without limitation, certificates of good
standing with respect to Newco and ART from the
appropriate authority in its jurisdiction of
organization and certificates of good standing with
respect to Newco and ART from the appropriate
authority in each jurisdiction in which it is
qualified to do business.
ARTICLE VII
TERMINATION, AMENDMENT, WAIVER
7.01. Termination of Agreement. This Agreement may be terminated at
any time prior to the Closing:
(a) by mutual agreement of EQK, Newco and ART, prior to
the Closing;
(b) by Newco or ART, on or after June 30, 1998, if any
of the conditions provided in Section 6.01 hereof
have not been met or, to the extent permitted by
applicable law, have not been waived in writing by
Newco and ART prior to such date;
(c) by EQK, on or after June 30, 1998, if any of the
conditions provided in Section 6.02 hereof have not
been met or, to the extent permitted by applicable
law, have not been waived in writing by EQK prior to
such date; or
(d) by EQK upon a Negative Determination.
7.02. Procedure Upon Termination. In the event of termination by
EQK, Newco or ART pursuant to Section 7.01 hereof, written
notice thereof shall promptly be given to the other parties
and the transactions contemplated by this Agreement shall be
terminated, without further action by any party. If the
transactions contemplated by this Agreement are terminated as
provided herein:
(a) each of EQK, Newco and ART shall return all
documents, work papers and other material of any
other party relating to the transactions contemplated
-24-
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hereby, whether so obtained before or after the
execution hereof, to the party furnishing the same;
and
(b) all confidential information received by EQK, Newco
or ART with respect to the business of any other
party or its subsidiaries or affiliates shall be
treated in accordance with Section 5.08 hereof, and
Section 5.08 hereof shall remain in full force and
effect notwithstanding the termination of this
Agreement.
7.03. Amendment. No amendment to this Agreement shall be effective
unless it shall be in writing and signed by each of the
parties hereto.
7.04. Waiver. At any time prior to the Closing Date, Newco or ART
may (1) waive compliance with any of the agreements or
conditions contained herein or (2) extend the time for the
performance of any of the obligations or other acts of EQK.
In addition, at any time prior to the Closing Date, EQK may
(1) waive compliance with any of the agreements or conditions
contained herein or (2) extend the time for the performance of
any of the obligations or other acts of Newco or ART. Any
agreement on the part of a party hereto to any such extension
or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
ARTICLE VIII
MISCELLANEOUS
8.01. Survival. The representations, warranties, covenants and
agreements of EQK shall survive any investigation made by or
on behalf of any party hereto but shall not survive the
Closing; provided however, that the covenants of EQK set forth
in Section 8.04 (Indemnification) shall continue so long as
ART owns EQK Shares, unless the approval of holders of a
majority of EQK Shares (other than those EQK Shares held by
ART or its affiliates) is obtained for the termination of any
such covenant. The representations, warranties, covenants and
agreements of ART and Newco contained herein shall survive for
the longer of three (3) years from the Closing Date or one (1)
year after they were to have been performed and were capable
of performance; provided that Sections 5.11 (Resignation and
Election of Trustees), 5.14 (Preservation of Net Operating
Losses) and 5.15 (Listing of ART Shares) shall continue so
long as ART owns EQK Shares, unless and until (i) the approval
of holders of a majority of EQK Shares (other than those EQK
Shares held by ART or its affiliates) is obtained for the
termination of any such covenant, or (ii) ART acquires 80% or
more of the then outstanding EQK Shares.
8.02. Acknowledgment by ART. Assuming that market conditions,
industry conditions and EQK's business or financial conditions
do not suffer adversely in the interim, ART hereby
acknowledges that it is the present intention (but not the
obligation) of
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ART to seek to acquire the remaining outstanding EQK Shares at
some time after the third anniversary of the Closing Date for
consideration of either (A) cash in an amount equal to at
least $1.00 per then outstanding EQK Share, or (B) a
combination of (i) cash in an amount equal to at least $0.27
per then outstanding EQK Share and (ii) 0.123 ART Shares
valued at the Liquidation Value per then outstanding EQK
Share.
8.03. Commissions. No party hereto has employed any investment
banker, broker, finder or similar agent in connection with any
transaction contemplated by this Agreement.
8.04. Indemnification. ART and BCM, jointly and severally, agree to
indemnify and hold harmless EQK and its officers, directors,
trustees, employees and controlling persons from and against
any and all claims, losses, penalties, fines, forfeitures,
legal fees and related costs, judgments, and any other costs,
fees and expenses that EQK may sustain directly resulting from
(i) the breach of any of the covenants or obligations of ART
or BCM hereunder, or (ii) any claims by third parties arising
from any untrue statement or alleged untrue statement of a
material fact contained (or incorporated by reference) in the
Prospectus/Proxy Statement, the Registration Statement or any
amendment with respect thereto (collectively, the "OFFERING
DOCUMENTS"), or the omission or alleged omission therefrom of
a material fact required to be stated therein or necessary to
make the statements therein not misleading, with respect to
any information provided by ART or BCM in connection with the
Merger. EQK agrees to indemnify and hold harmless each of ART
and BCM and their respective officers, directors, trustees,
employees and controlling persons from and against any and all
claims, losses, penalties, fines, forfeitures, legal fees and
related costs, judgments, and any other costs, fees and
expenses that ART or BCM may sustain directly resulting from
any claims by third parties arising from any untrue statement
or alleged untrue statement of a material fact contained (or
incorporated by reference) in the Offering Documents, or the
omission or alleged omission therefrom of a material fact
required to be stated therein or necessary to make the
statements therein not misleading, with respect to any
information provided by EQK to ART in connection with the
Merger. In addition, each of ERPM and Compass agree to
indemnify and hold harmless each of ART and BCM and their
respective officers, directors, trustees, employees and
controlling persons from and against any and all claims,
losses, penalties, fines, forfeitures, legal fees and related
costs, judgments, and any other costs, fees and expenses that
ART or BCM may sustain directly resulting from any claims by
third parties arising from any untrue statement or alleged
untrue statement of a material fact contained (or incorporated
by reference) in the Offering Documents, or the omission or
alleged omission therefrom of a material fact required to be
stated therein or necessary to make the statements therein not
misleading, with respect to any information provided by ERPM
or Compass in connection with the Merger.
8.05. Definition of Knowledge. For the purpose of this Agreement
and the Exhibits and Appendices to this Agreement, the phrases
"to the best knowledge" of any party and
-26-
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"known" and words of like effect shall mean to the knowledge
of such party and any officer, director or manager of any such
party, as such knowledge has been, or should have been,
obtained in the performance of their duties in the ordinary
course of business in a prudent and diligent manner, which
knowledge shall also include information existing in the
records and files of such party.
8.06. Successors and Assigns. No party shall have the right to
assign all or any part of its interest in this Agreement
without the prior written consent of the other parties, and
any attempted transfer without such consent shall be null and
void.
8.07 No Third-Party Benefit. Nothing in this Agreement shall be
deemed to create any right or obligation in any Person not a
party hereto and this Agreement shall not be construed in any
respect to be a contract or agreement in whole or in part for
the benefit of or binding upon any Person not a party hereto,
except that the holders of EQK Shares shall be third party
beneficiaries of the obligations of ART after the Closing
Date.
8.08 Entire Agreement; Amendment. This Agreement, the Exhibits and
the Appendices hereto constitute the entire agreement among
the parties hereto with respect to the transactions
contemplated herein and supersede all prior oral and written
agreements, memoranda, understandings and undertakings between
the parties hereto relating to the subject matter hereof.
This Agreement may not be modified, amended, altered or
supplemented except by a written instrument executed and
delivered by each of the parties hereto.
8.09. Reformation and Severability. If any provision of this
Agreement is held to be illegal, invalid or unenforceable
under present or future laws effective during the term hereof
and such illegality, invalidity or unenforceability does not
result in a material failure of consideration, then:
(a) in lieu of such illegal, invalid or unenforceable
provision, there shall be added automatically as a
part of this Agreement a provision as similar in
terms to such illegal, invalid or unenforceable
provision as may be possible and be legal, valid and
enforceable; and
(b) the legality, validity and enforceability of the
remaining provisions hereof shall not in any way be
affected or impaired thereby.
8.10. Notices. All notices, claims, certificates, requests, demands
and other communications hereunder shall be in writing and
shall be deemed to have been duly given if delivered
personally or mailed (registered or certified mail, postage
prepaid, return receipt requested) as follows:
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If to BCM, ART or Newco:
c/o Basic Capital Management, Inc.
00000 X. Xxxxxxx Xxxxxxxxxx
Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
with a copy to:
Xxxxxxx & Xxxxx L.L.P.
0000 Xxxx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxxxxxxx, Esq.
If to EQK, ERPM or Compass:
c/o Compass Retail, Inc.
0000 Xxxxxxxxx Xxxxxxxx Xxxx
Xxxxx 000-X
Xxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxx, Xx.
with a copy to:
Wolf, Block, Xxxxxx and Xxxxx-Xxxxx LLP
Twelfth Floor, Packard Building
Philadelphia, Pennsylvania 19102-2678
Attention: Xxxxx X. Xxxxxxx, Esq.
or to such other address as the person to whom notice is to be given may have
previously furnished to the other in writing in the manner set forth above,
provided that notice of a change of address shall be deemed given only upon
receipt.
8.11. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE
COMMONWEALTH OF MASSACHUSETTS, WITHOUT REGARD TO ITS CONFLICTS
OF LAW RULES.
8.12. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same
instrument.
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IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by parties hereto on the date first above written.
AMERICAN REALTY TRUST, INC.
By: /s/ Xxxx X. Xxxxx
-----------------------------------
Name: Xxxx X. Xxxxx
---------------------------------
Title: President
--------------------------------
ART NEWCO, LLC
By AMERICAN REALTY TRUST, INC.
By: /s/ Xxxx X. Xxxxx
-----------------------------------
Name: Xxxx X. Xxxxx
---------------------------------
Title: President
--------------------------------
BASIC CAPITAL MANAGEMENT, INC.
By: /s/ Xxxxxx X. Xxxxxx
-----------------------------------
Name: Xxxxxx X. Xxxxxx
---------------------------------
Title: EVP
--------------------------------
EQK REALTY INVESTORS I
By: /s/ Xxxxxxx X. Xxxxx, Xx.
-----------------------------------
Name: Xxxxxxx X. Xxxxx, Xx.
---------------------------------
Title: Vice President
--------------------------------
EQUITABLE REALTY PORTFOLIO
MANAGEMENT, INC.
By: /s/ Xxxxxxx X. Xxxxx, Xx.
-----------------------------------
Name: Xxxxxxx X. Xxxxx, Xx.
---------------------------------
Title: Vice President
--------------------------------
COMPASS RETAIL, INC.
By: /s/ Xxxxx X. Xxxxxx
-----------------------------------
Name: Xxxxx X. Xxxxxx
---------------------------------
Title: Sr. Vice President
--------------------------------
34
EXHIBIT A
Form of Amended Declaration of Trust
[begins on next page]
35
EXHIBIT B
Form of New Advisory Agreement
[begins on next page]
36
EXHIBIT C
Copy of Articles of Amendment
[begins on next page]
37
EXHIBIT D-1
List of EQK Exceptions
As of December 22, 1997
[Exceptions to Representations and Warranties of EQK contained in Article III]
As to Section 3.05(b) and 3.06: The consents of Prudential Insurance Company of America and PNC Bank, the holders of
mortgages on Harrisburg East Mall, are required prior to effecting the merger
contemplated hereby. Failure to obtain such consents could result in a default under
the relevant loan documents.
As to Section 3.07(c): The following tenant allowances in excess of $25,000 have been committed to and/or
paid since September 30, 1997: Xxxxxx Xxxxxxx Woman ($175,000), Cafe Mantango
($85,000, lease not yet executed); Tri-State Radio ($30,000); King's Jewelry
($12,500); The Gap ($375,000, lease not yet executed); Tropical Island kiosk
($20,000); Lady Footlocker ($35,000, lease not yet executed) and Radio Shack ($35,000
in connection with planned tenant relocation, lease not yet executed).
As to Section 3.07(m) The following capital expenditures in excess of $25,000 have been made or committed to
subsequent to September 30, 1997: X.X. Xxxxx roof overhang repairs ($31,000).
38
EXHIBIT D-2
List of ART Exceptions
None.
39
EXHIBIT E
Copy of Cost Sharing Agreement
[begins on next page]
40
EXHIBIT F
Form of Standstill Agreement
[begins on next page]
41
EXHIBIT A
TO EXHIBIT 99.1
================================================================================
ART REALTY INVESTORS I
(FORMERLY EQK REALTY INVESTORS I)
--------------------
SECOND
AMENDED AND RESTATED
DECLARATION OF TRUST
--------------------
AS EXECUTED AND AMENDED AS OF [___________], 1998
================================================================================
42
INDEX
Page
ARTICLE I
THE TRUST DEFINITIONS
1.1 Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Places of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Nature of Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE II
TRUSTEES
2.1 Number, Term of Office and Qualifications of Trustees . . . . . . . . . . . . . . . . . . . . . . . . 7
2.2 Compensation and Other Remuneration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.3 Resignation, Removal and Death of Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.4 Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.5 Successor and Additional Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.6 Actions by Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.7 Certification of Changes in Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.8 Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE III
TRUSTEES' POWERS
3.1 Power and Authority of Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.2 Specific Powers and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.3 Trustees' Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.4 Additional Powers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE IV
ADVISOR
4.1 Employment of Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.2 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.3 Other Activities of Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.4 Advisor Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
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43
4.5 Annual Total Operating Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE V
INVESTMENT POLICY
5.1 Statement of Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.2 Prohibited Investments and Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.3 Appraisals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE VI
THE SHARES AND SHAREHOLDERS
6.1 Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.2 Legal Ownership of Trust Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.3 Shares Deemed Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.4 Share Record; Issuance and Transferability of Shares . . . . . . . . . . . . . . . . . . . . . . . . 21
6.5 Dividends or Distributions to Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.6 Transfer Agent, Dividend Disbursing Agent and Registrar . . . . . . . . . . . . . . . . . . . . . . 22
6.7 Shareholders' Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.8 Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.9 Reports to Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.10 Fixing Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.11 Notice to Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.12 Shareholders' Disclosures; Trustees' Right to Refuse to Transfer Shares;
Limitation on Holdings; Redemption of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.13 Issuance of Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.14 Ownership Limitation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.15 Changes in Ownership Limit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.16 Waivers by Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE VII
LIABILITY OF TRUSTEES, SHAREHOLDERS, OFFICERS
EMPLOYEES AND AGENTS, AND OTHER MATTERS
7.1 Exculpation of Trustees, Officers, Employees and Agents . . . . . . . . . . . . . . . . . . . . . . 27
7.2 Limitation of Liability of Shareholders, Trustees, Officers, Employees
and Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.3 Express Exculpatory Clauses and Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.4 Indemnification and Reimbursement of Trustees, Officers, Employees
and Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
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7.5 Right of Trustees, Officers, Employees and Agents to Own Shares or
Other Property and to Engage in Other Business . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.6 Transactions Between Trustees, Officers, Employees or Agents and the Trust . . . . . . . . . . . . . 29
7.7 Restriction of Duties and Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.8 Persons Dealing with Trustees, Officers, Employees or Agents . . . . . . . . . . . . . . . . . . . . 31
7.9 Reliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.10 Income Tax Status. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE VIII
DURATION, AMENDMENT AND TERMINATION OF TRUST
8.1 Duration of Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.2 Termination of Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.3 Amendment Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
8.4 Transfer to Successor; Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE IX
MISCELLANEOUS
9.1 Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.2 Index and Headings for Reference Only . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.3 Successors in Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.4 Inspection of Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.5 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.6 Provisions of the Trust in Conflict with Law or Regulations; Severability . . . . . . . . . . . . . 35
9.7 Certifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
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SECOND AMENDED AND RESTATED
DECLARATION OF TRUST
of
ART REALTY INVESTORS I
(formerly EQK Realty Investors I)
Executed as of [_____________], 1998
This is a Second Amended and Restated Declaration of Trust made as of
the date set forth above by the undersigned Trustees. The Trust was formed
pursuant to a Declaration of Trust executed as of October 8, 1984 which was
filed with the Secretary of State of the Commonwealth of Massachusetts (the
"Secretary of State") on October 9, 1984 (the "Original Declaration of Trust").
The Original Declaration of Trust was amended and restated by an Amended and
Restated Declaration of Trust dated as of February 27, 1985 which was filed
with the Secretary of State of the Commonwealth of Massachusetts on March 4,
1985, and was further amended by an amendment thereto dated as of March 5, 1986
which was filed with the Secretary of State on April 14, 1986. The Original
Declaration of Trust, as so amended, is hereby referred to as the "Existing
Declaration of Trust". The undersigned desire to continue the Trust on the
terms and for the purposes hereinafter stated. They desire that such Trust
continue to qualify as a "real estate investment trust" under the REIT
Provisions of the Internal Revenue Code. They may hereafter acquire, hold,
manage and dispose of certain assets as Trustees in the manner hereinafter
stated. It is proposed that the beneficial interest in the Trust assets shall
be divided into transferable Shares of Beneficial Interest, evidenced by
certificates therefor, as hereinafter provided. Accordingly, the undersigned
hereby declare that they will hold any and all property of every type and
description which they are acquiring or may hereafter acquire as Trustees,
together with the proceeds thereof, in trust, to manage and dispose of the same
for the benefit of the holders from time to time of the Shares of Beneficial
Interest (as more specifically defined below, the "Shareholders") previously
issued and to be issued hereunder in the manner and subject to the stipulations
contained herein.
This Second Amended and Restated Declaration of Trust amends and
restates, as of the date hereof, the Existing Declaration of Trust in its
entirety, and has been approved by the Shareholders concurrently and in
connection with the merger (the "Merger") of ART Newco, LLC, a Massachusetts
limited liability company ("ART Newco"), and indirect, wholly owned subsidiary
of American Realty Trust, Inc., a Georgia corporation ("ART"), with and into
the Trust, with the Trust as the surviving entity.
The undersigned do hereby (i) certify, pursuant to Section 8.3 of the
Existing Declaration of Trust, that at a meeting of the Shareholders of the
Trust duly called and held on [____________], 1998, at which meeting a quorum
was present and acting throughout, the holders of at least three-quarters of
the outstanding Shares of Beneficial Interest of the Trust entitled to vote
thereon voted that the Existing Declaration of Trust be amended in certain
respects as reflected herein and authorized the filing with the Secretary of
State of the Commonwealth of Massachusetts of a Second Amended and Restated
Declaration of Trust restating in a single document the Existing Declaration
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of Trust as amended at such meeting; and (ii) further certify that the Trustees
of the Trust, including a majority of the Unaffiliated Trustees, by a written
consent dated as of [________], 1998, duly authorized the filing with the
Secretary of State of the Commonwealth of Massachusetts of this SECOND AMENDED
AND RESTATED DECLARATION OF TRUST made as of [_____________], 1998, which
restates the Existing Declaration of Trust, as so amended, in its entirety to
read as set forth herein.
ARTICLE I
THE TRUST DEFINITIONS
1.1 Name. The name of the Trust created by this Second Amended
and Restated Declaration of Trust shall be "ART Realty Investors I" and, so far
as may be practicable, the Trustees shall conduct the Trust's activities,
execute all documents and xxx or be sued under that name, which name (and the
word "Trust" wherever used in this Declaration of Trust, except where the
context otherwise requires) shall refer to the Trustees collectively but not
individually or personally or to the officers, agents, employees or
Shareholders of the Trust or of such Trustees. Under circumstances under which
the Trustees determine that the use of such name is not practicable or under
circumstances in which the Trustees are contractually bound to change the name,
they may use such other designation or they may adopt another name under which
the Trust may hold property or conduct its activities.
If Basic Capital Management, Inc., a Nevada corporation ("BCM"), or
any subsidiary, affiliate or successor of such corporation shall cease, for any
reason, to render to the Trust the services of Advisor, as defined in Section
1.4 hereof, to be rendered pursuant to the contract referred to in Article IV
hereof, and any renewal or extension of such contract, then the Trustees shall,
upon request of BCM or such successor and without any vote or consent of the
Shareholders being required, promptly amend this Declaration of Trust to change
its name to one which does not, in the reasonable opinion of BCM, include any
reference to BCM or any of its Affiliates.
1.2 Places of Business. The Trust shall maintain an office in
Massachusetts at 00 Xxxxx Xxxxxx, c/o Xxxxxxxx-Xxxx Corporation System, Inc.,
Xxxxxx, Xxxxxxxxxxxxx 00000, or such other place in Massachusetts as the
Trustees may determine from time to time. The Trust may have such other
offices or places of business within or without the Commonwealth of
Massachusetts as the Trustees may from time to time determine.
1.3 Nature of Trust. The Trust shall be of the type commonly
termed a Massachusetts business trust. It is intended that the Trust shall
carry on a business as a "real estate investment trust" as described in the
REIT Provisions of the Internal Revenue Code. The Trust is not intended to be,
shall not be deemed to be, and shall not be treated as a general partnership,
limited partnership, joint venture, corporation or joint stock company (but
nothing herein shall preclude the Trust from being treated for tax purposes as
an association under the REIT Provisions of the Internal Revenue Code) nor
shall the Trustees or Shareholders or any of them for any purposes be, nor be
deemed to
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be, nor be treated in any way whatsoever to be, liable or responsible hereunder
as partners or joint venturers. The relationship of the Shareholders to the
Trustees shall be solely that of beneficiaries of the Trust in accordance with
the rights conferred upon them by this Declaration.
1.4 Definitions. The terms defined in this Section 1.4 wherever
used in this Declaration shall, unless the context otherwise requires, have the
respective meanings hereinafter specified. Whenever the singular number is
used in this Declaration and when required by the context, the same shall
include the plural, and the masculine gender shall include the feminine and
neuter genders. Where applicable, calculations to be made pursuant to any such
definition shall be made in accordance with generally accepted accounting
principles as in effect on the date hereof except as otherwise provided in such
definition.
(a) Advisor. "Advisor" shall mean the Person employed by
the Trustees in accordance with the provisions of Article IV.
(b) Affiliate. "Affiliate" shall mean, as to any Person,
(i) any other Person directly or indirectly controlling, controlled by
or under common control with such Person, (ii) any other Person that
owns beneficially, directly or indirectly, five percent (5%) or more
of the outstanding capital stock, shares or equity interests of such
Person, or (iii) any officer, director, employee, general partner or
trustee of such Person or of any Person controlling, controlled by or
under common control with such Person (excluding trustees and persons
serving in similar capacities who are not otherwise an Affiliate of
such Person).
(c) Affiliated Trustee. "Affiliated Trustee" shall mean
a Trustee who is not an Unaffiliated Trustee.
(d) Annual Meeting of Shareholders. "Annual Meeting of
Shareholders" shall mean the meeting described in the first sentence
of Section 6.7.
(e) Annual Report. "Annual Report" shall have the
meaning set forth in Section 6.9(a).
(f) Average Invested Assets. "Average Invested Assets"
for any period shall mean the average of the values of the Invested
Assets on the last day of each month during such period.
(g) Book Value. "Book Value" of an asset or assets shall
mean the value of such asset or assets of the Trust on the books of
the Trust, without deduction for depreciation or other asset valuation
reserves and without deduction for mortgages or other security
interests to which such asset or assets are subject, except that no
asset shall be valued at more than its fair market value as determined
by the Trustees.
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(h) Controlling Shareholder. "Controlling Shareholder"
shall mean, subsequent to the Merger, ART.
(i) Declaration. "Declaration" or "this Declaration"
shall mean this Second Amended and Restated Declaration of Trust, as
amended, restated or modified from time to time. References in this
Declaration to "herein" and "hereunder" shall be deemed to refer to
this Declaration and shall not be limited to the particular text,
article or section in which such words appear.
(j) Internal Revenue Code. "Internal Revenue Code" shall
mean the Internal Revenue Code of 1986, as now enacted or hereafter
amended, or successor statutes.
(k) Invested Assets. "Invested Assets" shall mean the
Book Value of all the Real Estate Investments of the Trust.
(l) Mortgage Loans. "Mortgage Loans" shall mean notes,
debentures, bonds and other evidences of indebtedness or obligations
which are negotiable or nonnegotiable and which are secured or
collateralized by Mortgages.
(m) Mortgages. "Mortgages" shall mean mortgages, deeds
of trust or other security interests in Real Property or in rights or
interests, including leasehold interests, in Real Property.
(n) Net Income. "Net Income" for any period shall mean
the net income of the Trust (calculating the net income of the Trust
from any partnership, joint venture or other form of indirect
ownership as if the Trust directly received its proportionate share of
such entity's income, gains, expenses and losses, including non-cash
charges and imputed interest) for such period (i) excluding realized
gains and losses from the disposition of the Trust assets (after
attributing to such disposition the taxes and fees paid in connection
therewith); (ii) before deducting additions to reserves or provisions
for depreciation, amortization, provision for bad debts and other
similar noncash charges and imputed interest; (iii) less the amount of
any bad debts actually charged to the provision therefor.
(o) Ownership Limit. "Ownership Limit" shall have the
meaning set forth in Section 6.14.
(p) Permitted Investments. "Permitted Investments" shall
mean the types of investments specified in Section 5.1.
(q) Person. "Person" shall mean and include individuals,
corporations, limited liability companies, limited partnerships,
general partnerships, joint stock companies or associations, joint
ventures, associations, companies, trusts, banks, trust companies,
land
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trusts, business trusts, or other entities and governments and
agencies and political subdivisions thereof.
(r) Real Property. "Real Property" shall mean and
include land, leasehold interests (including but not limited to
interests of a lessor or lessee therein), rights and interests in
land, and any buildings, structures, improvements, furnishings,
fixtures and equipment located on or used in connection with land,
leasehold interests or rights in land or interests therein, but does
not include investments in Mortgages, Mortgage Loans or interests
therein.
(s) REIT. "REIT" shall mean a real estate investment
trust as defined in the REIT Provisions of the Internal Revenue Code.
(t) REIT Provisions of the Internal Revenue Code. "REIT
Provisions of the Internal Revenue Code" shall mean Parts II and III
of Subchapter M of Chapter 1 of Subtitle A of the Internal Revenue
Code, and regulations thereunder and rulings with respect thereto.
(u) Securities. "Securities" shall mean any stock,
shares, voting trust certificates, bonds, debentures, notes or other
evidences of indebtedness or in general any instruments commonly known
as "securities" or any certificates of interest, shares or
participations in temporary or interim certificates for, receipts for,
guarantees of, or warrants, options or rights to subscribe to,
purchase or acquire any of the foregoing.
(v) Shareholders. "Shareholders" shall mean as of any
particular time all holders of record of outstanding Shares at such
time.
(w) Shares. "Shares" shall mean the transferable Shares
of Beneficial Interest, without par value, of the Trust as described
in Section 6.1.
(x) Total Assets. "Total Assets" shall mean the Book
Value of all the assets of the Trust, as such Book Value appears on
the most recent quarterly balance sheet of the Trust.
(y) Total Operating Expenses. "Total Operating Expenses"
for any period shall mean all operating expenses (including additional
expenses paid directly or indirectly by the Trust to the Advisor,
Affiliates of the Advisor or third parties based upon their
relationship with the Trust) including loan administration, servicing,
engineering, inspection and all other expenses paid by the Trust,
exclusive of (i) interest and discounts, (ii) taxes and license fees,
(iii) expenses connected directly with the issuance, sale and
distribution, or listing on a stock exchange, of Securities of the
Trust, including without limitation underwriting and brokerage
discounts and commissions, private placement fees and expenses, legal
and accounting costs, printing, engraving and mailing costs, and
listing and registration fees; (iv) expenses
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connected directly with the acquisition, disposition, operation or
ownership of Trust assets, including without limitation costs of
foreclosure; maintenance, repair and improvement of property;
maintenance and protection of the lien of mortgages; property
management fees; legal fees; premiums for insurance on property owned
by or mortgaged to the Trust; taxes; brokerage and acquisition fees
and commissions; appraisal fees; title insurance and abstract
expenses; provisions for depreciation, depletion and amortization;
disposition fees and real estate commissions; and losses on the
disposition of assets and provisions for such losses; (v) fees and
expenses payable to public accountants, legal counsel, consultants,
managers or agents, employed for the Trust directly by the Trustees;
(vi) legal and other expenses in connection with formal or informal
administrative action or legal proceedings which involve a challenge
to the status of the Trust as a REIT, or advice concerning obtaining
or maintaining such status, or the determination by the Trust of its
taxable income or involving a claim that the activities of the Trust
or any Trustee, Shareholder, officer or agent of the Trust were
improper; (vii) expenses of organizing, revising, amending,
converting, modifying, reorganizing or terminating the Trust; (viii)
the cost of insurance in the nature of directors' or officers'
liability insurance covering Trustees and officers of the Trust; (ix)
fees and expenses of transfer agents, registrars, warrant agents,
rights agents, dividend payment and dividend reinvestment agents,
escrow holders and indenture trustees; (x) all printing and
distribution expenses connected with communications to holders of
Securities of the Trust and other necessary costs in maintaining
relations with holders of Securities, including the costs of printing
and mailing the certificates for Securities, proxy solicitation
materials and reports to such holders and the cost of holding meetings
of holders of the Securities of the Trust; (xi) legal, accounting,
printing and other costs of reports required to be filed with state or
Federal government agencies; and (xii) all fees paid to the Advisor
during such period; provided, however, that the foregoing exclusions
shall not include any allocation of costs of the Advisor's overhead
incurred in performing its duties under its advisory agreement with
the Trust.
(z) Trust. "Trust" shall mean the Trust created by this
Declaration.
(aa) Trustees. "Trustees" shall mean, as of any
particular time, original signatories hereto as long as they hold
office hereunder and additional and successor trustees, and shall not
include the officers, employees or agents of the Trust or the
Shareholders. Nothing herein shall be deemed to preclude the Trustees
from also serving as officers, employees or agents of the Trust or
owning Shares.
(bb) Trust Estate. "Trust Estate" shall mean as of any
particular time any and all property, real, personal or otherwise,
tangible or intangible, which is transferred, conveyed or paid to or
purchased by the Trust or Trustees and all rents, income, profits and
gains therefrom and which at such time is owned or held by or for the
Trust or the Trustees.
(cc) Trustees' Regulations. "Trustees' Regulations" shall
have the meaning set forth in Section 3.3.
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(dd) Unaffiliated Trustee. "Unaffiliated Trustee" shall
mean a Trustee who, in his individual capacity, (i) is not an
Affiliate of the Advisor or the Controlling Shareholder, (ii) does not
own any interest in the Advisor or the Controlling Shareholder, and
(iii) does not perform any services for the Trust except as Trustee;
provided that officers or employees of Compass Retail, Inc. shall also
be deemed "Unaffiliated Trustees" for purposes of this definition.
ARTICLE II
TRUSTEES
2.1 Number, Term of Office and Qualifications of Trustees. There
shall be no fewer than five (5) nor more than seven (7) Trustees. The initial
Trustees under this Second Amended and Restated Declaration of Trust are the
five signatories hereto. Within the limits set forth in this Section 2.1, the
number of Trustees may be increased and decreased from time to time by the
Trustees or by the vote or consent of the holders of a majority of the
outstanding Shares then entitled to vote thereon. Subject to the provisions of
Section 2.3, each Trustee shall hold office until the next annual meeting of
Shareholders and until the election and qualification of his successor. There
shall be no cumulative voting in the election for Trustees. A Trustee shall be
an individual at least twenty-one (21) years of age who is not under legal
disability. Subject to the provisions regarding vacancies set forth in Section
2.4, there shall be at least four (4) Unaffiliated Trustees at all times until
such time as ART owns at least 80% of the outstanding Shares of the Trust.
Upon the resignation, removal or death of a Trustee who is an Affiliated
Trustee, the remaining Affiliated Trustees shall appoint a person to replace
such Affiliated Trustee. Nominees to serve as Affiliated Trustees shall be
nominated by the then current Affiliated Trustees, if any. Unless otherwise
required by law, no Trustee shall be required to give bond, surety or security
in any jurisdiction for the performance of any duties or obligations hereunder.
The Trustees in their capacity as trustees shall not be required to devote
their entire time to the business and affairs of the Trust.
2.2 Compensation and Other Remuneration. The Trustees shall be
entitled to receive such reasonable compensation for their services as Trustees
as the Trustees may determine from time to time. The Trustees and Trust
officers shall be entitled to receive remuneration for services rendered to the
Trust in any other capacity. Subject to Sections 7.5 and 7.6, such services
may include, without limitation, services as an officer of the Trust, legal,
accounting or other professional services, or services as a broker, transfer
agent or underwriter, whether performed by a Trustee or any person affiliated
with a Trustee.
2.3 Resignation, Removal and Death of Trustees. A Trustee may
resign at any time by giving written notice in recordable form to the remaining
Trustees at the principal office of the Trust. Such resignation shall take
effect on the date such notice is given, or at any later time specified in such
notice, without need for prior or subsequent accounting. A Trustee may be
removed at any time, with or without cause, by vote or consent of holders of a
majority of the outstanding Shares
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then entitled to vote thereon or by a majority of the remaining Trustees;
provided that, subject to the provisions regarding vacancies set forth in
Section 2.4, there shall be at least four (4) Unaffiliated Trustees until such
time as ART owns at least 80% of the outstanding Shares of the Trust. A
Trustee judged incompetent or bankrupt, or for whom a guardian or conservator
has been appointed, shall be deemed to have resigned as of the date of such
adjudication or appointment. Upon the resignation or removal of any Trustee,
or upon his otherwise ceasing to be a Trustee, he shall execute and deliver
such documents as the remaining Trustees shall require for the conveyance of
any Trust property held in his name and shall account to the remaining Trustee
or Trustees, as they require, for all property which he holds as Trustee and
shall thereupon be discharged as Trustee. Upon the incapacity or death of any
Trustee, his legal representative shall perform the acts set forth in the
preceding sentence, and the discharge mentioned therein shall run to such legal
representative and to the incapacitated Trustee or the estate of the deceased
Trustee, as the case may be.
2.4 Vacancies. If any or all of the Trustees cease to be Trustees
hereunder, whether by reason of resignation, removal, incapacity, death or
otherwise, such event shall not terminate the Trust or affect its continuity.
Until vacancies are filled, the remaining Trustee or Trustees (even though
fewer than five (5)) may exercise the powers of the Trustees hereunder.
Vacancies (including vacancies created by increases in number) may be filled by
the remaining Trustee or by a majority of the remaining Trustees (or the
Controlling Shareholder, if the vacant position was formerly held by an
Affiliated Trustee) or by the vote and consent of holders of a majority of the
outstanding Shares entitled to vote thereon. If at any time there shall be no
Trustees in office, successor Trustees shall be elected by the Shareholders as
provided in Section 6.7. There shall be at least four (4) Unaffiliated
Trustees at all times until ART owns at least 80% of the outstanding Shares of
the Trust; provided, however, that if, as a result of vacancies created by the
resignation, removal or death of an Unaffiliated Trustee, there are less than
four (4) Unaffiliated Trustees, the remaining Unaffiliated Trustees, if any,
must fill such vacancy with one or more substitute Unaffiliated Trustees (in
such capacity, the "Substitute Unaffiliated Trustees") until the total number
of Unaffiliated Trustees is equal to four (4) or more; and provided further
that, if there are no Unaffiliated Trustees, the remaining Trustees, if any,
must fill such vacancies with four or more Substitute Unaffiliated Trustees;
and, provided further that, if there are no Trustees, the Shareholders shall
elect at least four or more Unaffiliated Trustees as provided in Section 6.7.
Notwithstanding anything herein to the contrary, at and after such time as ART
owns at least 80% of the outstanding Shares of the Trust, there shall only be
two Unaffiliated Trustees required hereunder. Any Trustee elected to fill a
vacancy created by the resignation, removal or death of a former Trustee shall
hold office for the unexpired term of such former Trustee. Successors of the
Unaffiliated Trustees shall be nominated by the remaining Unaffiliated
Trustees, if there are any remaining Unaffiliated Trustees.
2.5 Successor and Additional Trustees. The right, title and
interest of the Trustees in and to the Trust Estate shall also vest in
successor and additional Trustees upon their qualification, and they shall
thereupon have all the rights and obligations of Trustees hereunder. Such
right, title and interest shall vest in the Trustees whether or not
conveyancing documents have been executed and delivered pursuant to Section 2.3
or otherwise. Appropriate written evidence of the election and
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qualification of successor and additional Trustees shall be filed with the
records of the Trust and in such other offices or places as the Trustee may
deem necessary, appropriate or desirable.
2.6 Actions by Trustees. The Trustees may act with or without a
meeting. A quorum for all meetings of the Trustees shall be a majority of the
Trustees. Affiliated Trustees may be counted in determining the presence of a
quorum at a meeting of the Trustees. Except as provided below in this Section
2.6 or in Section 7.6 hereof, any action of the Trustees may be taken at a
meeting by vote of a majority of the Trustees present (a quorum being present)
or without a meeting by written consents of a majority of the Trustees, which
consents shall be filed with the records of meetings of the Trustees. Every
act or decision done or made by a majority of the Trustees present at a meeting
duly held at which a quorum is present shall be the act of the Trustees. Any
action or actions permitted to be taken by the Trustees in connection with the
business of the Trust may be taken pursuant to authority granted by a meeting
of the Trustees conducted by a telephone conference call, and the transaction
of Trust business represented thereby shall be of the same authority and
validity as if transacted at a meeting of the Trustees held in person or by
written consent. The minutes of any Trustees' meeting held by telephone shall
be prepared in the same manner as a meeting of the Trustees held in person.
Any agreement, Mortgage or other instrument or writing executed by one or more
of the Trustees or by any authorized Person shall be valid and binding upon the
Trustees and upon the Trust when authorized or ratified by action of the
Trustees or as provided in the Trustees' Regulations.
With respect to the actions of the Trustees, Trustees who have, or are
Affiliates of Persons who have, any direct or indirect interest in or
connection with any matter being acted upon may be counted for all quorum
purposes under this Section 2.6 and, subject to the provisions of Section 7.6,
may vote on the matter as to which they or their Affiliates have such interest
or connection.
Approval of the following transactions shall require the approval of a
majority of the Unaffiliated Trustees: (i) transactions between the Trust
(including any subsidiaries of the Trust) and ART and any of ART's Affiliates
and other related persons (other than transactions between related parties
pursuant to a new advisory agreement which has been approved or ratified by the
holders of a majority of the outstanding shares of beneficial interest of EQK,
including holders of a majority of the Shares not held by ART or any of its
Affiliates, that actually vote at the applicable meeting) and other
transactions requiring approval as set forth in Section 7.6; (ii) amendments to
this Declaration of Trust; and (iii) amendments to the Trustees' Regulations.
2.7 Certification of Changes in Trustees. No removal of a Trustee
and no election or appointment of any individual as Trustee (other than an
individual who was serving as a Trustee immediately prior to such election or
appointment) shall become effective unless and until there shall be delivered
to the chief executive officer or the secretary of the Trust an instrument in
writing signed by a majority of the Trustees, certifying to such removal of a
Trustee and or naming the individual so elected or appointed as Trustee,
together with his written acceptance thereof and agreement to be bound thereby.
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2.8 Committees. The Trustees may appoint from among their own
number an audit committee, a nominating committee and such other standing
committee as the Trustees determine. Each standing committee shall consist of
two or more members. All members of the audit committee shall be Unaffiliated
Trustees. At least 50% of the members of each other standing committee shall
be Unaffiliated Trustees; provided, however, that upon a failure to comply with
this requirement because of the resignation, removal or death of a Trustee who
is an Unaffiliated Trustee, such requirement shall not be applicable for a
period of sixty (60) days. Each committee shall have such powers, duties and
obligations as the Trustees may deem necessary or appropriate. The standing
committees shall report their activities periodically to the Trustees.
ARTICLE III
TRUSTEES' POWERS
3.1 Power and Authority of Trustees. The Trustees, subject only
to the specific limitations contained in this Declaration, shall have, without
further or other authorization, and free from any power or control on the part
of the Shareholders, full, absolute and exclusive power, control and authority
over the Trust Estate and over the business and affairs of the Trust to the
same extent as if the Trustees were the sole owners thereof in their own right,
and may do all such acts and things as in their sole judgment and discretion
are necessary for or incidental to or desirable for the carrying out of any of
the purposes of the Trust or the conducting of the business of the Trust. Any
determination made in good faith by the Trustees of the purposes of the Trust
or the existence of any power or authority hereunder shall be conclusive. In
construing the provisions of this Declaration, a presumption shall favor the
grant of powers and authority to the Trustees. The enumeration of any specific
power or authority herein shall not be construed as limiting the general powers
or authority or any other specified power or authority conferred herein upon
the Trustees.
3.2 Specific Powers and Authority. Subject only to the express
limitations contained in this Declaration and in addition to any powers and
authorities conferred by this Declaration or which the Trustees may have by
virtue of any present or future statute or rule or law, and also subject to
the REIT Provisions of the Internal Revenue Code, the Trustees, without any
action or consent by the Shareholders, shall have and may exercise at any time
and from time to time the following powers and authorities which may or may not
be exercised by them in their sole judgment and discretion and in such manner
and upon such terms and conditions as they may from time to time deem proper:
(a) to retain, invest and reinvest the capital or other
funds of the Trust in, and to acquire, purchase, or own, mortgage
and/or equity interests in real or personal property of any kind, all
without regard to whether any such property is authorized by law for
the investment of Trust funds or whether any investments may mature
before the possible termination of the Trust, and to possess and
exercise all the rights, powers, and privileges appertaining to the
ownership of the Trust Estate and to increase the capital of the Trust
at
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any time by the issuance of additional Shares or Securities of the
Trust for such consideration as they deem appropriate;
(b) without limitation of the powers set forth in
paragraph (a) above, for such consideration as they deem proper, to
invest in, purchase, or otherwise acquire for cash or other property
or through the issuance of Shares or through the issuance of notes,
debentures, bonds, or other obligations of the Trust and hold for
investment real, personal or mixed, tangible or intangible, property
of any kind wherever located in the world, including without
limitation: (i) the entire or any participating interest in rents,
lease payments, or other income from, or the entire or any
participating interest in the profits from, or the entire or any
participating interest in the equity or ownership of, Real Property;
(ii) the entire or any participating interest in notes, bonds, or
other obligations which are secured by Mortgages; (iii) in connection
with any such investment, purchase or acquisition, a share of rents,
lease payments, or other gross income from or a share of the profits
from or a share in the equity or ownership of Real Property, either
directly or through joint venture, general or limited partnership, or
other lawful combinations or associations; (iv) loans secured by the
pledge or transfer of Mortgages; and (v) Securities of every nature,
whether or not secured by Mortgage Loans. The Trustees shall also
have the power to develop, operate, pool, unitize, grant production
payments out of or lease or otherwise dispose of mineral, oil, and gas
properties and rights;
(c) to sell, rent, lease, hire, exchange, release,
partition, assign, mortgage, pledge, hypothecate, grant security
interests in, encumber, negotiate, convey, transfer or otherwise
dispose of any and all of the Trust Estate by deeds (including deeds
in lieu of foreclosure), trust deeds, assignments, bills of sale,
transfers, leases, mortgages, financing statements, security
agreements and other instruments for any of such purposes executed and
delivered for and on behalf of the Trust or the Trustees by one or
more of the Trustees or by a duly authorized officer, employee, agent
or any nominee of the Trust;
(d) to issue Shares, bonds, debentures, notes or other
evidences of indebtedness which may be secured or unsecured and may be
subordinated to any indebtedness of the Trust and may be convertible
into Shares and which include options, warrants and rights to
subscribe to, purchase or acquire any of the foregoing, all without
vote of or other action by the Shareholders to such Persons for such
cash, property or other consideration (including Securities issued or
created by, or interests in any Person) at such time or times and on
such terms as the Trustees in their sole discretion and in good faith
may deem advisable and to list any of the foregoing Securities issued
by the Trust on any securities exchange and to purchase or otherwise
acquire, hold, cancel, reissue, sell and transfer any of such
Securities, and to cause the instruments evidencing such Securities to
bear an actual or facsimile imprint of the seal of the Trust and to be
signed by manual or facsimile signature or signatures (and to issue
such Securities, whether or not any Person whose manual or facsimile
signature shall be imprinted thereon shall have ceased to occupy the
office with respect to which such signature was authorized), provided
that, where only facsimile signatures for the Trust are
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used, the instrument shall be countersigned manually by a transfer
agent, registrar or other authentication agent. Any of such
Securities of different types may be issued in combinations or units
with such restrictions on the separate transferability thereof as the
Trustees shall determine;
(e) to enter into leases of real and personal property as
lessor or lessee and to enter into contracts, obligations and other
agreements for a term, and to invest in obligations having a term,
extending beyond the term of office of the Trustees and beyond the
possible termination of the Trust, or having a lesser term;
(f) to borrow money and give negotiable or non-negotiable
instruments therefor; to guarantee, indemnify or act as surety with
respect to payment or performance of obligations of third parties; to
enter into other obligations on behalf of the Trust; and to assign,
convey, transfer, mortgage, subordinate, pledge, grant security
interests in, encumber or hypothecate the Trust Estate to secure any
indebtedness of the Trust or any other of the foregoing obligations of
the Trust;
(g) to lend money, whether secured or unsecured;
(h) to create reserve funds for any purpose;
(i) to incur and pay out of the Trust Estate any charges
or expenses, and disburse any funds of the Trust, which charges,
expenses or disbursements are, in the opinion of the Trustees,
necessary for or incidental to or desirable for the carrying out of
any of the purposes of the Trust or the conducting of the business of
the Trust, including without limitation taxes and other governmental
levies, charges and assessments, of whatever kind or nature, imposed
upon or against the Trustees in connection with the Trust or the Trust
Estate or upon or against the Trust Estate or any part thereof, and
for any of the purposes herein;
(j) to deposit funds or Securities held by the Trust in
banks, trust companies, savings and loan associations and other
depositories, whether or not such deposits will draw interest, the
same to be subject to withdrawal on such terms and in such manner and
by such Person or Persons (including any one or more Trustees,
officers, agents or representatives) as the Trustees may determine;
(k) to possess and exercise all the rights, powers and
privileges appertaining to the ownership of all or any interests in
Mortgages or Securities issued or created by any Person, forming part
of the Trust Estate, to the same extent that an individual might, and,
without limiting the generality of the foregoing, to vote or give any
consent, request or notice, or waive any notice, either in person or
by proxy or power of attorney, with or without power of substitution,
to one or more Persons, which proxies and powers of attorney
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may be for meetings or actions generally, or for any particular
meeting or action, and may include the exercise of discretionary
powers;
(l) to cause to be organized or assist in organizing any
Person under the laws of any jurisdiction to acquire the Trust Estate
or any part or parts thereof or to carry on any business in which the
Trust shall directly or indirectly have any interest and to sell,
rent, lease, hire, convey, negotiate, assign, exchange or transfer the
Trust Estate or any part or parts thereof to or with any such Person
or any existing Person in exchange for the Securities thereof or
otherwise, and to merge or consolidate the Trust with or into any
Person or merge or consolidate any Person into the Trust, and to lend
money to, subscribe for the Securities of, and enter into any
contracts with, any Person in which the Trust holds or is about to
acquire Securities or any other interest;
(m) to enter into joint ventures, general or limited
partnerships, participation or agency arrangements and any other
lawful combinations or associations;
(n) to elect, appoint, engage or employ such officers for
the Trust as the Trustees may determine, who may be removed or
discharged at the discretion of the Trustees, such officers to have
such powers and duties, and to serve such terms and at such
compensation as may be prescribed by the Trustees or by the Trustees'
Regulations, to engage or employ any Persons (including, subject to
the provisions of Sections 7.5 and 7.6, any Trustee, officer or agent
and any Person in which any Trustee, officer or agent is directly or
indirectly interested or with which he is directly or indirectly
connected) as agents, representatives, employees, or independent
contractors (including without limitation real estate advisors,
investment advisors, transfer agents, registrars, underwriters,
accountants, attorneys at law, real estate agents, managers,
appraisers, brokers, architects, engineers, construction managers,
general contractors or otherwise) in one or more capacities, and to
pay compensation from the Trust for services in as many capacities as
such Person may be so engaged or employed and, except as prohibited by
law, to delegate any of the powers and duties of the Trustees to any
one or more Trustees, agents, representatives, officers, employees,
independent contractors or other Persons;
(o) to determine whether moneys, Securities or other
assets received by the Trust shall be charged or credited to income or
capital or allocated between income and capital, including the power
to amortize or fail to amortize any part or all of any premium or
discount, to treat any part or all the profit resulting from the
maturity or sale of any asset, whether purchased at a premium or at a
discount, as income or capital, or to apportion the same between
income and capital; to apportion the sales price of any asset between
income and capital, and to determine in what manner any expenses or
disbursements are to be borne as between income and capital, whether
or not in the absence of the power and authority conferred by this
subsection such monies, Securities or other assets would be regarded
as income or as capital or such expense or disbursement would be
charged to income or to capital; to treat any dividend or other
distribution on any investment as income or capital or
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apportion the same between income and capital; to provide or fail to
provide reserves for depreciation, amortization or obsolescence in
respect of all or any part of the Trust Estate subject to
depreciation, amortization or obsolescence in such amounts and by such
methods as they shall determine; to allocate to the share of
beneficial interest account less than all of the consideration
received for the Shares and to allocate the balance thereof to capital
surplus; and to determine the method or form in which the accounts and
records of the Trust shall be kept and to change from time to time
such method or form;
(p) to determine from time to time, the value of all or
any part of the Trust Estate and of any services, Securities, assets
or other consideration to be furnished to or acquired by the Trust,
and from time to time to revalue all or any part of the Trust Estate
in accordance with such appraisals or other information as are, in the
Trustees' sole judgment, necessary and/or satisfactory;
(q) to collect, xxx for, and receive all sums of money or
other assets coming due to the Trust, and to engage in, intervene in,
prosecute, join, defend, compound, compromise, abandon or adjust, by
arbitration or otherwise, any actions, suits, proceedings, disputes,
claims, controversies, demands or other litigation relating to the
Trust, the Trust Estate or the Trust's affairs, to enter into
agreements therefor, whether or not any suit is commenced or claim
accrued or asserted and, in advance of any controversy, to enter into
agreements regarding arbitration, adjudication or settlement thereof;
(r) to renew, modify, release, compromise, extend,
consolidate or cancel, in whole or in part, any obligation to or of
the Trust or participate in any reorganization of obligors to the
Trust;
(s) to purchase and pay for out of the Trust Estate
insurance contracts and policies insuring the Trust Estate against any
and all risks and insuring the Trust and/or any or all of the
Trustees, the Shareholders, officers, employees, agents, investment
advisors or independent contractors of the Trust against any and all
claims and liabilities of every nature asserted by any Person arising
by reason of any action alleged to have been taken or omitted by the
Trust or by any such Person as Trustee, Shareholder, officer,
employee, agent, investment advisor or independent contractor, whether
or not the Trust would have the power to indemnify such Person against
such claim or liability;
(t) to cause legal title to any of the Trust Estate to be
held by and/or in the name of the Trustees, or except as prohibited by
law, by and/or in the name of the Trust or one or more of the Trustees
or any other Person, on such terms, in such manner, with such powers
in such Person as the Trustees may determine, and with or without
disclosure that the Trust or Trustees are interested therein;
(u) to adopt a fiscal year for the Trust, and from time
to time to change such fiscal year without the approval of the
Shareholders;
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(v) to adopt and use a seal (but the use of a seal shall
not be required for the execution of instruments or obligations of the
Trust);
(w) to make, perform, and carry out, or cancel and
rescind, contracts of every kind for any lawful purpose without limit
as to amount, with any Person, firm, trust, association, corporation,
municipality, county, parish, state, territory, government or other
municipal or governmental subdivision, such contracts to be for such
duration and upon such terms as the Trustees in their sole discretion
shall determine;
(x) to confess judgment against the Trust;
(y) to discontinue the operations of the Trust;
(z) to repurchase or redeem Shares; and
(aa) to do all other such acts and things as are necessary
or incidental to the foregoing, and to exercise all powers which are
necessary or useful to carry on the business of the Trust, to promote
any of the purposes for which the Trust is formed and to carry out the
provisions of this Declaration.
3.3 Trustees' Regulations. The Trustees may make, adopt, amend or
repeal regulations (the "Trustees' Regulations") containing provisions relating
to the business of the Trust, the conduct of its affairs, its rights or powers
and the rights or powers of its Shareholders, Trustees or officers not
inconsistent with law or with this Declaration. Notwithstanding anything to
the contrary in the Trustees' Regulations, any amendment of the Trustees'
Regulations shall require the approval of a majority of the Unaffiliated
Trustees.
3.4 Additional Powers. The Trustees shall additionally have and
exercise all the powers conferred by the laws of Massachusetts upon business
trusts or real estate investment trusts formed under such laws, insofar as such
laws are not in conflict with the provisions of this Declaration.
ARTICLE IV
ADVISOR
4.1 Employment of Advisor. The Trustees are responsible for the
general policies of the Trust and for such general supervision of the business
of the Trust conducted by all officers, agents, employees, advisors, managers
or independent contractors of the Trust as may be necessary to ensure that such
business conforms to the provisions of this Declaration. However, the Trustees
are not and shall not be required personally to conduct all of the business of
the Trust, and, consistent with their ultimate responsibility as stated above,
the Trustees shall have the power to appoint, employ or
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contract with any Person (including one or more of themselves or any
corporation, partnership, or trust in which one or more of them may be
directors, officers, stockholders, partners or trustees) as the Trustees may
deem necessary or proper for the transaction of the business of the Trust. The
Trustees may therefor employ or contract with such Person (herein referred to
as the "Advisor") and, consistent with their ultimate responsibility as set
forth in this Section 4.1, the Trustees may grant or delegate such authority to
the Advisor as the Trustees may in their sole discretion deem necessary or
desirable without regard to whether such authority is normally granted or
delegated by trustees.
Subject to the provisions of Sections 4.2 and 4.4 hereof, the Trustees
shall have the power to determine the terms and compensation of the Advisor or
any other Person whom they may employ or with whom they may contract; provided,
however, that any determination to employ or contract with any Trustee or any
Person such that a Trustee would be an Affiliated Trustee shall be valid only
if made, approved or ratified, after disclosure of such interests, by the
affirmative vote or written consent of a majority of the Trustees who would be
Unaffiliated Trustees. The Trustees may exercise broad discretion in allowing
the Advisor to administer and regulate the operations of the Trust, to act as
agent for the Trust, to execute documents on behalf of the Trustees and to make
executive decisions which conform to general policies and general principles
previously established by the Trustees.
4.2 Term. The Trustees shall not enter into any advisory contract
with the Advisor unless such contract has an initial term of no more than two
(2) years, provides for annual renewal or extension thereafter and for
termination thereof by the Trustees without cause at any time without penalty
upon sixty (60) days' written notice by the Trustees, either by affirmative
vote or written consent of a majority of the Unaffiliated Trustees, requires
for renewal or extension thereof the affirmative vote or written consent of a
majority of the Unaffiliated Trustees and provides for termination thereof by
the Advisor without cause at any time after the expiration of a period
specified in such contract (which period shall not be shorter than the original
term) without penalty upon one hundred and eighty (180) days' written notice by
the Advisor. In the event of the termination of an advisory contract, the
terminated Advisor shall be required to cooperate with the Trust and take all
reasonable steps requested to assist the Trustees in making an orderly
transition of the advisory function. It shall be the duty of the Trustees to
evaluate the performance of the Advisor before entering into or renewing an
advisory contract, and the Unaffiliated Trustees have a fiduciary duty to the
Shareholders to supervise the relationship of the Trust with the Advisor.
4.3 Other Activities of Advisor. The Advisor shall not be
required to administer the investment activities of the Trust as its sole and
exclusive function and may have other business interests and may engage in
other activities similar or in addition to those relating to the Trust,
including the rendering of services and advice to other Persons (including
other REITs) and the management of other investments (including investments of
the Advisor and its Affiliates). The Trustees may request the Advisor to
engage in other activities which complement the Trust's investments, and the
Advisor may receive compensation or commissions therefor from the Trust or
other Persons.
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The Advisor shall be required to use its best efforts to supervise the
operation of the Trust in a manner consistent with the investment policies and
objectives of the Trust, but neither the Advisor nor (subject to any applicable
provisions of Section 7.5) any Affiliate of the Advisor shall be obligated to
present any particular investment opportunity to the Trust, even if such
opportunity is of a character such that, if presented to the Trust, could be
taken by the Trust, and, subject to the foregoing, shall be protected in taking
for its own account or recommending to others any such particular investment
opportunity.
Upon request of any Trustee, the Advisor shall from time to time
promptly furnish the Trustees with such information on a confidential basis as
to any investments within the Trust's investment policies made by the Advisor
for its own account as may be provided in the advisory contract with the
Advisor in effect from time to time.
4.4 Advisor Compensation. The Trustees, including a majority of
the Unaffiliated Trustees, shall at least annually review generally the
performance of the Advisor in order to determine whether the compensation which
the Trust has contracted to pay to the Advisor is reasonable in relation to the
nature and quality of services performed and whether the provisions of the
advisory contract with the Advisor are being carried out. Each such
determination shall be based on such of the following and other factors as the
Trustees (including the Unaffiliated Trustees) deem relevant and shall be
reflected in the minutes of the meetings of the Trustees:
(a) the size of the advisory fee in relation to the size,
composition and profitability of the portfolio of the Trust;
(b) the success of the Advisor in generating
opportunities that meet the investment objectives of the Trust;
(c) the rates charged to other REITs and to investors
other than REITs by Advisors performing similar services;
(d) additional revenues realized by the Advisor and its
Affiliates through their relationship with the Trust, including loan
administration, underwriting or brokerage commissions, servicing,
engineering, inspection and other fees, whether paid by the Trust or
by others with whom the Trust does business;
(e) the quality and extent of service and advice
furnished by the Advisor;
(f) the performance of the investment portfolio of the
Trust, including income, conservation or appreciation of capital,
frequency of problem investments and competence in dealing with
distress situations; and
(g) the quality of the portfolio of the Trust in
relationship to any investments generated by the Advisor for its own
account.
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4.5 Annual Total Operating Expenses. The Total Operating Expenses
of the Trust shall not exceed in any twelve-month period the greater of two
percent (2%) of the Average Invested Assets for such twelve-month period and
twenty-five percent (25%) of the Net Income for such twelve (12) month period
(calculated before the deduction therefrom of such Total Operating Expenses),
or such greater amount, with respect to any year, as shall have been found by a
majority of the Trustees, including a majority of the Unaffiliated Trustees,
based upon such unanticipated, unusual or nonrecurring factors as they may deem
sufficient, to be justified for such year, and any such finding and the reasons
in support thereof shall be reflected in the minutes of the meetings of the
Trustees.
The Unaffiliated Trustees shall at least annually determine whether
the total fees and expenses of the Trust are reasonable in light of the
investment experience of the Trust, its Net Assets, its Net Income and the fees
and expenses of comparable REITs. Each such determination shall be reflected
in the minutes of meetings of the Trustees.
Within sixty (60) days after the end of any fiscal quarter of the
Trust ending on or after December 31, 1985 for which Total Operating Expenses
(for the twelve (12) months then ended) exceed both two percent (2%) of the
Average Invested Assets for such twelve (12) month period and twenty-five
percent (25%) of the Net Income for such twelve (12) month period (calculated
before the deduction therefrom of such Total Operating Expenses), there shall
be sent to the Shareholders a written disclosure of such fact, together with an
explanation of the factors, if any, which the Trustees (including a majority of
the Unaffiliated Trustees) have concluded were sufficiently unanticipated,
unusual or nonrecurring to justify such higher Total Operating Expenses.
Each advisory contract with the Advisor shall provide that in the
event that the Total Operating Expenses exceed the limitations provided in this
Section 4.5, then, unless the Trustees (including a majority of the
Unaffiliated Trustees) shall have found such excess to be justified as provided
above, the Advisor shall reimburse the Trust (which reimbursement may be
accomplished by, at the option of the Trust, a reduction of the Advisor's
compensation) for the amount by which the aggregate annual Total Operating
Expenses paid or incurred by the Trust exceed the limitations herein provided.
ARTICLE V
INVESTMENT POLICY
5.1 Statement of Policy. It shall be the general objectives of
the Trust that the Trustees invest the Trust Estate in equity interests in Real
Property (including equity Securities of real estate-related entities), leases,
joint venture development projects and partnerships and participate in the
financing of real estate and real estate- related activities through
investments in mortgage loans, including first, wraparound and junior mortgage
loans (collectively, the "Permitted Investments"). The Trustees shall pursue a
balanced investment policy, seeking both current income and capital
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appreciation. These general objectives shall be pursued in a manner consistent
with the investment policies specified in the remainder of this Section 5.1.
The Trustees intend to hold the Permitted Investments for up to
eighteen years after the date of this Second Amended and Restated Declaration
of Trust and, after the eighteenth year, the Trustees will dispose of any
remaining investments of the Trust in an orderly fashion within a period of two
years in order to achieve a complete liquidation of the Trust within twenty
years after the date of this Second Amended and Restated Declaration of Trust.
The Trust's existence and the maximum holding period for its investments may be
extended beyond the 20-year period only if (i) at any time after the 18th year
after the date of this Second Amended and Restated Declaration of Trust, a
majority of the Trustees, including a majority of the Unaffiliated Trustees,
affirmatively determines that such extension would be in the best interests of
the Shareholders, taking into consideration the then prevailing conditions in
the relevant real estate markets, and recommends to the Shareholders a single
specified extension of the aforesaid 20-year period and (ii) the holders of a
majority of the Shares then outstanding and entitled to vote thereon approve
such extension.
To the extent that the Trust Estate has assets not otherwise invested
in accordance with this Section 5.1, it shall be the policy of the Trustees to
invest such assets in (i) government Securities, (ii) Securities of government
agencies, (iii) bankers' acceptances, (iv) certificates of deposit, (v)
interest-bearing deposits in commercial banks, (vi) participations in pools of
mortgages or bonds and notes (such as Federal Home Loan Mortgage Corporation
participation sale certificates, Government National Mortgage Association
modified pass-through certificates and Federal National Mortgage Association
bonds and notes); (vii) bank repurchase agreements covering the Securities of
the United States or agencies or instrumentalities thereof and (viii) other
similarly secured short-term investment Securities.
Subject to the investment restrictions in Section 5.2, the Trustees
may alter any or all of the above-described investment policies if they should
determine such change to be in the best interest of the Trust. Subject to the
preceding terms, the Trustees shall endeavor to invest the Trust's assets in
accordance with the investment policies set forth in this Article V, but the
failure so to invest its assets shall not affect the validity of any investment
made or action taken by the Trustees.
It shall be the policy of the Trustees to make investments in such
manner as to comply with the requirements of the Internal Revenue Code with
respect to the composition of the investments and the derivation of the income
of a real estate investment trust as defined in the REIT Provisions of the
Internal Revenue Code; provided, however, that no Trustee, officer, employee or
agent of the Trust shall be liable for any act or omission resulting in the
loss of tax benefits under the Internal Revenue Code, except for that arising
from his own willful misfeasance, bad faith, gross negligence or reckless
disregard of duty.
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5.2 Prohibited Investments and Activities. The Trustees shall
not:
(a) invest in any foreign currency, commodities,
commodity futures contracts, bullion or chattels, except such chattels
as are employed in the day to day business of the Trust or in
connection with its Real Property;
(b) invest in any contracts for the sale of real estate,
except in connection with the acquisition of interests in Real
Property;
(c) engage in any short sale;
(d) issue "redeemable securities" as defined in Section
2(a)(32) of the Investment Company Act of 1940;
(e) hold equity Securities, except in connection with the
acquisition of equity interests in Real Property; or
(f) engage in trading as compared with investment
activities or engage in the business of underwriting or agency
distribution of Securities issued by others, but this prohibition
shall not prevent the Trustees from selling interests in Real
Property.
5.3 Appraisals. If the Trustees shall at any time purchase Real
Property, or interests therein, the consideration paid therefor shall generally
be based upon the fair market value thereof as determined by an appraisal by a
Person who is not an Affiliate of the Trust or the Advisor and who is, in the
sole judgment of the Trustees, properly qualified to make such a determination.
ARTICLE VI
THE SHARES AND SHAREHOLDERS
6.1 Shares. The units into which the beneficial interest in the
Trust will be divided shall be designated as Shares of Beneficial Interest,
each without par value. The Shares shall be of one class, and each Share shall
be identical in all respects with every other Share. There shall be no limit
upon the number of authorized Shares which may be issued by the Trust. The
certificates evidencing the Shares shall be in such form, and signed as
provided in Section 3.2(d) on behalf of the Trust and of a transfer agent
and/or registrar (if any) in such manner as the Trustees may from time to time
prescribe or as may be prescribed in the Trustees' Regulations. The
certificates shall be negotiable and title thereto and to the Shares
represented thereby shall be transferred by assignment and delivery thereof to
the same extent and in all respects as a share certificate of a Massachusetts
business corporation (subject to Sections 3.2(d), 6.4 and 6.12). The Shares
may be issued for such consideration as the Trustees in their sole discretion
shall determine or by way of Share dividend or Share split in the sole
discretion of the Trustees. Shares reacquired by the Trust shall no longer be
deemed outstanding and shall have no voting or other rights unless and until
reissued. Shares reacquired by the Trust may be canceled and restored to the
status of authorized and unissued Shares by action of the Trustees. All Shares
shall be validly issued, fully paid and nonassessable by the
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Trust upon receipt of full consideration for which they have been issued or
without additional consideration if issued by way of Share dividend or Share
split. Each holder of Shares shall as a result thereof be deemed to have
agreed to and be bound by the terms of this Declaration. The holders of Shares
shall be entitled to receive, when and as declared from time to time by the
Trustees out of any funds legally available for the purpose, such dividends as
may be declared from time to time by the Trustees. In the event of the
termination of the Trust or upon the distribution of its assets, the assets of
the Trust available for payment and distribution to Shareholders shall be
distributed ratably among the holders of Shares at the time outstanding. The
Shares shall entitle the holders thereof to one vote per share, shall not
entitle the holders thereof to preference, appraisal, conversion, exchange,
preemptive or redemption rights of any kind and shall have equal dividend or
distribution, liquidation and other rights.
6.2 Legal Ownership of Trust Estate. The legal ownership of the
Trust Estate and the right to conduct the business of the Trust are vested
exclusively in the Trustees (subject to Section 3.2(t)), and the Shareholders
shall have no interest therein other than beneficial interest in the Trust
conferred by their Shares issued hereunder and they shall have no right to
compel any partition, division, dividend or distribution of the Trust or any of
the Trust Estate.
6.3 Shares Deemed Personal Property. The Shares shall be personal
property and shall confer upon the holders thereof only the interest and rights
specifically set forth or provided for in this Declaration. The death,
insolvency or incapacity of a Shareholder shall not dissolve or terminate the
Trust or affect its continuity nor give his legal representative any rights
whatsoever, whether against or in respect of other Shareholders, the Trustees
or the Trust Estate or otherwise except the sole right to demand and, subject
to the provisions of this Declaration, the Trustees' Regulations and any
requirements of law, to receive a new certificate for Shares registered in the
name of such legal representative, in exchange for the certificate held by such
Shareholder.
6.4 Share Record; Issuance and Transferability of Shares. Records
shall be kept by or on behalf of and under the direction of the Trustees, which
shall contain the names and addresses of the Shareholders, the number of Shares
held by them respectively, and the numbers of the certificates representing the
Shares, and in which there shall be recorded all transfers of Shares. The
Trust, the Trustees and the officers, employees and agents of the Trust shall
be entitled to deem the Persons in whose names certificates are registered on
the records of the Trust to be the absolute owners of the Shares represented
thereby for all purposes of this Trust; but nothing herein shall be deemed to
preclude the Trustees or officers, employees or agents of the Trust from
inquiring as to the actual ownership of Shares. Until a transfer is duly
effected on the records of the Trust, the Trustees shall not be affected by any
notice of such transfer, either actual or constructive.
Shares shall be transferable on the records of the Trust only by the
record holder thereof or by his agent thereunto duly authorized in writing upon
delivery to the Trustees or a transfer agent of the certificate or certificates
therefor, properly endorsed or accompanied by duly executed instruments of
transfer and accompanied by all necessary documentary stamps together with such
evidence of the genuineness of each such endorsement, execution or
authorization and of other
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matters as may reasonably be required by the Trustees or such transfer agent.
Upon such delivery, the transfer shall be recorded in the records of the Trust
and a new certificate for the Shares so transferred shall be issued to the
transferee and in case of a transfer of only a part of the Shares represented
by any certificate, a new certificate for the balance shall be issued to the
transferor. Any Person becoming entitled to any Shares in consequence of the
death of a Shareholder or otherwise by operation of law shall be recorded as
the holder of such Shares and shall receive a new certificate therefor but only
upon delivery to the Trustees or a transfer agent of instruments and other
evidence required by the Trustees or the transfer agent to demonstrate such
entitlement, the existing certificate for such Shares and such releases from
applicable governmental authorities as may be required by the Trustees or
transfer agent. In case of the loss, mutilation or destruction of any
certificate for Shares, the Trustees may issue or cause to be issued a
replacement certificate on such terms and subject to such rules and regulations
as the Trustees may from time to time prescribe. Nothing in this Declaration
shall impose upon the Trustees or a transfer agent a duty or limit their rights
to inquire into adverse claims.
6.5 Dividends or Distributions to Shareholders. The Trustees may
from time to time declare and pay to Shareholders such dividends or
distributions in cash, property or assets of the Trust or Securities issued by
the Trust, out of current or accumulated income, capital, capital gains,
principal, surplus, proceeds from the increase or financing or refinancing of
Trust obligations, or from the sale of portions of the Trust Estate or from any
other source as the Trustees in their discretion shall determine. Shareholders
shall have no right to any dividend or distribution unless and until declared
by the Trustees. The Trustees shall furnish the Shareholders with a statement
in writing advising as to the source of the funds so distributed not later than
ninety (90) days after the close of the fiscal year in which the distribution
was made.
6.6 Transfer Agent, Dividend Disbursing Agent and Registrar. The
Trustees shall have power to employ one or more transfer agents, dividend
disbursing agents and registrars (including the Advisor and/or its Affiliates)
and to authorize them on behalf of the Trust to keep records, to hold and to
disburse any dividends or distributions, and to have and perform, in respect of
all original issues and transfers of Shares, dividends and distributions and
reports and communications to Shareholders, the powers and duties usually had
and performed by transfer agents, dividend disbursing agents and registrars of
a Massachusetts business corporation.
6.7 Shareholders' Meetings. There shall be an annual meeting of
the Shareholders, at such time and place as shall be determined by or in the
manner prescribed in the Trustees' Regulations, at which the Trustees shall be
elected and any other proper business may be conducted. The Annual Meeting of
Shareholders shall be held after delivery to the Shareholders of the Annual
Report and within six (6) months after the end of each fiscal year, commencing
with the fiscal year ending December 31, 1985. Special meetings of
Shareholders may be called by the chief executive officer of the Trust or by a
majority of the Trustees or of the Unaffiliated Trustees and shall be called
upon the written request of Shareholders holding in the aggregate not less than
ten percent (10%) of the total votes authorized to be cast by the outstanding
Shares of the Trust entitled to vote at such meeting in the manner provided in
the Trustees' Regulations. If there shall be no Trustees, the
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officers of the Trust shall promptly call a special meeting of the Shareholders
entitled to vote for the election of successor Trustees. Notice of any special
meeting shall state the purposes of the meeting. The holders of Shares
entitled to vote at the meeting representing a majority of the total number of
votes authorized to be cast by Shares then outstanding and entitled to vote on
any question present in person or by proxy shall constitute a quorum at any
such meeting for action on such question. Any meeting may be adjourned from
time to time by a majority of the votes properly cast upon the question,
whether or not a quorum is present, and the meeting may be reconvened without
further notice. At any reconvened session of the meeting at which there shall
be a quorum, any business may be transacted at the meeting as originally
noticed. Whenever any action is to be taken by the Shareholders, it shall,
except as otherwise required by this Declaration, be authorized by holders of a
majority of the Shares then outstanding and entitled to vote thereon. At all
elections of Trustees, voting by Shareholders shall be conducted under the
noncumulative method and the election of Trustees shall be by the affirmative
vote of the holders of Shares representing a majority of the total votes
authorized to be cast by Shares then outstanding which are present at the
meeting in person or by proxy and entitled to vote in the election of the
Trustees. Whenever Shareholders are required or permitted to take any action
(unless a vote at a meeting is specifically required as in Sections 8.1 and
8.3), such action may be taken without a meeting by written consents setting
forth the action so taken, signed by the holders of a majority (or such higher
percentage as may be specified elsewhere in this Declaration) of the
outstanding Shares that would be entitled to vote thereon at a meeting. The
Shareholders shall be entitled, to the same extent as the shareholders in a
Massachusetts business corporation, to determine by vote whether a court
action, proceeding or claim should be brought or maintained derivatively or as
a class action on behalf of the Trust or its Shareholders. Except with respect
to matters on which a Shareholder's vote shall be required for or shall
determine action of the Trustees as expressly set forth in this Declaration, no
action taken by the Shareholders at any meeting shall in any way bind the
Trustees.
6.8 Proxies. Whenever the vote or consent of a Shareholder
entitled to vote is required or permitted under this Declaration, such vote or
consent may be given either directly by such Shareholder or to a proxy in the
form prescribed in the Trustees' Regulations. The Trustees may solicit such
proxies from the Shareholders or any of them entitled to vote in any matter
requiring or permitting the Shareholders' vote or consent. No proxy for any
meeting of Shareholders entitled to vote shall be effective unless such proxy
shall have been placed on file with such officer of the Trust as the Trustees
shall have designated for such purposes for verification prior to such meeting.
6.9 Reports to Shareholders.
(a) Not later than one hundred twenty (120) days after
the close of each fiscal year of the Trust, the Trustees shall mail or
deliver a report of the business and operations of the Trust during
such fiscal year to the Shareholders, which report shall constitute
the accounting of the Trustees for such fiscal year. The report (the
"Annual Report") shall be in such form and have such content as the
Trustees deem proper. The Annual Report shall include a statement
indicating the financial position of the Trust and a statement
indicating the results of its operations, each prepared in accordance
with generally accepted accounting
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principles. Such financial statements shall be accompanied by the
report of an independent certified public accountant thereon. A
manually signed copy of the accountant's report shall be filed with
the Trustees. The Annual Report shall also disclose the results of
year-end appraisals of the fair market values of the Trust's Permitted
Investments.
(b) At least quarterly the Trustees shall send interim
reports to the Shareholders containing financial information which may
be unaudited and otherwise having such form and content as the
Trustees deem proper.
6.10 Fixing Record Date. The Trustees' Regulations may provide for
fixing or, in the absence of such provision, the Trustees may fix, in advance,
a date as the record date for determining the Shareholders entitled to notice
of or to vote at any meeting of Shareholders or to express consent to any
proposal without a meeting, or for the purpose of determining Shareholders
entitled to receive payment of any dividend or distribution (whether before or
after termination of the Trust) or any Annual Report or other communication
from the Trustees, or for any other purpose. The record date so fixed shall be
not less than five (5) days nor more than sixty (60) days prior to the date of
the meeting or event for the purposes of which it is fixed.
6.11 Notice to Shareholders. Any notice of meeting or other
notice, communication or report to any Shareholder shall be deemed duly
delivered to such Shareholder when such notice, communication or report is
deposited, with postage thereon prepaid, in the United States mail, addressed
to such Shareholder at his address as it appears on the records of the Trust or
is delivered in person to such Shareholder.
6.12 Shareholders' Disclosures; Trustees' Right to Refuse to
Transfer Shares; Limitation on Holdings; Redemption of Shares.
(a) The Shareholders shall upon demand disclose to the
Trustees in writing such information with respect to direct and
indirect ownership of the Shares as the Trustees deem necessary or
appropriate to comply with the REIT Provisions of the Internal Revenue
Code or to comply with the requirements of any taxing authority or
governmental agency.
(b) Whenever it is deemed by them to be reasonably
necessary to protect the status of the Trust as a REIT, the Trustees
may require a statement or affidavit from each Shareholder or proposed
transferee of Shares setting forth the number of Shares already owned
by him and any related Person specified in the form prescribed by the
Trustees for that purpose. If, in the opinion of the Trustees, which
shall be conclusive upon any proposed transferee of Shares, any
proposed transfer would jeopardize the status of the Trust as a REIT,
the Trustees shall have the right, but not the duty, to refuse to
permit such transfer.
(c) The Trustees, by notice to the holder thereof, may
redeem any or all Shares which have been transferred pursuant to a
transfer which, in the opinion of the Trustee would jeopardize the
status of the Trust as a REIT; and from and after the date of giving
of such
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notice of redemption ("Redemption Date") the Shares called for
redemption shall cease to be outstanding and the holder thereof shall
cease to be entitled to dividends, voting rights and other benefits
with respect to such Shares excepting only the right to payment by the
Trust of the redemption price determined and payable as set forth in
the following sentence. The redemption price of each Share called for
redemption shall be the closing price on the exchange which is the
principal United States market for the Shares on the last business day
prior to redemption if the Shares of the Trust are listed on a
securities exchange, and, if the Shares are not so listed, shall be
the mean between the average per Share closing bid prices and the
average per Share closing asked prices on such date, or, if there have
been no sales on a national securities exchange and no published bid
quotations and no published asked quotations with respect to Shares of
the Trust on such date, the redemption price shall be the price
determined by the Trustees in good faith.
(d) Notwithstanding any other provision of this
Declaration of Trust to the contrary, any purported acquisition of
Shares of the Trust which would result in the disqualification of the
Trust as a REIT shall be null and void.
(e) Nothing contained in this Section 6.12 or in any
other provision of this Declaration of Trust shall limit the authority
of the Trustees to take such other action as they deem necessary or
advisable to protect the Trust and the interests of the Shareholders
by preservation of the Trust's status as a REIT.
(f) If any provision of this Section 6.12 or any
application of any such provision is determined to be invalid by any
federal or state court having jurisdiction over the issues, the
validity of the remaining provisions shall not be affected and other
applications of such provision shall be affected only to the extent
necessary to comply with the determination of such court. To the
extent this Section 6.12 may be inconsistent with any other provision
of this Declaration of Trust, this Section 6.12 shall be controlling.
(g) It shall be the policy of the Trustees to consult
with the appropriate officials of the principal securities exchange,
if any, on which the Shares are listed as far as reasonably possible
in advance of the final exercise of any powers granted by subsections
(b) or (c) of this Section 6.12.
6.13 Issuance of Shares. Notwithstanding any other provision of
this Declaration, the Trust is authorized to issue an unlimited number of
Shares or other types of Securities from time to time, including Securities
with preferential rights senior to the Shares; provided that any issuance of
Shares (other than Shares issued to The Prudential Insurance Company of America
("Prudential") upon the exercise of certain warrants held by Prudential) shall
be approved by the affirmative vote of holders of not less than a majority of
the then outstanding Shares entitled to vote thereon. Any Security of a class
or series so issued shall have the same characteristics and entitle the
registered holder thereof to the same rights as any identical Securities of the
same class or series issued separately by the Trust.
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6.14 Ownership Limitation.
(a) No person other than ART, the Tennessee Consolidated
Retirement System and X.X. xxXxxx de Nemours Co. Inc. Trust Fund may
beneficially own more than 4.9% of the outstanding Shares (the
"Ownership Limit") at any time. Any transfer of Shares that, if
effected, would result in any Person beneficially owning any Shares in
excess of the Ownership Limit shall be void ab initio as to the
transfer of any Shares representing beneficial ownership of Shares in
excess of the Ownership Limit.
(b) Any transfer of Shares that, if effective, would
result in the Shares being beneficially owned (as provided in section
856(a) of the Code) by less than 100 Persons (determined without
reference to any rules of attribution) shall be void ab initio as to
the transfer of such Shares which would be otherwise beneficially
owned (as provided in section 856(a) of the Code) by the intended
transferee; and the intended transferee shall acquire no rights in
such Shares.
(c) Any transfer of Shares that, if effective, would
result in the Trust being "closely held" within the meaning of section
856(h) of the Code shall be void ab initio as to the transfer of such
Shares which would cause the Trust to be "closely held" within the
meaning of section 856(h) of the Code; and the intended transferee
shall acquire no rights in such Shares.
(d) Any transfer of Shares that, if effective, would
result in disqualification of the Trust as a REIT shall be void ab
initio as to the transfer of such Shares; and the intended transferee
shall acquire no rights in such Shares.
(e) Nothing contained herein shall impair the settlement
of transactions entered into on the facilities of the NYSE or any
other exchange or quotation system on which Shares are traded.
6.15 Changes in Ownership Limit. The Board of Trustees may from
time to time increase or decrease the Ownership Limit; provided, however, that:
(a) Any decrease may be made prospectively as to
subsequent holders (other than a decrease as a result of a retroactive
change in existing law, in which case such decrease shall be effective
immediately);
(b) The Ownership Limit may not be increased if, after
giving effect to such increase, five beneficial owners of Shares could
beneficially own in the aggregate, more than 50% of the Shares then
outstanding; and
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(c) Prior to the modification of the Ownership Limit, the
Board of Trustees may require such opinions of counsel, affidavits,
undertakings or agreements as it may deem necessary or advisable in
order to determine or ensure the Trust's status as a REIT.
6.16 Waivers by Board. The Board of Trustees, upon receipt of a
ruling from the Internal Revenue Service or an opinion of its tax advisor or
other documents or evidence satisfactory to the Board of Trustees and upon such
other conditions as the Board of Trustees may direct, may waive the Ownership
Limit with respect to an intended transferee in connection with a proposed
transfer of Shares which, if consummated, would result in such intended
transferee owning Shares in excess of the Ownership Limit. The Board of
Trustees may require written notice from a transferee such number of days prior
to the proposed transfer as the Board may determine in its sole discretion.
ARTICLE VII
LIABILITY OF TRUSTEES, SHAREHOLDERS, OFFICERS,
EMPLOYEES AND AGENTS, AND OTHER MATTERS
7.1 Exculpation of Trustees, Officers, Employees and Agents. No
Trustee, officer, employee or agent of the Trust shall be liable to the Trust
or to any other Person for any act or omission except for his own willful
misfeasance, bad faith, or failure to act in good faith in the reasonable
belief that the act or omission was in the best interests of the Trust. No
future changes or amendments made to this Article VII shall (a) create
standards of liability less favorable to any past or current Trustee, officer,
employee or agent of the Trust than those standards of liability defined
herein; or (b) adversely affect the rights of past or current officers or
Trustees to indemnification and the advancement of expenses.
7.2 Limitation of Liability of Shareholders, Trustees, Officers,
Employees and Agents. The Trustees, officers, employees and agents of the
Trust in incurring any debts, liabilities or obligations or in taking or
omitting any other actions for or in connection with the Trust are, and shall
be deemed to be, acting as Trustees, officers, employees or agents of the Trust
and not in their own individual capacities. No Shareholder and, except to the
extent provided in Section 7.1, no Trustee, officer, employee or agent shall be
liable for any debt, claim, demand, judgment, decree, liability or obligation
of any kind (in tort, contract or otherwise) of, against or with respect to the
Trust, arising out of any action taken or omitted for or on behalf of the Trust
and the Trust shall be solely liable therefor and resort shall be had solely to
the Trust Estate for the payment or performance thereof, and no Shareholder
and, except as aforesaid, no Trustee, officer, employee or agent shall be
subject to any personal liability whatsoever, in tort, contract or otherwise,
to any other Person or Persons in connection with the Trust Estate or the
affairs of the Trust (or any actions taken or omitted for or on behalf of the
Trust), and all such other Persons shall look solely to the Trust Estate for
satisfaction of claims of any nature arising in connection with the Trust
Estate or the
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affairs of the Trust (or any action taken or omitted for or on behalf of the
Trust). Each Shareholder shall be entitled to pro rata indemnity from the
Trust Estate if, contrary to the provisions hereof, such Shareholder shall be
held to any personal liability.
7.3 Express Exculpatory Clauses and Instruments. Any written
instrument creating an obligation of the Trust shall include a reference to
this Declaration and provide that neither the Shareholders nor the Trustees nor
officers, employees or agents of the Trust shall be liable thereunder and that
all Persons shall look solely to the Trust Estate for the payment of any claim
thereunder or for the performance thereof; however, the omission of such
provision from any such instrument shall not render the Shareholder or any
Trustee, officer, employee or agent of the Trust liable nor shall the Trustees
or any officer, employee or agent of the Trust be liable to anyone for such
omission.
7.4 Indemnification and Reimbursement of Trustees, Officers,
Employees and Agents. Any Person made a party to any action, suit or
proceeding or against whom a claim or liability is asserted by reason of the
fact that he, his testator or intestate was or is a Trustee, officer, employee
or agent of the Trust shall be indemnified and held harmless by the Trust
against judgments, fines, amounts paid on account thereof (whether in
settlement or otherwise) and reasonable expenses, including attorneys' fees,
actually and reasonably incurred by him in connection with the defense of such
action, suit, proceeding, claim or alleged liability or in connection with any
appeal therein, whether or not the same proceeds to judgment or is settled or
otherwise brought to a conclusion; provided, however, that no such Person shall
be so indemnified or reimbursed for any claim, obligation or liability as to
which he shall have been adjudicated not to have acted in good faith in the
reasonable belief that his actions were in the best interests of the Trust; and
provided further that such Person gives prompt notice thereof, executes such
documents and takes such action as will permit the Trust to conduct the defense
or settlement thereof and cooperates therein, but the failure to do any of the
foregoing shall not deprive such Person of the right to indemnity hereunder
except to the extent that the Trust is actually prejudiced by such failure. In
the event of a settlement approved by the Trustees of any such claim, alleged
liability, action, suit or proceeding (which approval shall not be unreasonably
withheld), indemnification and reimbursement shall be provided except as to
such matters covered by the settlement as to which the Trust is advised by its
counsel that such Person would, if the matter were adjudicated, be found not to
have acted in good faith in the reasonable belief that his actions were in the
best interests of the Trust. Such rights of indemnification and reimbursement
shall be satisfied only out of the Trust Estate. The rights accruing to any
Person under these provisions shall not exclude any other right to which he may
be lawfully entitled, nor shall anything contained herein restrict the right of
the Trust to indemnify or reimburse such person in any proper case even though
not specifically provided for herein, nor shall anything contained herein
restrict such Person's right to contribution as may be available under
applicable law. The Trustees shall make advance payments in connection with
indemnification under this Section 7.4, provided that the indemnified Person
shall have given a written undertaking to reimburse the Trust in the event it
is subsequently determined that he is not entitled to such indemnification,
which undertaking shall be accepted without regard to the financial ability of
such Person to make repayment.
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Any action taken by or conduct on the part of a Trustee, officer,
employee or agent of the Trust in conformity with or in good faith reliance
upon the provisions of Section 7.5 shall not, for the purposes of this Trust
(including without limitation Sections 7.1, 7.2 and 7.3 and this Section 7.4)
constitute willful misfeasance, bad faith, or a failure to act in good faith in
the reasonable belief that the action was in the best interests of the Trust.
7.5 Right of Trustees, Officers, Employees and Agents to Own
Shares or Other Property and to Engage in Other Business. Any Trustee or
officer, employee or agent of the Trust may acquire, own, hold and dispose of
Shares in the Trust, for his individual account, and may exercise all rights of
a Shareholder to the same extent and in the same manner as if he were not a
Trustee or officer, employee or agent of the Trust. Any Trustee or officer,
employee or agent of the Trust may, in his personal capacity or in a capacity
of trustee, officer, director, stockholder, partner, member, advisor or
employee of any Person or otherwise, have business interests and engage in
business activities similar to or in addition to those relating to the Trust,
which interests and activities may be similar to and competitive with those of
the Trust and may include the acquisition, syndication, holding, management,
development, operation or disposition, for his own account or for the account
of such Person or others, of interests in Mortgages, interests in Real
Property, or interests in Persons engaged in the real estate business. Each
Trustee, officer, employee and agent of the Trust shall be free of any
obligation to present to the Trust any investment opportunity which comes to
him in any capacity other than solely as Trustee, officer, employee or agent of
the Trust, even if such opportunity is of a character which, if presented to
the Trust, could be taken by the Trust; provided, however, that the provisions
of this sentence shall not extend, with respect to interests in Real Property
which could be acquired by the Trust consistent with its then existing
policies, to any of such Trustees or agents who are Affiliated Trustees or
would be were they Trustees rather than agents, or to any officer or employee
of the Trust or (at a time when there is no Advisor or other person providing
an investment program for the Trust) to any Trustee of the Trust, who in
failing to present such opportunity is not acting as a trustee, officer,
director, stockholders, partner, member, advisor or employee of any Person
other than the Trust but is acting for his own personal account. Subject to the
provisions of Article IV and Section 7.6, any Trustee or officer, employee or
agent of the Trust may be interested as trustee, officer, director,
stockholder, partner, member, advisor or employee of, or otherwise have a
direct or indirect interest in, any Person who may be engaged to render advice
or services to the Trust, and may receive compensation from such Person as well
as compensation as Trustee, officer, employee or agent or otherwise hereunder.
None of these activities shall be deemed to conflict with his duties and powers
as Trustee or officer, employee or agent of the Trust.
7.6 Transactions Between Trustees, Officers, Employees or Agents
and the Trust. Except as otherwise provided by this Declaration, and in the
absence of fraud, a contract, act or other transaction, between the Trust and
any other Person, or in which the Trust is interested, shall be valid and no
Trustee, officer, employee or agent of the Trust shall have any liability as a
result of entering into any such contract, act or transaction, even though (a)
one or more of the Trustees, officers, employees or agents are directly or
indirectly interested in or connected with, or are trustees,
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partners, directors, employees, officers or agents of such other Person, or (b)
one or more of the Trustees, officers, employees or agent of the Trust,
individually or jointly with others, is a party or are parties to, or directly
or indirectly interested in, or connected with, such contract, act or
transaction, provided that (i) such interest or connection is disclosed or
known to the Trustees and thereafter the Trustees authorize or ratify such
contract, act or other transaction by affirmative vote of a majority of the
Trustees who are not interested or (ii) such interest or connection is
disclosed or known to the Shareholders, and thereafter such contract, act or
transaction is approved by Shareholders holding a majority of the Shares then
outstanding and entitled to vote thereon.
Notwithstanding any other provision of this Declaration, the Trust
shall not engage in a transaction with (a) any Trustee, officer, employee or
agent of the Trust (acting in his individual capacity), (b) any director,
trustee, partner, officer, employee or agent (acting in his individual
capacity) of the Advisor or any other investment advisor of the Trust, (c) the
Advisor or any other investment advisor of the Trust or (d) an Affiliate of any
of the foregoing, except to the extent that such transaction has, after
disclosure of such affiliation, been approved or ratified in accordance with
the final paragraph of Section 2.6, after a determination by them that to the
extent applicable:
(a) such transaction is fair and reasonable to the Trust
and the Shareholders;
(b) based upon an appraisal by a qualified independent
real estate appraiser who shall have been approved by a majority of
Unaffiliated Trustees (or, if the transaction is with a Person other
than the Advisor or an Affiliate of the Advisor, a majority of the
Trustees not having any interest in such transaction and not
Affiliates of any party to the transaction), the total consideration
is not in excess of the appraised value of the interest in Real
Property being acquired, if an acquisition is involved, or less than
the appraised value of the interest in Real Property being disposed
of, if a disposition is involved; and
(c) if such transaction involves payments by the Trust
for services rendered to the Trust by a Person in a capacity other
than that of Advisor, Trustee or Trust officer, (1) the compensation
is not in excess of the compensation, if any, paid to such Person by
any other person who is not an Affiliate of such Person, for any
comparable services in the same geographic area, and (2) the
compensation is not greater than the charges for comparable services
generally available in the same geographic area from other Persons who
are competent and not affiliated with any of the parties involved;
No disposition of a Permitted Investment to an Affiliate of the Trust or the
Advisor shall be accomplished without the approval of Shareholders holding a
majority of the Shares then outstanding and entitled to vote thereon. This
Section 7.6 shall not prevent any sale of Shares issued by the Trust for the
public offering thereof in accordance with a registration statement filed with
the Securities and Exchange Commission under the Securities Act of 1933. The
Trustees are not restricted by this Section 7.6 from forming a corporation,
partnership, trust or other business association owned by any Trustee, officer,
employee or agent or by their nominees for the purpose
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of holding title to property of the Trust or managing property of the Trust
providing their motive for the formation of such business association is not
for their own enrichment.
7.7 Restriction of Duties and Liabilities. The Shareholders,
Trustees, officers, employees and agents shall in no event have any greater
duties than those established by this Declaration of Trust or, in cases as to
which such duties are not so established, than those of the shareholders,
directors, officers, employees and agents of a Massachusetts business
corporation in effect from time to time.
7.8 Persons Dealing with Trustees, Officers, Employees or Agents.
Any act of the Trustees, officer, employees or agents purporting to be done in
their capacity as such, shall, as to any Persons dealing with such Trustees,
officers, employees or agents, be conclusively deemed to be within the purposes
of this Trust and within the powers of the Trustees, officers, employees or
agents. No Person dealing with the Trustees or any of them, or with the
officers, employees or agents of the Trust, shall be bound to see to the
application of any funds or property passing into their hands or control. The
receipt of the Trustees or any of them, or of authorized officers, employees or
agents of the Trust, for moneys or other consideration, shall be binding upon
the Trust.
7.9 Reliance. The Trustees and the officers, employees and agents
of the Trust may consult with counsel (which may be a firm in which one or more
of the Trustees or the officers, employees or agents of the Trust is or are
members) and the advice or opinion of such counsel shall be full and complete
personal protection to all the Trustees and the officers, employees and agents
of the Trust in respect of any action taken or suffered by them in good faith
and in reliance on or in accordance with such advice or opinion. In
discharging their duties, Trustees or officers, employees or agents of the
Trust, when acting in good faith, may rely upon financial statements of the
Trust represented to them to fairly present the financial position of the Trust
by the chief executive officer of the Trust or the officer of the Trust having
charge of its books of account, or stated in a written report by an independent
certified public accountant fairly to present the financial position of the
Trust. The Trustees and the officers, employees and agents of the Trust may
rely, and shall be personally protected in acting, upon any instrument or other
document believed by them to be genuine.
7.10 Income Tax Status. Anything to the contrary herein
notwithstanding and without limitation of any rights of indemnification or
non-liability of the Trustees herein, said Trustees by this Declaration make no
commitment or representation that the Trust will qualify for the dividends paid
deduction permitted by the Internal Revenue Code and by the rules and
regulations thereunder pertaining to real estate investment trusts in any given
year. The failure of the Trust to qualify as a real estate investment trust
under the Internal Revenue Code shall not render the Trustees liable to the
Shareholders or to any other person or in any manner operate to annul the
Trust.
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ARTICLE VIII
DURATION, AMENDMENT AND TERMINATION OF TRUST
8.1 Duration of Trust. Unless the Trust is sooner terminated as
otherwise provided herein, the Trust shall continue in such manner that the
Trustees shall have all the powers and discretions, express and implied,
conferred upon them by law or by this Declaration until December 31, 2017;
provided, however, that any plan for the termination of the Trust which
contemplates the distribution to the Shareholders of Securities or other
property-in-kind (other than the right promptly to receive cash) shall require
the affirmative vote or written consent of the holders of Shares representing a
majority of the total number of votes authorized to be cast by Shares then
outstanding and entitled to vote thereon; and provided further that the Trust
may be terminated at any time prior to that set forth above by the affirmative
vote at a meeting of Shareholders of the holders of Shares representing a
majority of the total number of votes authorized to be cast by Shares then
outstanding and entitled to vote thereon.
8.2 Termination of Trust.
(a) Upon the termination of the Trust:
(1) the Trust shall carry on no business
except for the purpose of winding up
its affairs;
(2) the Trustees shall proceed to wind
up the affairs of the Trust and all
the powers of the Trustees under
this Declaration shall continue
until the affairs of the Trust shall
have been wound up, including the
power to fulfill or discharge the
contracts of the Trust, collect its
assets, sell, convey, assign,
exchange, transfer or otherwise
dispose of all or any part of the
remaining Trust Estate to one or
more persons at public or private
sale for consideration which may
consist in whole or in part of cash,
Securities or other property of any
kind, discharge or pay its
liabilities, and do all other acts
appropriate to liquidate its
business; and
(3) after paying or adequately providing
for the payment of all liabilities,
and upon receipt of such releases,
indemnities and refunding
agreements, as they deem necessary
for their protection, the Trustees
may distribute the remaining Trust
Estate, in cash or, subject to
Section 8.1, in kind or partly each,
among the Shareholders according to
their respective rights.
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(b) After termination of the Trust and distribution to
the Shareholders as herein provided, the Trustees shall execute and
lodge among the records of the Trust an instrument in writing setting
forth the fact of such termination and such distribution, a copy of
which instrument shall be filed with the Secretary of the Commonwealth
of Massachusetts, and the Trustees shall thereupon be discharged from
all further liabilities and duties hereunder and the rights and
interests of all Shareholders shall thereupon cease.
8.3 Amendment Procedure. This Declaration may be amended (except
as to the limitation of personal liability of the Shareholders, Trustees,
officers, employees and agents of the Trust and the prohibition of assessments
upon Shareholders) at a meeting of Shareholders by holders of Shares
representing a majority of the total number of votes authorized to be cast by
Shares then outstanding and entitled to vote thereon. Approval in accordance
with the final paragraph of Section 2.6 shall also be required for any such
amendment. The Trustees may, with the approval of the committee consisting
solely of Unaffiliated Trustees and without Shareholder approval, change the
investment policies of the Trust from time to time, by amendment of Section 5.1
herein or any other provision of this Declaration. The Trustees may also amend
this Declaration without the vote or consent of Shareholders if they deem it
necessary to conform this Declaration to the requirements of (i) the REIT
Provisions of the Internal Revenue Code, (ii) other applicable Federal laws or
regulations or (iii) any state securities or "blue sky" laws or requirements of
administrative agencies thereunder in connection with the initial public
offering of Shares, but the Trustees shall not be liable for failing so to do.
Actions by the Trustees pursuant to the second paragraph of Section 1.1 or
pursuant to Section 9.6(a) that result in amending this Declaration shall be
effected without vote or consent of Shareholders.
Any amendment pursuant to any Section of this Declaration of Trust
shall not become effective until a certification in recordable form signed by a
majority of the Trustees setting forth an amendment and reciting that it was
duly adopted as aforesaid or a copy of this Declaration, as amended, in
recordable form, and executed by a majority of the Trustees, is filed with the
Secretary of the Commonwealth of Massachusetts.
8.4 Transfer to Successor; Merger. The Trustees, with the
approval of a majority of the Trustees (including a majority of the
Unaffiliated Trustees) and the affirmative vote or written consent of the
holders of Shares representing a majority of the total number of votes
authorized to be cast by Shares then outstanding and entitled to vote thereon,
shall have the power to cause to be organized or to assist in organizing a
corporation or corporations under the laws of any jurisdiction or any other
trust, partnership, association, or other organization to take over the Trust
Estate or any part or parts thereof or to carry on any business in which the
Trust shall directly or indirectly have any interest, and to sell, convey and
transfer the Trust Estate or any part or parts thereof to any such corporation,
trust, partnership, association, or organization in exchange for the Shares or
Securities thereof or otherwise, and to lend money to, subscribe for the Shares
or Securities of, and enter into any contracts with any such corporation,
trust, partnership, association, or organization, or any corporation, trust
partnership, association, or organization in which the Trust holds or is about
to
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acquire Shares or any other interest. The Trustees may also cause a merger or
consolidation between the Trust or any successor thereto and any such
corporation, trust, partnership, association or organization if and to the
extent permitted by law, provided that under the law then in effect, the
federal income tax benefits available to qualified real estate investment
trusts and their shareholders, or substantially similar benefits, are also
available to such corporation, trust, partnership, association, or organization
and its stockholders or members, and provided that the resulting investment
would be substantially equal in quality and substantially the same in type as
an investment in the Shares.
ARTICLE IX
MISCELLANEOUS
9.1 Applicable Law. This Declaration is executed and acknowledged
by the Trustees in the Commonwealth of Massachusetts and with reference to the
statutes and laws thereof and the rights of all parties and the construction
and effect of every provision hereof shall be subject to and construed
according to statutes and laws of such Commonwealth.
9.2 Index and Headings for Reference Only. The index and headings
preceding the text, articles and sections hereof have been inserted for
convenience and reference only and shall not be construed to affect the
meaning, construction or effect of this Declaration.
9.3 Successors in Interest. This Declaration and the Trustees'
Regulations shall be binding upon and inure to the benefit of the undersigned
Trustees and their successors, assigns, heirs, distributees and legal
representatives, and every Shareholder and his successors, assigns, heirs,
distributees and legal representatives.
9.4 Inspection of Records. Trust records shall be available for
inspection by Shareholders at the same time and in the same manner and to the
extent that comparable records of a Massachusetts business corporation would be
available for inspection by shareholders under the laws of the Commonwealth of
Massachusetts. Except as specifically provided for in this Declaration,
Shareholders shall have no greater right than shareholders of a Massachusetts
business corporation to require financial or other information from the Trust,
Trustees or officers of the Trust. Any Federal or state securities
administration or other similar authority shall have the right, at reasonable
times during business hours and for proper purposes, to inspect the books and
records of the Trust.
9.5 Counterparts. This Declaration may be simultaneously executed
in several counterparts, each of which when so executed shall be deemed to be
an original and such counterparts together shall constitute one and the same
instrument, which shall be sufficiently evidenced by any such original
counterpart.
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9.6 Provisions of the Trust in Conflict with Law or Regulations;
Severability.
(a) The provisions of this Declaration are severable, and
if the Trustees shall determine, with the advice of counsel, that any
one or more of such provisions (the "Conflicting Provisions") are in
conflict with the REIT Provisions of the Internal Revenue Code, or
with other applicable Federal laws and regulations, the Conflicting
Provisions shall be deemed never to have constituted a part of the
Declaration; provided, however, that such determination by the
Trustees shall not affect or impair any of the remaining provisions of
this Declaration or render invalid or improper any action taken or
omitted (including but not limited to the election of Trustees) prior
to such determination. A certification in recordable form signed by a
majority of the Trustees setting forth any such determination and
reciting that it was duly adopted by the Trustees, or a copy of this
Declaration, with the Conflicting Provisions removed pursuant to such
a determination, in recordable form, signed by a majority of the
Trustees, shall be conclusive evidence of such determination when
filed with the Secretary of the Commonwealth of Massachusetts. The
Trustees shall not be liable for failure to make any determination
under this Section 9.6(a). Nothing in this Section 9.6(a) shall in
any way limit or affect the right of the Trustees to amend this
Declaration as provided in Section 8.3.
(b) If any provision of this Declaration shall be held
invalid or unenforceable, such invalidity of unenforceability shall
attach only to such provision and shall not in any manner affect or
render invalid or unenforceable any other provision of this
Declaration, and this Declaration shall be carried out as if any such
invalid or unenforceable provision were not contained herein.
9.7 Certifications. The following certifications shall be final
and conclusive as to any Persons dealing with the Trust:
(a) a certification of a vacancy among the Trustees by
reason of resignation, removal, increase in the number of Trustees,
incapacity, death or otherwise, when made in writing by a majority of
the remaining Trustees;
(b) a certification as to the individuals holding office
as Trustees or officers at any particular time, when made in writing
by the secretary of the Trust or by any Trustee;
(c) a certification that a copy of this Declaration or of
the Trustees' Regulations is a true and correct copy thereof as then
in force, when made in writing by the secretary of the Trust or by any
Trustee;
(d) the certifications referred to in Sections 2.7, 8.3
and 9.6(a); and
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(e) a certification as to any actions by Trustees, other
than the above, when made in writing by the secretary of the Trust or
by any Trustee.
IN WITNESS WHEREOF, the undersigned have signed these presents all on
the day and year first above written.
--------------------------- -----------------------------------
Xxxxxx X. Xxxxx Xxxxx X. Xxxxxxxx
--------------------------- -----------------------------------
Xxxxxx X. Xxxxxxx Xxxxxxx X. Xxxxxxxx
---------------------------
Xxxxxx X. Xxxx
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EXHIBIT B-1
TO EXHIBIT 99.1
TERMINATION AGREEMENT
THIS TERMINATION AGREEMENT (the "Agreement") is entered into as of the
date specified below, by and among EQK REALTY INVESTORS I, a Massachusetts
business trust ("Trust"), whose address is 0000 Xxxxxxxxx Xxxxxxxx Xxxx, Xxxxx
000X, Xxxxxxx, Xxxxxxx, EQUITABLE REALTY PORTFOLIO MANAGEMENT, INC., a
Delaware corporation ("Advisor"), whose address is 0000-X Xxxxxxxxx Xxxxxxxx
Xxxx, Xxxxx 000, Xxxxxxx, Xxxxxxx, and AMERICAN REALTY TRUST, INC., a Georgia
corporation ("ART"), whose address is 00000 Xxxxx Xxxxxxx Xxxxxxxxxx, Xxxxx
000, Xxxxxx, Xxxxx.
RECITALS:
A. Trust and Advisor executed an Advisory Agreement dated March
1, 1985 (as amended to the date hereof, the "Advisory Agreement") with respect
to the performance by Advisor of certain advisory services for Trust. Under
the Advisory Agreement, Advisor made recommendations to Trust concerning
investments, administration and day-to-day operations of the Trust. A copy of
the Advisory Agreement is attached hereto as EXHIBIT A and made a part hereof;
B. Trust, Advisor and ART have entered into an Agreement and Plan
of Merger dated December 23, 1997 (the "Merger Agreement") whereby a
wholly-owned subsidiary of ART will merge with and into Trust, with the Trust
being the surviving entity;
C. Pursuant to Section 1.09 of the Merger Agreement, Trust,
Advisor and ART have agreed to terminate the Advisory Agreement and all duties
and obligations of Trust and Advisor thereunder upon the terms hereinafter
provided.
AGREEMENT:
NOW, THEREFORE, for and in consideration of the covenants herein
contained and for other good and valuable consideration as described herein,
the receipt and sufficiency of which is hereby acknowledged and confessed, the
parties agree hereto as follows:
1. The Advisory Agreement shall terminate and shall be of no
further force and effect upon the payment by ART to Advisor of an amount equal
to $1,975,000 in the form of 197,500 shares of ART's Series F Cumulative
Convertible Preferred Stock (the "ART Shares") valued at the liquidation value
of $10 per ART Share (the "Liquidation Value"). In addition, as further
consideration for the termination of the Advisory Agreement, on the first
Business Day following
82
the third anniversary of the date of this Agreement (the "Deferred Payment
Date"), ART shall pay to Advisor $1,360,000 in the form of 136,000 ART Shares
valued at the Liquidation Value (the "Deferred ART Shares"). As used herein,
the term "Business Day" shall mean any day other than a Saturday, a Sunday or
any day on which banks in the State of Texas are permitted or required by law
to be closed.
2. In connection with the termination of the Advisory Agreement,
subject to the performance by Advisor of its duties and obligations as set
forth in the Advisory Agreement, Trust shall unconditionally and fully release
and discharge Advisor and its stockholders, affiliates, subsidiaries,
directors, officers, successors and assigns, agents, employees, and
representatives from any and all obligations, claims, actions, or liability on
account of or arising out of the Advisory Agreement. This Agreement shall
fully and finally settle all demands, claims, charges, accounts or causes of
action of any nature arising out of or connected with the management,
administration or similar services by Advisor with respect to the Trust.
3. a. Each individual executing or attesting this Agreement
on behalf of Advisor and Trust covenants, warrants and represents that he is
duly authorized to execute or attest and deliver this Agreement on behalf of
such party. Trust and Advisor further represent and warrant that they have
full power and authority to sign and deliver this Agreement, and the execution
and delivery of this Agreement will not violate and will not constitute a
default under any agreements with any third parties.
b. Advisor represents and warrants that it has not made
any assignment, pledge or other disposition of (i) its interest in the Advisory
Agreement; or (ii) any claim, demand, obligation, liability, action, or cause
of action arising under the terms of the Advisory Agreement, to any person,
firm, partnership, association, or other entity.
c. Advisor hereby releases Trust from any obligation of
any type whatsoever, including without limitation for deferred fees or
disposition fees under the Advisory Agreement, other than deferred portfolio
advisory fees and deferred refinancing fees in the amount of $303,465 as of
November 1, 1997, plus additional amounts that accrue but are not paid in
accordance with the terms of the Advisory Agreement through the Closing Date
(as defined in the Merger Agreement), which fees and additional amounts shall
remain an obligation of Trust.
d. Except as otherwise expressly provided herein, Trust
and Advisor hereby agree to indemnify and hold harmless the other party against
all actions, demands, liabilities, costs, expenses, rights of action, or causes
of action based on, arising out of, or in connection with any breach by the
applicable indemnifying party of any of the foregoing representations and
warranties.
e. Advisor hereby indemnifies and holds Trust harmless
from all demands, causes of action, losses, damages, liabilities, costs and
expenses (including, without limitation, attorneys' fees and disbursements) at
any time suffered or incurred by Trust on account of or arising out of any
claim for management fees or other remuneration at any time made against Trust
by any other person or entity claiming to have dealt with or through Advisor on
account of or in connection with the services contemplated by the Advisory
Agreement.
TERMINATION AGREEMENT - Page 2
83
f. If an action is commenced between the parties in
connection with the enforcement of any provision of this Agreement, the
prevailing party in that action shall be entitled to recover its costs and
expenses, including reasonable attorney's fees.
4. Trust, Advisor and ART agree to perform, execute and deliver
or cause to be performed, executed and delivered any and all such further acts,
deeds and assurances as may be necessary to effect the payment, termination and
release contemplated by this Agreement.
5. Advisor understands that it may be deemed to be an "affiliate"
of EQK within the meaning of Rule 145 ("Rule 145") promulgated under the
Securities Act and the applicable regulations promulgated by the Securities and
Exchange Commission (the "SEC"), although nothing contained herein should be
construed as an admission of such fact. Advisor further understands that, if
it were in fact an affiliate under the Securities Act, its ability to sell,
assign or transfer the ART Shares or the Deferred ART Shares may be restricted
unless such transaction is made in conformity with the provisions of Rule 145.
Advisor understands that the ART Shares and the Deferred ART Shares may only be
sold (i) pursuant to a registration statement which has been declared effective
by the SEC, (ii) in transactions which comply with the provisions of Rule 145,
or (iii) in a transaction that is exempt from registration under the Securities
Act.
6. This Agreement shall be deemed to be made in and in all
respects will be interpreted, construed and governed by and in accordance with
the internal, substantive law of the State of Georgia without reference to
principles of conflicts of laws.
7. This Agreement shall be binding upon and inure to the benefit
of Trust, Advisor, ART and their respective successors and assigns.
8. This Agreement contains the entire agreement between the
parties hereto. No variations, modifications or changes. herein or hereof
shall be binding upon any party hereto unless set forth in a document duly
executed by or on behalf of such party.
9. This Agreement may be executed in a number of identical
counterparts which, taken together, shall constitute collectively one (1)
agreement; but in making proof of this Agreement, it shall not be necessary to
produce or account for more than one such counterpart.
TERMINATION AGREEMENT - Page 3
84
SIGNED this _____ day of ___, 1998, to be effective as of the ___ day of ___,
1998.
TRUST:
EQK REALTY INVESTORS I
By:
------------------------------------
Name:
------------------------------
Title:
-----------------------------
ADVISOR:
EQUITABLE REALTY PORTFOLIO
MANAGEMENT, INC.
By:
------------------------------------
Name:
------------------------------
Title:
-----------------------------
ART:
AMERICAN REALTY TRUST, INC.
By:
------------------------------------
Name:
------------------------------
Title:
-----------------------------
TERMINATION AGREEMENT - Page 4
85
EXHIBIT B-2
TO EXHIBIT 99.1
ADVISORY AGREEMENT
ADVISORY AGREEMENT dated as of ___________, 1998, between EQK REALTY
INVESTORS I, a Massachusetts business trust (the "Trust"), and Basic Capital
Management, Inc. (the "Advisor").
The Trust was organized under a Declaration of Trust executed as of
October 8, 1984, which was amended and restated as of February 27, 1985, and
which was further amended and restated pursuant to a Second Amended and
Restated Declaration of Trust dated as of _________, 1998 (as so amended and
restated, the "Declaration of Trust"). The Trust currently operates in a
manner so as to qualify as a "real estate investment trust" ("REIT") under the
Internal Revenue Code of 1986, as amended (the "Code"), and to make
investments, principally consisting of the Specified Investments (as herein
defined) of the type permitted to qualified REITs under the Code and not
inconsistent with the Declaration of Trust. The Trust desires to avail itself
of the experience, advice and assistance of the Advisor and to have the Advisor
undertake the duties and responsibilities herein set forth, subject to the
supervision of the Trustees of the Trust, as provided herein. The Advisor is
willing to undertake to render such services, on the terms and conditions
herein set forth. Accordingly, the Trust and Advisor hereby agree as follows:
1. Definitions. As used herein, the following terms
shall have the definitions set forth below. Where applicable, calculations to
be made pursuant to any such definition shall be made in accordance with
generally accepted accounting principles as in effect on the date hereof,
except as otherwise provided in such definition.
"Aggregate Shareholder Investment" means the gross proceeds of the
initial public offering of Shares made pursuant to the Registration Statement
(which are conclusively deemed to equal $181,000,000), minus the sum of any
amounts distributed to Shareholders from the proceeds of financings,
refinancings, sales or other dispositions of real or personal property,
condemnations, damage awards or insurance (other than business or rental
interruption or similar insurance).
"Affiliate" means, as to any Person, (i) any other Person directly or
indirectly controlling, controlled by or under common control with such Person,
(ii) any other Person that owns beneficially, directly or indirectly, five
percent (5%) or more of the outstanding capital stock, shares or equity
interests of such Person, or (iii) any officer, director, employee, general
partner or trustee of such Person or of any other Person controlling,
controlled by or under common control with such Person (excluding trustees and
persons serving in similar capacities who are not otherwise an Affiliate of
such Person).
"Average Invested Assets" for any period means the average of the
values of the Invested Assets on the last day of each month during such period.
"Book Value" means the value of an asset or assets of the Trust on the
books of the Trust, without deduction for depreciation or other asset valuation
reserves and without deduction for mortgages or other security interests to
which such asset or assets are subject, except that no asset
86
shall be valued at more than its fair market value as determined by the
Trustees and the underlying assets of a partnership, joint venture or other
form of indirect ownership, to the extent of the Trust's interest in such
partnership, joint venture or other form of indirect ownership, shall be valued
as if owned directly by the Trust.
"Distributable Cash" for any period means Net Income for such period
less (a) principal payments on long-term debt (unless paid for by long-term
borrowings or from the proceeds of any sale or other disposition), (b) tenant
alterations, (c) leasing commissions (to the extent capitalized) and (d) other
capital expenditures (exclusive of the Specified Investments), unless such
capital expenditures are paid for (i) from long-term borrowings, (ii) out of
reserves previously deducted in calculating Net Income, (iii) from tenant
reimbursements, or (iv) from the proceeds of sale or other disposition,
including within clauses (a) through (d) the Trust's proportionate share of any
such expenditures made by any partnership, joint venture or other form of
indirect ownership referred to in the first parenthetical clause of the
definition of "Net Income".
"Invested Assets" means the Book Value of all the Real Estate
Investments of the Trust.
"Mortgage" means a mortgage, deed of trust or other security interest
in Real Property or in rights or interests, including leasehold interests, in
Real Property.
"Mortgage Loan" means a note, debenture, bond or other evidence of
indebtedness or obligation which is negotiable or non-negotiable and which is
secured or collateralized by a Mortgage.
"Net Income" for any period means the net income of the Trust
(calculating the net income of the Trust from any partnership, joint venture or
other form of indirect ownership as if the Trust directly received its
proportionate share of such entity's income, gains, expenses and losses,
including non-cash charges and imputed interest) for such period (i) excluding
realized gains and losses from the disposition of Trust assets (after
attributing to such disposition the taxes and fees paid in connection
therewith); (ii) before deducting additions to reserves or provisions for
depreciation, amortization, provision for bad debts and other similar non-cash
charges and imputed interest; (iii) less the amount of any bad debts actually
charged to the provision therefor.
"Person" means and includes individuals, corporations, limited
partnerships, general partnerships, joint stock companies or associations,
joint ventures, associations, companies, trusts, banks, trust companies, land
trusts, business trusts, or other entities and governments and agencies and
political subdivisions thereof.
"Real Estate Investment" means any direct or indirect investment in
any interest in Real Property or in any Mortgage Loan, or in any Person whose
principal purpose is to make any such investment.
"Real Property" means and includes land, leasehold interests
(including, but not limited to, interests of a lessor or lessee therein),
rights and interests in land, and any buildings, structures, improvements,
furnishings, fixtures and equipment located on or used in connection with land,
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leasehold interests or rights in land or interests therein, but does not
include investments in Mortgages, Mortgage Loans or interests therein.
"Registration Statement" means the Registration Statement on Form
S-11, No. 2-93936, of the Trust, as amended on the effective date thereof,
covering the initial public offering of the Shares under the Securities Act of
1933.
"Securities" means any stock, shares, voting trust certificates,
bonds, debentures, notes, or other evidences of indebtedness or in general any
instruments commonly known as "securities" or any certificates of interest,
shares or participations in temporary or interim certificates for, receipts
for, guarantees of, or warrants, options or rights to subscribe to, purchase or
acquire any of the foregoing.
"Shareholders" means the holders of record of outstanding Shares.
"Shares" means Shares of Beneficial Interest, without par value, of
the Trust.
"Short-term Investments" means investments which the Trust makes of
its funds (a) on a temporary basis pending utilization of such funds to acquire
Real Estate Investments, make distributions to Shareholders, or pay anticipated
expenses of the Trust or (b) to hold as reasonable reserves and which may
consist of any of the following: (i) government Securities; (ii) Securities of
government agencies; (iii) bankers' acceptances; (iv) bank certificates of
deposit; (v) interest-bearing deposits in commercial banks; (vi) participations
in pools of mortgages or bonds and notes (such as Federal Home Loan Mortgage
Corporation participation sale certificates ("Xxxxxxx Mac PCS"), Government
National Mortgage Association modified pass-through certificates ("Xxxxxx Mae
Pass-Throughs") and Federal National Mortgage Association bonds and notes
("Xxxxxx Xxxx")); (vii) bank repurchase agreements covering the Securities of
the United States or agencies or instrumentalities thereof; and (viii) other
similarly secured short-term investment Securities.
"Specified Investments" means the Real Estate Investments which are
specifically described in the Registration Statement.
"Total Operating Expenses" for any period means all operating expenses
(including additional expenses paid directly or indirectly by the Trust to the
Advisor. Affiliates of the Advisor or third parties based upon their
relationship with the Trust) including loan administration, servicing,
engineering, inspection and all other expenses paid by the Trust, exclusive of
(i) interest and discounts; (ii) taxes and license fees; (iii) expenses
connected directly with the issuance, sale and distribution, or listing on a
stock exchange, of Securities of the Trust, including, without limitation,
underwriting and brokerage discounts and commissions, private placement fees
and expenses, legal and accounting costs, printing, engraving and mailing
costs, and listing and registration fees; (iv) expenses connected directly with
the acquisition, disposition, operation or ownership of Trust assets,
including, without limitation, costs of foreclosure; maintenance, repair and
improvement of property; maintenance and protection of the lien of mortgages;
property management fees; legal fees; premiums for insurance; property owned by
or mortgaged to the Trust; taxes; brokerage and acquisition fees and
commissions; appraisal fees; title insurance and abstract expenses; provisions
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for depreciation, depletion and amortization; disposition fees and real estate
commissions; and losses on the disposition of assets and provisions for such
losses; (v) fees and expenses payable to public accountants, legal counsel,
consultants, managers, or agents, employed for the Trust directly by the
Trustees; (vi) legal and other expenses in connection with formal or informal
administrative action or legal proceedings which involve a challenge to the
status of the Trust as a REIT, or advice concerning obtaining or maintaining
such status, or the determination by the Trust of its taxable income or involve
a claim that the activities of the Trust or any Trustee or Shareholder or any
officer or agent of the Trust were improper; (vii) expenses of organizing,
revising, amending, converting, modifying, reorganizing or terminating the
Trust; (viii) the cost of insurance in the nature of directors' or officers'
liability insurance covering Trustees and officers of the Trust; (ix) fees and
expenses of transfer agents, registrars, warrant agents, rights agents,
dividend payment and dividend reinvestment agents, escrow holders and indenture
trustees; (x) all printing and distribution expenses connected with
communications to holders of Securities of the Trust and other necessary costs
in maintaining relations with holders of Securities, including the costs of
printing and mailing the certificates for Securities, proxy solicitation
materials and reports to such holders and the cost of holding meetings of
holders of the Securities of the Trust; (xi) legal, accounting, printing and
other costs of reports required to be filed with state or Federal governmental
agencies; and (xii) all fees paid or payable to the Advisor pursuant to Section
9 hereof; provided, however, that the foregoing exclusion shall not include any
allocation of costs of the Advisor's overhead incurred in performing its duties
hereunder.
"Trustees" means the Trustees holding office under the Declaration of
Trust at any particular time.
"Unaffiliated Trustee" means a Trustee who, in his individual
capacity, (i) is not an Affiliate of the Advisor, (ii) does not own any
interest in the Advisor, and (iii) does not perform any other services for the
Trust except as Trustee.
2. Duties of Advisor. The principal duties of the
Advisor shall be to supervise and make recommendations to the Trust concerning
the Trust's investments and to provide administrative services with respect to
the Trust and as administrator of the Trust's day-to-day affairs, in each case
subject to the supervision of the Trustees.
Subject to the supervision of the Trustees and consistent with the
provisions of the Declaration of Trust and Section 12 hereof, the Advisor
shall:
(a) perform necessary administrative functions in the
management of the Trust;
(b) serve as the Trust's investment and financial Advisor
and provide research, economic and statistical data in connection with
the Trust's investments and financial policies;
(c) investigate, select and conduct relations with
accountants, legal counsel, property managers, brokers, investors,
builders, developers, banks and other lenders, and
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others as necessary in connection with the business of the Trust and
the fulfillment of the Advisor's duties hereunder.
(d) maintain bank accounts for the Trust, and arrange for
fidelity bonds with respect to fraudulent acts, in amounts specified
by the Trustees, covering all the personnel handling funds and other
assets of the Trust, with the Trust named as an insured party;
(e) maintain appropriate records of activities on behalf
of the Trust;
(f) provide office space, office equipment and office
personnel;
(g) obtain for the Trust the services that may be
required in acquiring and disposing of investments of the Trust,
disbursing and collecting the funds of the Trust, paying the debts and
fulfilling the obligations of the Trust, and handling, prosecuting and
settling any claims of the Trust;
(h) obtain for the Trust such services as may be required
for property management and other activities relating to the
investment portfolio of the Trust;
(i) advise in connection with negotiations by the Trust
with investment banking firms, securities brokers or dealers and other
institutions or investors in connection with the sale of Securities of
the Trust and the securing of loans for the Trust; and
(j) provide services to the Trust in connection with the
financing, refinancing, sale or other disposition of the Trust's Real
Estate Investments or any part thereof.
In performing its various services under this Agreement, the Advisor
may from time to time call upon and utilize various facilities, personnel and
support services of other Persons, including one or more Affiliates of the
Advisor.
3. No Partnership or Joint Venture. The Trust and the Advisor
are not, and shall not be deemed to be, partners or joint venturers with each
other, and nothing herein shall be construed so as to make them such partners
or joint venturers or to impose any liability as such on either of them.
4. Records. The Advisor shall keep proper books of account and
records relating to services performed hereunder, which books of account and
records shall be accessible for inspection by the Trustees at any time during
ordinary business hours.
5. REIT Qualifications, etc. The Advisor shall refrain from any
action which, in its judgment or in any judgment of the Trustees of which the
Advisor has written notice, would adversely affect the qualification of the
Trust as a REIT or which would violate any law, rule or regulation of any
governmental body or agency having jurisdiction over the Trust or its
Securities or which would otherwise not be permitted by the Declaration of
Trust.
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6. Bank Accounts. The Advisor may establish and maintain one or
more bank accounts in its own name and may collect and deposit into and
disburse from such accounts any money on behalf of the Trust, under such terms
and conditions as the Trustees may approve, provided that no funds in any such
account shall be commingled with funds of the Advisor. The Advisor shall from
time to time render appropriate accounting of such collections, deposits and
payments to the Trustees and to the auditors of the Trust.
7. Bond. The Advisor shall maintain a fidelity bond with a
responsible surety company in such form and amounts as may be required by the
Trustees from time to time, covering officers, employees and agents handling
funds and any investment documents or records pertaining to any investments of
the Trust. Such bond shall be paid for by the Trust and shall inure to the
benefit of the Trust in respect of losses of any such property from acts of
such officers, employees and agents through theft, embezzlement or fraud. In
the event that such a bond is canceled or not renewed by the bonding company,
the Advisor shall give notice thereof to the Trustees, in which event the
Trustees shall have the right to terminate immediately this Agreement.
8. Information Furnished Advisor. The Trustees shall at all
times keep the Advisor informed concerning the investment, financial and
operating policies of the Trust. The Trustees shall notify the Advisor
promptly in writing of their intention to make any new investments or to sell
or dispose of any existing investments. The Trust shall make available to the
Advisor a certified copy of all financial statements, a signed xxx of each
report prepared by independent certified public accountants and such other
information with regard to its affairs as the Advisor may reasonably request.
9. Compensation. The Trust shall pay to the Advisor compensation
for its services hereunder as follows:
(a) Initial Fees. The Initial Fees have been paid to the
Advisor and no further Initial Fees shall be payable hereunder.
(b) Annual Portfolio Management Fee. The Annual
Portfolio Management Fee shall be an annual fee in an amount equal to
forty-two and one-half one one hundredths of one percent (0.425%) per
annum of the sum of (i) the Average Amount (as defined below) and (ii)
the average daily outstanding principal balance of the Trust's
indebtedness which was long-term indebtedness when incurred (including
mortgage indebtedness and including the Trust's proportionate interest
in such debt of a partnership, joint venture or other form of indirect
ownership) during each calendar year or portion thereof as reflected
on the books and records of the Trust under generally accepted
accounting principles, minus the Debt Adjustment set forth in
subsection 9(c)(i) with the date in question being deemed to be the
"time of sale" for purposes of subsection 9(c)(i)(A), except that any
indebtedness to which Harrisburg East Mall is subject pursuant to the
terms of the Mortgage encumbering such property at the date of its
acquisition by the Trust shall be valued at the remaining principal
amount of such Mortgage based upon the terms of such Mortgage. The
Average Amount shall equal the average of the Daily Amounts for the
days during the relevant calendar year during which Shares are traded
on the principal United States market for the Shares. The
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Daily Amount for any day shall equal the Daily Price for such day
multiplied by the number of Shares outstanding as of the end of such
day. The Daily Price shall equal the closing per share price of the
Shares on the stock exchange which is the principal United States
market for the Shares, provided that, for any portion of any year
during which the principal United States market for the Shares is not
an exchange, the Daily Price shall equal the average of the closing
per share bid and asked prices as reported on NYSE, or, if such prices
are not reported on NYSE, the Daily Price shall be determined by the
Trustees in good faith.
The Annual Portfolio Management Fee shall be paid monthly
(prorated for any partial months) in arrears within ten (10) days
after the end of each calendar month.
(c) Real Estate Disposition Fees. The Real Estate
Disposition Fees shall equal one percent (1%) of the gross sale price
(including the outstanding principal balance of any indebtedness taken
subject to or assumed by the buyer and the principal amount of any
purchase money indebtedness taken back by the Trust) of the Real
Estate Investment sold or one percent (1%) of the Trust's share of the
gross sale price (calculated as above of any Real Estate Investment
sold by a partnership, joint venture or other form of indirect
ownership; provided, however, that in calculating the gross sale
price, the following adjustments (the "Debt Adjustments") shall be
made: (i) with respect to any indebtedness taken subject to or
assumed by a buyer from the Trust (other than the indebtedness to
which Harrisburg East Mall is subject at the date of its acquisition
by the Trust), there shall be deducted from the gross sale price an
amount equal to the lesser of (A) the excess, if any, of the principal
amount of such indebtedness at the time of sale based upon the
relevant instrument over the principal amount of such indebtedness at
the time of sale as determined in accordance with generally accepted
accounting principles ("GAAP"), and (B) the excess, if any, of the
principal amount of such indebtedness at the time incurred based upon
the relevant instrument over the principal amount of such indebtedness
at the time incurred as determined in accordance with GAAP; and (ii)
with respect to any purchase money indebtedness taken back by the
Trust, there shall be deducted from the gross sale price an amount
equal to the excess of the principal amount of such indebtedness based
upon the relevant instrument over the principal amount of such
indebtedness as determined in accordance with GAAP. The Real Estate
Disposition Fee shall be reduced (but not below zero) by the amount of
any brokerage commissions and legal expenses paid by the Trust in
connection with such sale. A Real Estate Disposition Fee shall be due
and payable at the closing of each disposition of a Real Estate
Investment or any part thereof.
10. Compensation for Additional Services. If the Trust shall
request the Advisor (or any Affiliate or any officer or employee thereof) to
render services for the Trust other than those required to be rendered by the
Advisor hereunder, such additional services, if performed (including, without
limitation, property management services to be rendered by Compass Retail,
Inc.), will be compensated separately on terms to be agreed upon between such
party and the Trustees, including a majority of the Unaffiliated Trustees, from
time to time. To the extent the Advisor or any Affiliate of the Advisor
performs any leasing, loan servicing, loan administration, property management,
legal, shareholder relations, registrar, transfer agent, or other similar
services, the compensation for
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such services shall not exceed either (a) the compensation, if any, paid to
such Person by any other Person who is not an Affiliate of such Person for any
comparable services in the same geographic area or (b) the rate generally
charged for similar services generally available in the relevant geographic
area by qualified Persons who are not Affiliates of the Advisor.
11. Statements. The Advisor shall promptly furnish to the Trust
monthly and annual statements showing the computation of the compensation
payable to it under Section 9(b) hereof with respect to the month or year then
ended. All calculations of the fees paid hereunder shall be reported upon by
the Trust's independent public accountants.
12. Expenses of Advisor. Without regard to the amount of
compensation received hereunder by the Advisor, the Advisor shall bear the
following expenses:
(a) salaries and other employment expenses of the
personnel employed by the Advisor to assist it in performing its
obligations hereunder and of Trustees, officers and employees of the
Trust who are directors, officers or employees of the Advisor or of
any Affiliate of the Advisor, including, without limitation, fees,
salaries, wages, payroll taxes and the cost of employee benefit plans
and temporary help expenses, but excluding any salaries and other
expenses as to which separate compensation is permitted pursuant to
Section 10 hereof and excluding the compensation to the Trustees
described in the Registration Statement under the caption "Management
- Trustees and Officers";
(b) rent, telephone, utilities, office furniture and
equipment and other office expenses of the Advisor and the Trust,
except as any of such expenses relate to an office maintained by the
Trust separate from the office of the Advisor;
(c) travel and related out-of-pocket expenses incurred by
officers and employees of the Advisor and of Trustees, officers and
employees of the Trust who are directors, officers or employees of the
Advisor or of any Affiliate of the Advisor, except that the Trust will
bear all travel and other out-of-pocket expenses of officers,
employees and Trustees of the Trust to the extent incurred in
furtherance of the business of the Trust; and
(d) all overhead expenses incurred by the Advisor.
13. Expenses of the Trust. Except as expressly otherwise provided
in this Agreement, the Trust shall pay all expenses relating to services of the
Advisor in the performance of its duties hereunder, including, without
limitation, all legal and accounting expenses, not assumed by the Advisor.
14. Refund by Advisor. The Advisor will refund to the Trust,
within sixty (60) days after the end of such period, the amount, if any, by
which the Total Operating Expenses of the Trust for any twelve-month period
ending on the last day of any fiscal quarter ending on or after March 31, 1986
exceed the greater of (a) 2% of the Average Invested Assets for such
twelve-month period and (b) 25% of the Net Income for such twelve-month period
(calculated before the deduction therefrom of such Total Operating Expenses);
provided, however, that only so much of such excess need be
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refunded as is determined by the Trustees, including a majority of the
Unaffiliated Trustees, acting pursuant to Section 4.5 of the Declaration of
Trust, to be not justified.
15. Other Activities of the Advisor. Nothing herein contained
shall prevent the Advisor from engaging in other activities, including, without
limitation, the management of other investments and the rendering of advice to
other investors (including in respect of other real estate programs), even if
any such investors are in competition with the Trust or any of the Trust's Real
Estate Investments; nor shall this Agreement limit or restrict the right of any
partner, director, officer, employee or shareholder of the Advisor or any
Affiliate of the Advisor to engage in any other business (including business
activities competitive with those of the Trust) or to render services of any
kind to any other Person.
16. Trustee Action. Wherever action on the part of the Trust or
the Trustees is contemplated in this Agreement, unless otherwise provided
herein, action by a majority of the Trustees, including a majority of the
Unaffiliated Trustees, shall constitute the action provided for herein.
17. Term; Termination of Agreement. This Agreement shall continue
in force until December 31, 1998, and thereafter may be extended from year to
year by the affirmative vote or written consent of a majority of the
Unaffiliated Trustees. Notice of renewal shall be given in writing by the
Trust to the Advisor not less than thirty (30) days before the expiration of
this Agreement or of any extension thereof. Notwithstanding any other
provision to the contrary, this Agreement may be terminated without cause upon
sixty (60) days' written notice by a majority of the Unaffiliated Trustees to
the Advisor and, after December 31, 1998, upon one hundred eighty (180) days'
written notice by the Advisor to the Trust.
18. Amendments. This Agreement shall not be modified or
terminated except by an instrument in writing signed by both parties hereto or
otherwise as provided herein. Any amendment to this Agreement shall require
the written consent of a majority of the Unaffiliated Trustees.
19. Assignment. The Trust may terminate this Agreement
immediately in the event of its assignment by the Advisor without the consent
of the Trust. Any permitted assignment of this Agreement shall bind the
assignee hereunder in the same manner as the assignor is bound hereunder.
20. Default, Bankruptcy, etc. At the option of the Trustees, this
Agreement shall be terminated immediately upon written notice of termination by
a majority of the Unaffiliated Trustees to the Advisor if any of the following
events shall occur:
(a) if the Advisor shall violate any provisions of this
Agreement, and after written notice of such violation shall not cure
such default within thirty (30) days; or
(b) if the Advisor shall be adjudged bankrupt or
insolvent by a court of competent jurisdiction, or any order shall be
made by a court of competent jurisdiction for the appointment of a
receiver, liquidator or trustee of the Advisor or of all or
substantially all its property by reason of the foregoing or approving
any petition filed against the Advisor for
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its reorganization, and such adjudication or order shall remain in
force or unstayed for a period of thirty (30) days; or
(c) if the Advisor shall institute proceedings for
voluntary bankruptcy or shall file a petition seeking reorganization
under the Federal bankruptcy laws, or for relief under any law for the
relief of debtors, or shall consent to the appointment of a receiver,
or shall make a general assignment for the benefit of its creditors,
or shall admit in writing its inability to pay its debts generally as
they become due.
The Advisor agrees that if any of the events specified in subsection
(b) or (c) of this Section 20 shall occur, it will give written notice thereof
to the Trust promptly (but in any event not later than seven days) after the
occurrence of such event.
21. Action Upon Termination. Except as provided in Section 9
hereof, the Advisor shall not be entitled to compensation after the date of
termination of this Agreement for further services hereunder but shall be
reimbursed for all expenses and shall be paid all compensation accruing to the
date of termination. The Advisor shall forthwith upon such termination:
(a) pay over to the Trust all monies collected and held
for the account of the Trust pursuant to this Agreement, after
deducting any accrued compensation and reimbursement for its expenses
to which it is then entitled;
(b) deliver to the Trust a full accounting, including a
statement showing all payments collected by it and a statement of all
monies held by it, covering the period following the date of the last
accounting furnished to the Trust;
(c) deliver to the Trust all property and documents of
the Trust then in the custody of the Advisor; and
(d) cooperate with the Trust and take all reasonable
steps requested to assist the Trustees in making an orderly transition
of the advisory function.
22. Change of Name. Upon termination of this Agreement by either
party, the Trustees shall, upon the request of the Advisor, cause the name of
the Trust to be changed to a name that does not, in the reasonable opinion of
the Advisor, include any reference to the Advisor or any of its Affiliates.
23. Governing Law. The provisions of this Agreement shall be
construed and interpreted in accordance with the laws of the State of Texas as
at the time in effect.
24. Miscellaneous. The Advisor assumes no responsibility under
this Agreement other than to render the services called for hereunder in good
faith, and shall not be responsible for any action of the Trust in following or
declining to follow any advice or recommendations of the Advisor. None of the
Advisor, its partners, officers or employees shall be liable to the Trust, the
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Trustees or the holders of Securities of the Trust except by reason of acts
constituting bad faith, willful misfeasance, gross negligence or reckless
disregard of their duties.
25. Notices. Any communications given hereunder shall be in
writing delivered at the address of the respective party at which that party
most recently has established its principal office, or at such other address as
a party shall have specified to the other party as the address for notices
hereunder.
26. Trustees' and Shareholders' Liability. The Declaration of
Trust establishing EQK Realty Investors I, dated October 8, 1984, a copy of
which, together with all amendments thereto, has been duly filed in the office
of the Secretary of the Commonwealth of Massachusetts, provides that the name
"ART Realty Investors I" refers to the Trustees under the Declaration
collectively as Trustees, but not individually or personally; and that no
Trustee, officer, shareholder, employee or agent of the Trust shall be held to
any personal liability, jointly or severally, for any obligation of, or claim
against, the Trust. All persons dealing with the Trust, in any way, shall look
only to the assets of the Trust for the payment of any sum or the performance
of any obligation.
IN WITNESS WHEREOF, the Trust and the Advisor have each caused this
Agreement to be executed and delivered on its behalf as of the day first above
written.
EQK REALTY INVESTORS I
By:
------------------------------------------
BASIC CAPITAL MANAGEMENT, INC.
By:
------------------------------------------
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EXHIBIT C
TO EXHIBIT 99.1
ARTICLES OF AMENDMENT OF THE ARTICLES OF INCORPORATION OF
AMERICAN REALTY TRUST, INC.
setting forth the
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RELATIVE PARTICIPATING
OR OPTIONAL OR OTHER SPECIAL RIGHTS, AND QUALIFICATIONS, LIMITATIONS
OR RESTRICTIONS THEREOF
of
SERIES F CUMULATIVE CONVERTIBLE PREFERRED STOCK
of
AMERICAN REALTY TRUST, INC.
(Pursuant to Section 14-2-602(d) of the
Georgia Business Corporation Code)
__________________________
American Realty Trust, Inc., a corporation organized and existing
under the Georgia Business Corporation Code (hereinafter called the
"Corporation"), hereby certifies:
THAT, pursuant to the authority conferred upon the board of Directors
(the "Board of Directors") by the articles of incorporation, as amended
("Articles of Incorporation") of the Corporation, and pursuant to Section 14-2-
602(d) of the Georgia Business Corporation Code (which Section provides that no
shareholder action is required in order to effect these articles of amendment),
the Board of Directors by unanimous written consent dated August 13, 1997, duly
adopted certain recitals and resolutions providing for the designations,
preferences and relative participating, optional or other special rights and
qualifications, limitations or other restrictions thereof, of a series of
special stock of the Corporation, specifically the Series F Cumulative
Convertible Preferred Stock, which recitals and resolutions are as follows:
WHEREAS, Article Five of the Articles of Incorporation authorizes the
Corporation to issue not more than 16,666,667 shares of common voting stock,
$0.01 par value per share (the "Common Stock"), and 20,000,000 shares of a
special class of stock, $2.00 par value per share (the "Special Stock"), which
Special Stock may be issued from time to time in one or more series and shall
be designated as the Board of Directors may determine to have such voting
powers, preferences, limitations and relative rights with respect to the shares
of each series of the class of Special Stock
97
of the Corporation as expressly provided in a resolution or resolutions
providing for the issuance of such series adopted by the Board of Directors
which is vested with the authority in respect thereof;
WHEREAS, 4,000 shares of such Special Stock have been previously
designated as the Series B 10% Cumulative Preferred Stock prior to the date
hereof, all of which have been issued and are outstanding;
WHEREAS, 16,681 shares of such Special Stock have been previously
designated as the Series C 10% Cumulative Preferred Stock prior to the date
hereof, all of which have been issued and are outstanding;
WHEREAS, 91,000 shares of such Special Stock have been previously
designated as the Series D Cumulative Preferred Stock prior to the date hereof,
none of which has been issued or is outstanding;
WHEREAS, 80,000 shares of such Special Stock have been previously
designated as the Series E Cumulative Convertible Preferred Stock prior to the
date hereof, none of which has been issued or is outstanding; and
WHEREAS, the Board of Directors now desires to further amend the
Articles of Incorporation to designate an additional series of the Special
Stock.
NOW, THEREFORE, BE IT RESOLVED, that pursuant to the authority granted
to the Board of Directors by Article Five of the Articles of Incorporation, the
Board of Directors hereby further amends the Articles of Incorporation to
provide for the issuance of a single series of Special Stock consisting of the
number of shares in such series as set forth below and, subject to the
provisions of Article Five of the Articles of Incorporation, hereby fixes and
determines with respect to such series the following designations, preferences
and relative participating, optional or other special rights, if any, and
qualifications, limitations and restrictions thereof:
Section 1. Designation and Amount. The shares of such series shall
be designated as "Series F Cumulative Convertible Preferred Stock" (the "Series
F Preferred Stock") and each share of the Series F Preferred Stock shall have a
par value of $2.00 per share and a preference on liquidation as specified in
Section 6 below. The number of shares constituting the Series F Preferred Stock
shall be 7,500,000. Such number of shares may be increased or decreased by the
Board of Directors by filing articles of amendment as provided in the Georgia
Business Corporation Code; provided, that no decrease shall reduce the number
of shares of Series F Preferred Stock to a number less than the number of
shares then outstanding plus the number of shares reserved for issuance upon
the exercise of outstanding options, rights or warrants; provided further, that
no increase in the authorized amount of shares constituting Series F Preferred
Stock shall be made without the prior written consent of the holders of a
majority of shares of Series F Preferred Stock then outstanding voting
separately as a class.
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Section 2. Dividends and Distributions.
(A) The holders of shares of Series F Preferred Stock shall be
entitled to receive, when, as, and if declared by the Board of
Directors and to the extent permitted under the Georgia
Business Corporation Code, out of funds legally available for
the purpose and in preference to and with priority over
dividends upon all Junior Securities, quarterly cumulative
dividends payable in arrears in cash on the fifteenth day
following the end of each calendar quarter (each such date
being referred to herein as a "Quarterly Dividend Payment
Date"), commencing on October 15, 1998, in an amount per share
(rounded to the next highest cent) equal to 10% per annum of
the Adjusted Liquidation Value, as determined immediately
prior to the beginning of such calendar quarter assuming each
year consists of 360 days and each quarter consists of 90
days. The term "Adjusted Liquidation Value" shall mean
Liquidation Value (as defined in Section 6) plus all accrued
and unpaid dividends through the applicable date. The
foregoing is intended to provide a 10% cumulative return,
compounded on a quarterly basis, on the Liquidation Value from
August 16, 1998.
(B) Dividends shall commence accruing cumulatively on outstanding
shares of the Series F Preferred Stock from August 16, 1998 to
and including the date on which the Redemption Price (as
defined in Section 9(A), below) of such shares is paid,
whether or not such dividends have been declared and whether
or not there are profits, surplus or other funds of the
Corporation legally available for the payment of such
dividends. Dividends for the first Quarterly Dividend Payment
Date shall accrue and shall be payable for a period of 45
days. Dividends payable on each Quarterly Dividend Payment
Date shall be dividends accrued and unpaid through the last
Business Day (as defined in Section 3(A) below) of the
immediately preceding calendar month. The Board of Directors
may fix a record date for the determination of holders of
shares of Series F Preferred Stock entitled to receive payment
of a dividend or distribution declared thereon other than a
quarterly dividend paid on the Quarterly Dividend Payment Date
immediately after such dividend accrued, which record date
shall be not more than 50 days prior to the date fixed for the
payment thereof.
(C) So long as any shares of the Series F Preferred Stock are
outstanding, the Corporation will not make, directly or
indirectly, any distribution (as such term is defined in the
Georgia Business Corporation Code) in respect of Junior
Securities unless on the date specified for measuring
distributions in Section 14-2-640(e) of the Georgia Business
Corporation Code (a) all accrued dividends on the Series F
Preferred Stock for all past quarterly dividend periods have
been paid in full and the full amount of accrued dividends for
the then current quarterly dividend period has been paid or
declared and a sum sufficient for the payment thereof set
apart and (b) after giving effect to such distribution (i) the
Corporation would not be rendered
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unable to pay its debts as they become due in the usual course
of business and (ii) the Corporation's total assets would not
be less than the sum of its total liabilities plus the amount
that would be needed, if the Corporation were to be dissolved
at the time of the distribution, to satisfy the preferential
rights upon dissolution of the holders of the Series F
Preferred Stock as provided in these Articles of Amendment.
Dividends shall not be paid (in full or in part) or declared
and set apart for payment (in full or in part) on any series
of Special Stock (including the Series F Preferred Stock) for
any dividend period unless all dividends, in the case
dividends are being paid in full on the Series F Preferred
Stock, or a ratable portion of all dividends (i.e., so that
the amount paid on each share of each series of Special Stock
as a percentage of total accrued and unpaid dividends for all
periods with respect to each such share is equal), in the case
dividends are not being paid in full on the Series F Preferred
Stock, have been or are, contemporaneously, paid and declared
and set apart for payment on all outstanding series of Special
Stock (including the Series F Preferred Stock) entitled
thereto for each dividend period terminating on the same or
earlier date. If at any time the Corporation pays less than
the total amount of dividends then accrued with respect to the
Series F Preferred Stock, such payment will be distributed
ratably among the then holders of Series F Preferred Stock so
that an equal amount is paid with respect to each outstanding
share.
Section 3. Conversion Rights.
(A) The Series F Preferred Stock may be converted at any time and
from time to time in whole or in part after the earliest to
occur of (i) August 15, 2003, (ii) the first Business Day, if
any, occurring after a Quarterly Dividend Payment Date on
which dividends equal to or in excess of 5% of the Liquidation
Value (i.e., $0.50 per share) are accrued and unpaid, or (iii)
the Corporation becomes obligated to mail a statement pursuant
to subsection (G)(iv) below, at the option of the holders
thereof, in accordance with subsection (D) below at the
Conversion Price (as defined below in subsection (D)) into
fully paid and nonassessable Common Stock of the Corporation
by dividing (i) the Adjusted Liquidation Value for such share
of Series F Preferred Stock as of the date of conversion by
(ii) the Conversion Price; provided, however, that as to any
shares of Series F Preferred Stock which shall have been
called for redemption, the right of conversion shall terminate
at the close of business on the second full Business Day
(unless otherwise provided, "Business Day" herein shall mean
any day other than a Saturday, a Sunday or a day on which
banking institutions in Dallas, Texas are authorized or
obligated by law or executive order to remain closed) prior to
the date fixed for redemption. Notwithstanding anything to
the contrary herein provided, the Corporation may elect to
redeem the shares of Series F Preferred Stock sought to be
converted hereunder instead of issuing shares of Common Stock
in replacement thereof in accordance with the provisions of
Section 3(D), below.
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(B) For purposes of this Section 3, the term "Conversion Price"
shall be and mean the amount obtained (rounded upward to the
next highest cent) by multiplying (i) 0.9 by (ii) the simple
average of the daily closing price of the Common Stock for the
twenty Business Days ending on the last Business Day of the
calender week immediately preceding the date of conversion on
the New York Stock Exchange or, if the shares of Common Stock
are not then being traded on the New York Stock Exchange, then
on the principal stock exchange (including without limitation
NASDAQ NMS or NASDAQ Small Cap) on which such Common Stock is
then listed or admitted to trading as determined by the
Corporation (the "Principal Stock Exchange") or, if the Common
Stock is not then listed or admitted to trading on a Principal
Stock Exchange, the average of the last reported closing bid
and asked prices on such days in the over-the- counter market
or, if no such prices are available, the fair market value per
share of the Common Stock, as determined by the Board of
Directors of the Corporation in its sole discretion. The
Conversion Price shall not be subject to any adjustment as a
result of the issuance of any additional shares of Common
Stock by the Corporation for any purpose, except for stock
splits (whether accomplished by stock dividend or otherwise).
For purposes of calculating the Conversion Price, the term
"Business Day" shall mean a day on which the exchange looked
to for purposes of determining the Conversion Price is open
for business or, if no such exchange, the term "Business Day"
shall have the meaning given such term in Section 3(A), above.
(C) Upon any conversion, fractional shares of Common Stock shall
not be issued but any fractions shall be adjusted by the
delivery of one additional share of Common Stock in lieu of
any cash. Any accrued but unpaid dividends shall be
convertible into shares of Common Stock as provided for in
this Section. The Corporation shall pay all issue taxes, if
any, incurred in respect to the issuance of Common Stock on
conversion, provided, however, that the Corporation shall not
be required to pay any transfer or other taxes incurred by
reason of the issuance of such Common Stock in names other
than those in which the Series F Preferred Stock surrendered
for conversion may stand.
(D) Any conversion of Series F Preferred Stock into Common Stock
shall be made by the surrender to the Corporation, at the
office of the Corporation set forth in Section 12 hereof or at
the office of the transfer agent for such shares, of the
certificate or certificates representing the Series F
Preferred Stock to be converted, duly endorsed or assigned
(unless such endorsement or assignment be waived by the
Corporation), together with a written request for conversion.
The Corporation shall either (i) issue as of the date of
receipt by the Corporation of such surrender shares of Common
Stock calculated as provided above and evidenced by a stock
certificate delivered to the holder as soon as practicable
after the date of such surrender or (ii) within two Business
Days after the date of such surrender advise the holder of the
Series F Preferred Stock that the Corporation is exercising
its option to redeem the Series F Preferred Stock pursuant to
Section 3(A), above, in which case the Corporation shall
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have thirty (30) days from the date of such surrender to pay
to the holder cash in an amount equal to the Conversion Price
for each share of Series F Preferred Stock so redeemed. The
date of surrender of any Series F Preferred Stock shall be the
date of receipt by the Corporation or its agent of such
surrendered shares of Series F Preferred Stock.
(E) A number of authorized shares of Common Stock sufficient to
provide for the conversion of the Series F Preferred Stock
outstanding upon the basis hereinbefore provided shall at all
times be reserved for such conversion. If the Corporation
shall propose to issue any securities or to make any change in
its capital structure which would change the number of shares
of Common Stock into which each share of Series F Preferred
Stock shall be convertible as herein provided, the Corporation
shall at the same time also make proper provision so that
thereafter there shall be a sufficient number of shares of
Common Stock authorized and reserved for conversion of the
outstanding Series F Preferred Stock on the new basis.
(F) The term "Common Stock" shall mean stock of the class
designated as Common Stock of the Corporation on the date the
Series F Preferred Stock is created or stock of any class or
classes resulting from any reclassification or
reclassifications thereof, the right of which to share in
distributions of both earnings and assets is without
limitation in the Articles of Incorporation of the Corporation
as to any fixed amount or percentage and which are not subject
to redemption; provided, that if at any time there shall be
more than one such resulting class, the shares of each such
class then issuable on conversion of the Series F Preferred
Stock shall be substantially in the proportion which the total
number of shares of stock of each such class resulting from
all such reclassifications bears to the total number of shares
of stock of all such classes resulting from all such
reclassifications.
(G) In case the Corporation shall propose at any time before all
shares of the Series F Preferred Stock have been redeemed by
or converted into Common Stock of the Corporation:
(i) to pay any dividend on the Common Stock
outstanding payable in Common Stock or to make any other
distribution, other than cash dividends to the holders of the
Common Stock outstanding; or
(ii) to offer for subscription to the holders of
the Common Stock outstanding any additional shares of any
class or any other rights or option; or
(iii) to effect any re-classification or
recapitalization of the Common Stock outstanding involving a
change in the Common Stock, other than a subdivision or
combination of the Common Stock outstanding; or
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(iv) to merge or consolidate with or into any
other corporation (unless the Corporation is the surviving
entity and holders of Common Stock continue to hold such
Common Stock without modification and without receipt of any
additional consideration), or to sell, lease, or convey all or
substantially all its property or business, or to liquidate,
dissolve or wind up;
then, in each such case, the Corporation shall mail to the holders of
record of each of the shares of Series F Preferred Stock at their last
known addresses as shown by the Corporation's records a statement,
signed by an officer of the Corporation, with respect to the proposed
action, such statement to be so mailed at least thirty (30) days prior
to the date of the taking of such action or the record date for
holders of the Common Stock for the purposes thereof, whichever is
earlier. If such statement relates to any proposed action referred to
in clauses (iii) or (iv) of this subsection (G), it shall set forth
such facts with respect thereto as shall reasonably be necessary to
inform the holders of the Series F Preferred Stock as to the effect of
such action upon the conversion rights of such holders.
Section 4. Voting Rights and Powers. The holders of shares of Series
F Preferred Stock shall have only the following voting rights:
(A) Except as may otherwise be specifically required by law under
Section 14-2-1004 of the Georgia Business Corporation Code or
otherwise provided herein, the holders of the shares of Series
F Preferred Stock shall not have the right to vote such stock,
directly or indirectly, at any meeting of the shareholders of
the Corporation, and such shares of stock shall not be counted
in determining the total number of outstanding shares to
constitute a quorum at any meeting of shareholders;
(B) In the event that, under the circumstances, the holders of the
Series F Preferred Stock are required by law to vote upon any
matter, the approval of such series shall be deemed to have
been obtained only upon the affirmative vote of the holders of
a majority of the shares of the Series F Preferred Stock then
outstanding;
(C) Except as set forth herein, or as otherwise provided by the
Articles of Incorporation or by law, holders of the Series F
Preferred Stock shall have no voting rights and their consent
shall not be required for the taking of any corporate action;
(D) Notwithstanding anything herein to the contrary, if and
whenever at any time or times all or any portion of the
dividends on Series F Preferred Stock for any six quarterly
dividends, whether or not consecutive, shall be in arrears and
unpaid, then and in any such event, the number of Directors
constituting the Board of Directors shall be increased by two,
and the holders of Series F Preferred Stock, voting separately
as a class, shall be entitled at the next annual meeting of
shareholders, or at a special meeting of holders of Series F
Preferred Stock called as hereinafter provided, to elect two
Directors to fill such newly created Directorships. Each
holder
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shall be entitled to one vote in such election for each share
of Series F Preferred Stock held. At such time as all
arrearages in dividends on the Series F Preferred Stock shall
have been paid in full and dividends thereon for the current
quarterly period shall have been paid or declared and a sum
sufficient for the payment thereof set aside, then (i) the
voting rights of holders of Series F Preferred Stock described
in this subsection (D) shall cease (subject always to
revesting of such voting rights in the event of each and every
similar future arrearages in quarterly dividends), (ii) the
term of the Directors then in office as a result of the voting
rights described in this subsection (D) shall terminate and
(iii) the number of Directors shall be reduced by the number
of Directors then in office elected pursuant to this
subsection (D). A vacancy in the class of Directors elected
pursuant to this subsection (D) shall be filled by a Director
chosen by the remaining Directors of the class, unless such
vacancy is filled pursuant to the final sentence of subsection
(G);
(E) At any time when the voting right described in subsection (D)
shall have vested and shall remain in the holders of Series F
Preferred Stock, such voting right may be exercised initially
either at a special meeting of holders of Series F Preferred
Stock or at any annual or special shareholders' meeting called
for the purpose of electing Directors, but thereafter it shall
be exercised only at annual shareholders' meetings. If such
voting right shall not already have been initially exercised,
the Secretary of the Corporation may, and upon the written
request of the holders of record of at least 10% of the shares
of Series F Preferred Stock then outstanding shall, call a
special meeting of the holders of Series F Preferred Stock for
the purpose of electing two Directors pursuant to subsection
(D), and notice thereof shall be given to the holders of
Series F Preferred Stock in the same manner as that required
to be given to holders of the Corporation's Common Stock for
the annual meeting of shareholders. Such meeting shall be
held at the earliest practicable date upon the notice required
for special meetings of shareholders of the Corporation, or,
if none, at a time and place designated by the Secretary of
the Corporation.
(F) At any meeting held for the purpose of electing Directors at
which the holders of Series F Preferred Stock shall have the
right to elect Directors as provided in subsection (D) above,
the presence in person or by proxy of the holders of at least
thirty-five percent (35%) of the then outstanding shares of
Series F Preferred Stock shall be required and be sufficient
to constitute a quorum of Series F Preferred Stock for the
election of Directors by Series F Preferred Stock, and the
vote of the holders of a majority of such shares so present in
person or by proxy at any such meeting at which there shall be
such a quorum shall be required and be sufficient to elect the
members of the Board of Directors which the holders of Series
F Preferred Stock are entitled to elect as hereinabove
provided. At any such meeting or adjournment thereof, (i) the
absence of a quorum of the holders of Series F Preferred Stock
shall not prevent the election of Directors other than the
Directors to be elected by the holders of Series F Preferred
Stock and (ii) in the case of holders of Series F
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Preferred Stock entitled to vote for the election of
Directors, a majority of the holders present in person or by
proxy of such class, if constituting less than a quorum as
hereinabove provided, shall have the power to adjourn the
meeting for the election of the Directors that the holders of
such class are entitled to elect, from time to time until a
quorum shall be present, and notice of such adjourned meeting
need not be given unless otherwise required by law, provided
that nothing herein shall affect the conduct of the meeting
with respect to shareholders of any other class.
(G) Any Director who shall have been elected or appointed pursuant
to Section 4(D) shall hold office for a term expiring (subject
to the earlier termination of the default in quarterly
dividends) at the next annual meeting of shareholders, and
during such term may be removed at any time, either with or
without cause, only by the affirmative vote of the holders of
record of a majority of the shares of Series F Preferred Stock
then outstanding at a special meeting of such shareholders
called for such purpose. Any vacancy created by such removal
may also be filled at such meeting.
Section 5. Reacquired Shares. Any shares of Series F Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever or
surrendered for conversion hereunder shall no longer be deemed to be
outstanding and all rights with respect to such shares of stock, including the
right, if any, to receive notices and to vote, shall forthwith cease except, in
the case of stock surrendered for conversion hereunder, rights of the holders
thereof to receive Common Stock in exchange therefor. All shares of Series F
Preferred Stock obtained by the Corporation shall be retired and canceled
promptly after the acquisition thereof. All such shares shall upon their
cancellation become authorized but unissued shares of Special Stock and may be
reissued as part of a new series of Special Stock subject to the conditions and
restrictions on issuance set forth herein, in the Articles of Incorporation, or
in any other Certificates of Designations creating a series of Special Stock or
any similar stock or as otherwise required by law.
Section 6. Liquidation, Dissolution or Winding Up. The Liquidation
Value of the Series F Preferred Stock shall be $10.00 per share. Upon any
liquidation, dissolution or winding up of the Corporation, and after paying and
providing for the payment of all creditors of the Corporation, the holders of
shares of the Series F Preferred Stock then outstanding shall be entitled,
before any distribution or payment is made upon any Junior Securities (defined
to be and mean the Common Stock and any other equity security of any kind which
the Corporation at any time has issued, issues or is authorized to issue if the
Series F Preferred Stock has priority over such securities as to dividends or
upon liquidation, dissolution or winding up), to receive a liquidation
preference in an amount in cash equal to the Adjusted Liquidation Value as of
the date of such payment, whether such liquidation is voluntary or involuntary,
and the holders of the Series F Preferred Stock shall not be entitled to any
other or further distributions of the assets. If, upon any liquidation,
dissolution or winding up of the affairs of the Corporation, the net assets
available for distribution shall be insufficient to permit payment to the
holders of all outstanding shares of all series of Special Stock of the amount
to which they respectively shall be entitled, then the assets of the
Corporation to be distributed to such holders will be distributed ratably among
them based upon the amounts payable
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on the shares of each such series of Special Stock in the event of voluntary or
involuntary liquidation, dissolution or winding up, as the case may be, in
proportion to the full preferential amounts, together with any and all
arrearages to which they are respectively entitled. Upon any such liquidation,
dissolution or winding up of the Corporation, after the holders of Special
Stock have been paid in full the amounts to which they are entitled, the
remaining assets of the Corporation may be distributed to holders of Junior
Securities, including Common Stock, of the Corporation. The Corporation will
mail written notice of such liquidation, dissolution or winding up, not less
than twenty (20) nor more than fifty (50) days prior to the payment date stated
therein to each record holder of Series F Preferred Stock. Neither the
consolidation nor merger of the Corporation into or with any other corporation
or corporations, nor the sale or transfer by the Corporation of less than all
or substantially all of its assets, nor a reduction in the capital stock of the
Corporation, nor the purchase or redemption by the Corporation of any shares of
its Special Stock or Common Stock or any other class of its stock will be
deemed to be a liquidation, dissolution or winding up of the Corporation within
the meaning of this Section 6.
Section 7. Ranking. Except as provided in the following sentence,
the Series F Preferred Stock shall rank on a parity as to dividends and upon
liquidation, dissolution or winding up with all other shares of Special Stock
issued by the Corporation. The Corporation shall not issue any shares of
Special Stock of any series which are superior to the Series F Preferred Stock
as to dividends or rights upon liquidation, dissolution or winding up of the
Corporation as long as any shares of the Series F Preferred Stock are issued
and outstanding, without the prior written consent of the holders of at least
66 2/3 of such shares of Series F Preferred Stock then outstanding voting
separately as a class.
Section 8. Redemption at the Option of the Holder. The shares of
Series F Preferred Stock shall not be redeemable at the option of a holder of
Series F Preferred Stock.
Section 9. Redemption at the Option of the Corporation.
(A) In addition to the redemption right of the Corporation set
forth in Section 3(A), above, the Corporation shall have the
right to redeem all or a portion of the Series F Preferred
Stock issued and outstanding at any time and from time to
time, at its option, for cash. The redemption price of the
Series F Preferred Stock pursuant to this Section 9 shall be
an amount per share (the "Redemption Price") equal to (i) 105%
of the Adjusted Liquidation Value as of the Redemption Date
(as defined in subsection (B) below) during the period from
August 15, 1997 through August 15, 1998; (ii) 104% of Adjusted
Liquidation Value as of the Redemption Date during the period
from August 16, 1998 through August 15, 1999; and (iii) 103%
of the Adjusted Liquidation Value as of the Redemption Date at
any time on or after August 16, 1999.
(B) The Corporation may redeem all or a portion of any holder's
shares of Series F Preferred Stock by giving such holder not
less than twenty (20) days nor more than
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thirty (30) days notice thereof prior to the date on which the
Corporation desires such shares to be redeemed, which date
shall be a Business Day (the "Redemption Date"). Such notice
shall be written and shall be hand delivered or mailed,
postage prepaid, to the holder (the "Redemption Notice"). The
Redemption Notice, once given, shall be irrevocable. If
mailed, such notice shall be deemed to be delivered when
deposited in the United States Mail, postage prepaid,
addressed to the holder of shares of Series F Preferred Stock
at his address as it appears on the stock transfer records of
the Corporation. The Redemption Notice shall state (i) the
total number of shares of Series F Preferred Stock held by
such holder; (ii) the total number of shares of the holder's
Series F Preferred Stock that the Corporation intends to
redeem; (iii) the Redemption Date and the Redemption Price;
and (iv) the place at which the holder(s) may obtain payment
of the applicable Redemption Price upon surrender of the share
certificate(s).
(C) If fewer than all shares of the Series F Preferred Stock at
any time outstanding shall be called for redemption, such
shares shall be redeemed pro rata, by lot drawn or other
manner deemed fair in the sole discretion of the Board of
Directors to redeem one or more such shares without redeeming
all such shares of Series F Preferred Stock. If a Redemption
Notice shall have been so mailed, at least two Business Days
prior to the Redemption Date the Corporation shall provide for
payment of a sum sufficient to redeem the applicable number of
shares of Series F Preferred Stock subject to redemption
either by (i) setting aside the sum required to be paid as the
Redemption Price by the Corporation, separate and apart from
its other funds, in trust for the account of the holder(s) of
the shares of Series F Preferred Stock to be redeemed or (ii)
depositing such sum in a bank or trust company (either located
in the state where the principal executive office of the
Corporation is maintained, such bank or trust company having a
combined surplus of at least $20,000,000 according to its
latest statement of condition, or such other bank or trust
company as may be permitted by the Articles of Incorporation,
or by law) as a trust fund, with irrevocable instructions and
authority to the bank or trust company to give or complete the
notice of redemption and to pay, on or after the Redemption
Date, the applicable Redemption Price on surrender of
certificates evidencing the share(s) of Series F Preferred
Stock so called for redemption and, in either event, from and
after the Redemption Date (a) the share(s) of Series F
Preferred Stock shall be deemed to be redeemed, (b) such
setting aside or deposit shall be deemed to constitute full
payment for such shares(s), (c) such share(s) so redeemed
shall no longer be deemed to be outstanding, (d) the holder(s)
thereof shall cease to be a shareholder of the Corporation
with respect to such share(s), and (e) such holder(s) shall
have no rights with respect thereto except the right to
receive the Redemption Price for the applicable shares. Any
interest on the funds so deposited shall be paid to the
Corporation. Any and all such redemption deposits shall be
irrevocable except to the following extent: any funds so
deposited which shall not be required for the redemption of
any shares of Series F Preferred Stock because of any prior
sale or
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purchase by the Corporation other than through the redemption
process, subsequent to the date of deposit but prior to the
Redemption Date, shall be repaid to the Corporation forthwith
and any balance of the funds so deposited and unclaimed by the
holder(s) of any shares of Series F Preferred Stock entitled
thereto at the expiration of one calendar year from the
Redemption Date shall be repaid to the Corporation upon its
request or demand therefor, and after any such repayment of
the holder(s) of the share(s) so called for redemption shall
look only to the Corporation for payment of the Redemption
Price thereof. All shares of Series F Preferred Stock
redeemed shall be canceled and retired and no shares shall be
issued in place thereof, but such shares shall be restored to
the status of authorized but unissued shares of Special Stock.
(D) Holders whose shares of Series F Preferred Stock have been
redeemed hereunder shall surrender the certificate or
certificates representing such shares, duly endorsed or
assigned (unless such endorsement or assignment be waived by
the Corporation), to the Corporation by mail, courier or
personal delivery at the Corporation's principal executive
office or other location so designated in the Redemption
Notice, and upon the Redemption Date the Redemption Price
shall be payable to the order of the person whose name appears
on such certificate or certificates as the owner thereof, and
each surrendered certificate shall be canceled and retired.
In the event fewer than all of the shares represented by such
certificates are redeemed, a new certificate shall be issued
representing the unredeemed shares.
Section 10. Sinking Fund. The Corporation shall not be required to
maintain any so-called "sinking fund" for the retirement on any basis of the
Series F Preferred Stock.
Section 11. Fractional Shares. The Series F Preferred Stock may be
issued in fractions of a share which shall entitle the holder, in proportion to
such holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of shares of Series F Preferred Stock.
Section 12. Notice. Any notice or request made to the Corporation in
connection with the Series F Preferred Stock shall be given, and shall
conclusively be deemed to have been given and received three Business Days
following deposit thereof in writing, in the U.S. mails, certified mail, return
receipt requested, duly stamped and addressed to the Corporation, to the
attention of its General Counsel, at its principal executive offices (which
shall be deemed to be the address most recently provided to the Securities and
Exchange Commission ("SEC") as its principal executive offices for so long as
the Corporation is required to file reports with the SEC).
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IN WITNESS WHEREOF, these Articles of Amendment are executed on behalf
of the Corporation by its President and attested by its Secretary as of the
____ day of ______________, 1997.
---------------------------
Xxxx X. Xxxxx
President
Attest:
-------------------
Xxxxxx X. Xxxxxxx
Secretary
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EXHIBIT E
TO EXHIBIT 99.1
EQK REALTY INVESTORS I
0000 XXXXXXXXX XXXXXXXX XXXX
XXXXX 000-X
XXXXXXX, XX 00000-0000
(000) 000-0000
July 9, 1997
Xx. Xxxxxx X. Xxxxxx
Executive Vice President
Basic Capital Management, Inc.
00000 Xxxxx Xxxxxxx Xxxxxxxxxx
Xxxxx 000
Xxxxxx, Xxxxx 00000
Re: COST SHARING AGREEMENT RELATIVE TO PROPOSED TRANSACTIONS
Dear Xxxxxx:
On March 6, 1997, American Realty Trust ("ART") and EQK Realty Investors I
("EQK") entered into a Cost Sharing Agreement ("Original Cost Sharing
Agreement") in connection with the possibility of ART's acquiring up to 50% of
the outstanding shares of EQK. ART and EQK have recently decided to proceed
towards such an acquisition through a modified structure which involves a
merger (the "New Structure") rather than a tender offer (the "Old Structure").
This letter amends, restates and supersedes the Original Cost Sharing
Agreement.
Significant legal, financial and other costs have been and will be incurred in
connection with the proposed transactions (the "transactions"). As used
herein, "transaction costs" shall mean all out-of-pocket fees and expenses
incurred on or after February 20, 1997 by either EQK or ART in connection with
the transactions, whether or not such transactions are ultimately completed,
and whether or not such fees and expenses were incurred in connection with
pursuing the Old Structure or the New Structure. Transaction costs include,
without limitation:
(i) legal fees and expenses (including, without limitation, any
fees or expenses incurred as a result of threatened or actual
litigation or other legal proceedings), fees associated with the
issuance of a fairness opinion relating to the Old Structure and a
new, revised or updated opinion for use with respect to the New
Structure, an appraisal of Harrisburg East Mall and any update
thereof, printing expenses, accounting fees, costs of a solicitor used
during the proxy solicitation process and all other out-of-pocket
expenses directly related to the transactions.
110
(ii) all costs paid or obligated to be paid through the date, if
any, on which either party notifies the other that it is terminating
negotiations.
Inasmuch as ART and EQK have preliminarily agreed that the pursuit of the
transactions would be in their mutual interest, and want to provide the
incentives and protections desired by both companies to proceed, the parties
hereby agree to the following sharing of transaction costs, to the extent they
may be incurred:
(1) Until the parties execute a definitive agreement,
EQK's liability shall be limited to the lesser of 50% of
actual transaction costs or $50,000 and ART shall be
responsible for all additional transaction costs. If, for any
reason, a definitive agreement is not executed, EQK shall have
no further liability for transaction costs.
(2) If the parties agree upon the terms of and execute a
definitive agreement and proceed in good faith to complete the
proposed transaction, but are unsuccessful in this effort by
reason of an inadequate shareholder response to the merger
proxy or otherwise, EQK's liability shall be limited to the
lesser of 50% of actual transaction costs or $100,000 and ART
shall be responsible for all additional transaction costs.
(3) If the proposed transaction is ultimately initiated
and successfully achieves the desired merger in accordance
with the definitive agreement, EQK's liability shall be
limited to the lesser of 50% of actual transaction costs or
$150,000, and ART shall be responsible for all additional
transaction costs.
In addition to the foregoing sharing agreement, EQK and ART agree to reconcile
the transaction costs incurred by each party on a regular and timely basis.
ART agrees to provide prompt reimbursement to EQK (not more than 15 days after
submission of a payment request) should EQK's share of expenses exceed the
applicable maximum threshold amounts.
If the terms of this sharing arrangement are acceptable, please indicate your
approval by signing in the space indicated below.
Very truly yours,
EQK REALTY INVESTORS I
By:/s/ Xxxxxxx X. Xxxxx, Xx.
--------------------------------
Xxxxxxx X. Xxxxx, Xx.
Vice President and Controller
ACCEPTED AND AGREED this 24th
day of September, 1997.
111
AMERICAN REALTY TRUST, INC.
By: /s/ Xxxx X. Xxxxx
-----------------------
Name: Xxxx X. Xxxxx
Title: President
Date: 9/24/97
112
EXHIBIT F
TO EXHIBIT 99.1
STANDSTILL AGREEMENT
BY AND BETWEEN
AMERICAN REALTY TRUST, INC.
AND
[NAME OF EQK SHAREHOLDER]
DATED AS OF ___________ __, 1998
113
STANDSTILL AGREEMENT
THIS STANDSTILL AGREEMENT (this "AGREEMENT"), dated as of ___________
___, 1997, is by and between American Realty Trust, Inc., a Georgia Corporation
("ART"), and [Name of EQK Shareholder] (the "EQK SHAREHOLDER"), a
___________________________.
RECITALS:
WHEREAS, EQK Shareholder owns 1,250,000 shares of beneficial interest
(the "EQK SHARES"), or 13.5% of the shares outstanding, in EQK Realty Investors
I, a Massachusetts business trust ("EQK") (collectively the "EQK SHARES"); and
WHEREAS, EQK Shareholder has received a copy of the Prospectus /Proxy
Statement dated ___________, 1997 with respect to, among other things, the
merger of ART Newco, LLC, a Massachusetts limited liability company ("ART
NEWCO"), with and into EQK (the "MERGER") pursuant to an Agreement and Plan of
Merger, dated as of ___________, 1997 (the "MERGER AGREEMENT") among ART, ART
Newco and EQK; and
WHEREAS, it is a condition to the consummation of the transactions
contemplated by the Merger Agreement that ART and EQK Shareholder shall have
entered into a Standstill Agreement in form and substance satisfactory to ART
with respect to the EQK Shares, and accordingly ART and EQK Shareholder desire
to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements herein set forth, the parties hereto, intending to be legally bound,
hereby agree as follows:
SECTION 1. Restrictions on Disposition.
(a) In consideration of the payment to EQK Shareholder of
$0.10 per each EQK Share (the "STANDSTILL PAYMENT"), EQK Shareholder
hereby covenants and agrees, for a period of 42 months after
[_______________ ___, 1998][THE DATE OF THE CONSUMMATION OF THE
MERGER] (the "STANDSTILL PERIOD"), not to (i) offer to sell, contract
to sell or otherwise sell, dispose of, loan, pledge or grant any
rights with respect to (collectively, a "DISPOSITION") any EQK Shares,
any options or warrants to purchase any EQK Shares or any securities
convertible into or exchangeable for EQK Shares, now owned or
hereafter acquired directly or indirectly by EQK Shareholder or with
respect to which EQK Shareholder has or hereafter acquires the power
of disposition, or (ii) acquire any additional EQK Shares.
(b) The foregoing restrictions are expressly agreed to
preclude the holder of the EQK Shares from engaging in any hedging or
other transaction which is designed to or reasonably expected to lead
to or result in a Disposition of EQK Shares during the Standstill
Period, even if such shares would be disposed of by a party other than
EQK Shareholder. Such
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114
prohibited hedging or other transactions include, without limitation,
any short sale (whether or not against the box) or any purchase, sale
of grant of any right (including without limitation any put or call
option) with respect to any EQK Shares or with respect to any security
(other than a broad-based market basket or index) that includes,
relates to or derives any significant part of its value from the EQK
Shares. Notwithstanding the foregoing, this Standstill Agreement does
not prohibit the sale of EQK Shares by EQK Shareholder to ART.
SECTION 2. Stop Transfer Instructions. EQK Shareholder hereby agrees
and consents to the entry of stop transfer instructions with EQK's transfer
agent against the transfer of the EQK Shares except in compliance with this
Standstill Agreement.
SECTION 3. Termination. This Standstill Agreement shall terminate
and be of no further force or effect if (i) the Merger is not consummated on or
before May 31, 1998, or (ii) ART files a petition seeking or consenting to
reorganization or relief under any applicable federal or state law relating to
bankruptcy, or is otherwise adjudicated bankrupt or insolvent by a court of
competent jurisdiction.
SECTION 4. Dividends and Distributions; Nature of Standstill Payment.
During the Standstill Period, all dividends and distributions in respect of EQK
Shares shall accrue for the benefit of, and be paid to, EQK Shareholder, and
all voting rights with respect to such EQK Shares shall remain with EQK
Shareholder. The Standstill Payment is separate from and independent of the
consideration to be paid with respect to the EQK Shares pursuant to the Merger
Agreement.
SECTION 5. Successors and Assigns. No party shall have the right to
assign all or any part of its interest in this Agreement without the prior
written consent of the other parties, and any attempted transfer without such
consent shall be null and void.
SECTION 6. No Third-Party Benefit. Nothing in this Agreement shall
be deemed to create any right or obligation in any Person not a party hereto,
and this Agreement shall not be construed in any respect to be a contract or
agreement in whole or in part for the benefit of or binding upon any Person not
a party hereto.
SECTION 7. Entire Agreement; Amendment. This Agreement constitutes
the entire agreement between the parties hereto with respect to the subject
matter hereof and supersedes all prior oral and written agreements, memoranda,
understandings and undertakings between the parties hereto with respect to the
subject matter hereof. This Agreement may not be modified, amended, altered or
supplemented except by a written instrument executed and delivered by each of
the parties hereto.
SECTION 8. Notices. All notices, claims, certificates, requests,
demands and other communications hereunder shall be in writing and shall be
deemed to have been duly given when delivered as follows:
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If to ART:
c/o Basic Capital Management, Inc.
00000 X. Xxxxxxx Xxxxxxxxxx
Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
If to EQK Shareholder:
-----------------------------
-----------------------------
-----------------------------
-----------------------------
Attention:
------------------
or to such other address as the person to whom notice is to be given
may have previously furnished to the other in writing in the manner
set forth above.
SECTION 10. Governing Law. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of Texas,
without regard to its conflict of law rules.
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SECTION 11. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by parties hereto on the date first above written.
AMERICAN REALTY TRUST, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
[NAME OF EQK SHAREHOLDER]
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
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EXHIBIT G
TO EXHIBIT 99.1
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made as of the
23rd day of December, 1997 by and between American Realty Trust, Inc., a
Georgia corporation (the "Company") and Equitable Realty Portfolio Management,
Inc., a Delaware corporation ("ERPM").
WHEREAS, pursuant to Section 1.09 of that certain Agreement and Plan
of Merger dated as of December 23, 1997, by and among the Company, ART Newco,
L.L.C., Basic Capital Management, Inc., EQK Realty Investors I, ERPM and
Compass Retail, Inc. (the "Merger Agreement"), ART has agreed to issue to ERPM
136,000 shares of Series F Preferred Cumulative Convertible Stock, par value
$2.00 per share (the "Preferred Stock"), with a stated liquidation value of
$10.00 per share, on the first Business Day following the third anniversary of
the Closing Date (the "Deferred Payment Date");
WHEREAS, the Company, desires to provide ERPM with certain rights with
respect to the Preferred Stock and the common stock of ART into which such
Preferred Stock is convertible on the terms and conditions herein set forth
herein;
WHEREAS, ERPM has required that the Company execute this Agreement in
consideration of ERPM's agreement to enter into the transactions contemplated
by the Merger Agreement and its acceptance of the Preferred Stock, and but for
the execution of this Agreement by the Company, ERPM would not enter into the
transactions contemplated by the Merger Agreement or accept the Preferred
Stock;
NOW, THEREFORE, in consideration of the foregoing and the respective
mutual agreements, covenants, representations and warranties herein contained,
and for other good, valid and binding consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, hereby agree as follows:
ARTICLE I.
CERTAIN DEFINITIONS
"Affiliate" shall mean a Person that directly or indirectly, through
one or more intermediaries, controls, is controlled by, or is under common
control with the Company.
"Agreement" shall have the meaning set forth in the Preamble hereto.
"Business Day" shall mean any day other than a Saturday, a Sunday or
any day on which banks in the State of Texas are permitted or required by law
to be closed.
"Closing Date" shall have the meaning assigned to such term in the
Merger Agreement.
"Commission" shall mean the Securities and Exchange Commission.
118
"Common Stock" shall mean the common stock of the Company.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Holder" shall mean a holder of Registrable Securities that is either
ERPM or a Permitted Transferee that is an assignee of rights and obligations
under this Agreement as provided in Section 3.4.
"Permitted Transferee" shall have the meaning set forth in Section 3.4
hereof.
"Person" shall mean any individual, partnership, corporation, joint
venture, trust or other entity.
"Preferred Stock" shall have the meaning set forth in the Preamble
hereof.
"Prospectus" shall mean the prospectus included in a Shelf
Registration Statement or any other registration statement, including any
preliminary prospectus, and all amendments and supplements thereto, including
any supplement relating to the terms of the offering of any portion of the
Registrable Securities covered by a Shelf Registration Statement or any other
registration statement, and in each case including all materials incorporated
by referenced therein.
"Merger Agreement" shall have the meaning set forth in the Preamble
hereof.
"Registrable Securities" shall mean the 136,000 shares of Preferred
Stock issued to ERPM on the Deferred Payment Date pursuant to the Merger
Agreement and the shares of Common Stock issued to the Holders upon conversion
of shares of such Preferred Stock excluding (i) shares that have been disposed
of by a Holder under a Shelf Registration Statement or any other effective
registration statement, (ii) shares sold or otherwise transferred in compliance
with Rule 145 (or any similar provision then in effect) under the Securities
Act, and (iii) shares that in the opinion of counsel to the Company may be sold
in a transaction exempt from the registration and prospectus delivery
requirements of the Securities Act and applicable state securities laws so that
all transfer restrictions and legends with respect thereto are removed upon the
consummation of such sale.
"Registration Expenses" shall have the meaning set forth in Section
2.2(d) hereof.
"Registration Notice" shall have the meaning set forth in Section
2.1(a) hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Shelf Registration Statement" shall mean a registration statement of
the Company (and any other entity required to be a registrant with respect to
such registration statement pursuant to the requirements of the Securities Act)
that covers Registrable Securities to be offered on a delayed or continuous
basis by the Holder pursuant to Rule 415 under the Securities Act, or any
similar rule that may be adopted by the Commission, and all amendments
(including post-effective amendments) to such registration statement, all
exhibits thereto and all materials incorporated by reference therein.
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"Suspension Event" shall have the meaning set forth in Section 2.2(b)
hereof.
ARTICLE II.
REGISTRATION
Section 2.1 Registration of the Registrable Securities.
(a) Promptly after the receipt by the Company of notice (the
"Registration Notice") that a Holder desires to sell Registrable Securities
held by it to a Person that is not a Holder, the Company shall file a Shelf
Registration Statement providing for the sale of such Registrable Securities by
such Holder in accordance with the terms hereof and uses its best efforts to
cause such Shelf Registration Statement to be declared effective by the
Commission promptly. The Company agrees to use its best efforts to keep the
Shelf Registration Statement continuously effective for the shorter of one
hundred and eighty (180) days or the sale of all of the outstanding Registrable
Securities covered by the applicable Registration Notice. After the expiration
of such period, the Company will use its best efforts to cause the Shelf
Registration Statement to become available for use again within ten (10)
Business Days of receipt by the Company of a Registration Notice from another
Holder holding Registrable Securities. The parties acknowledge and agree that
any Holder may deliver a Registration Notice prior to the Deferred Payment
Date, and that in such event the Company shall use its best reasonable efforts
to file a Shelf Registration Statement providing for the sale of the
Registerable Securities covered by such Registration Notice and to cause such
Shelf Registration Statement to be declared effective by the Commission on or
as soon as practicable following the Deferred Payment Date.
(b) Upon receipt of a Registration Notice pursuant to this Section
2.1 from a Holder, the Company shall promptly notify each of the other Holders
who hold Registrable Securities and, if so requested by any other Holder no
later than ten (10) days following receipt of such written notice, the Company
shall include any additional shares of Registrable Securities sought to be
registered by such other Holder in the registration statement.
(c) Notwithstanding anything herein to the contrary, if the Company
may not use Form S-3 under the Securities Act to register the Registrable
Securities pursuant to a continuous Shelf Registration Statement, the Company
shall use its reasonable efforts to effectively register for public resale each
Holder's Registrable Securities upon receipt of a Registration Notice.
(d) Notwithstanding anything to the contrary herein provided, if
the Company may not use Form S-3 under the Securities Act to register the
Registrable Securities pursuant to a continuous Shelf Registration Statement,
each Holder shall be entitled to submit a Registration Notice to the Company
with respect to Registrable Securities on only two (2) occasions. If the
Company is eligible to use Form S-3 under the Securities Act to register the
Registrable Securities pursuant to a continuous Shelf Registration Statement,
the number of Registration Notices that each Holder shall be entitled to submit
to the Company with respect to the Registrable Securities shall be unlimited.
Notwithstanding anything to the contrary herein provided, a Holder who has
previously exercised its request for registration hereunder may request that
additional shares of Registrable Securities held
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by such Holder be registered by the Company in connection with a demand
registration made by another Holder pursuant to this Article II.
Section 2.2 Company's Undertakings.
(a) Registration. The Company shall, in connection with any Shelf
Registration Statement or other registration statement contemplated in Section
2.1, undertake to do the following:
(i) prepare and file with the Commission the requisite
registration statement to effect registration of the Registrable
Securities sought to be registered as soon as practicable after
receipt of such notice and thereafter use its best efforts to cause
such registration statement to become effective;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for the applicable period or as may be required by
Rule 424 or any similar rule that may be adopted under the Securities
Act, comply with the provisions of the Securities Act with respect to
the issuance or disposition of all securities covered by such
registration statement until such time as all of such securities have
been issued or disposed of in accordance with the intended methods of
issuance or disposition by the Company or the seller or sellers
thereof set forth in such registration statement, and respond as
promptly as practicable to any comments received from the Commission
with respect to any registration statement or any amendment thereto;
provided, however, that (A) the Company shall have ten (10) Business
Days to prepare and file any such amendment or supplement after
receipt of a Registration Notice and (B) the Company shall not in any
event be required to keep the registration statement effective for a
period of more than 180 days after such registration statement becomes
effective;
(iii) furnish, without charge, to each Holder covered by such
registration statement such number of conformed copies of such
registration statement and of each such amendment and supplement
thereto (in each case including all exhibits), such number of copies
of the prospectus contained in such registration statement (including
each preliminary prospectus and any summary prospectus) and such other
documents as such Holders may reasonably request to facilitate the
public sale or other disposition of the Registrable Securities;
(iv) use its best efforts to register or qualify the
Registrable Securities by the time the related registration statement
is declared effective by the Commission under such other securities or
blue sky laws of such jurisdictions as each Holder covered by such
registration statement may reasonably request, to keep such
registration or qualification in effect during the period such
registration statement is required to be kept effective or during the
period offers or sales are being made by a Holder covered by such
registration statement (provided, however, that the Company shall not
in any event be required to keep such registration or qualification in
effect for a period of more than 180 days after such registration or
qualification becomes effective), and take any other action which may
be reasonably necessary or advisable to enable each Holder to
consummate the disposition in such
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jurisdictions of the Registrable Securities owned by such Holder,
except that the Company shall not for any such purpose be required to
(A) qualify generally to do business as a foreign corporation in any
jurisdiction or register as a broker or dealer in any jurisdiction
wherein it would not but for the requirement of this Section 2.2(a) be
obligated to be so qualified, or registered, to (B) subject itself to
taxation in any such jurisdiction, or to (C) execute a general consent
to service of process in any jurisdiction in which it has not executed
such a consent;
(v) notify each Holder covered by such registration
statement at any time when a prospectus relating to any of the
Registrable Securities is required to be delivered under the
Securities Act upon discovery that, or upon the happening of any event
as a result of which, the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact necessary to make
the statements therein not misleading in light of the circumstances
under which they were made, and at the request of any such Holder,
prepare and furnish to such Holder a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary
so that, as thereafter delivered to the purchasers of such Registrable
Securities, such prospectus shall not include an untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein not misleading in light of the circumstances under
which they were made;
(vi) notify each Holder covered by such registration
statement (A) when any registration statement and any post-effective
amendment thereto have become effective, (B) when any amendment or
supplement to a prospectus has been filed with the Commission, (C) of
the issuance by the Commission or any state securities authority of
any stop order suspending the effectiveness of the registration
statement or any part thereof or the initiation of any proceedings for
that purpose, or (D) if the Company receives any notification with
respect to the suspension of the qualification of the Registrable
Securities for offer or sale in any jurisdiction or the initiation of
any proceeding for such purpose;
(vii) use its best efforts to comply with all applicable
rules and regulations of the Commission, and make generally available
to its security holders, as soon as practicable, a consolidated
earnings statement meeting the requirements of Rule 158 (which need
not be audited) for the twelve-month period (A) commencing at the end
of any fiscal quarter in which Registrable Securities are sold to
underwriters in a firm or best efforts underwritten offering or (B) if
not sold to underwriters in such an offering, beginning with the first
month of the Company's first fiscal quarter commencing after the
effective date of the Shelf Registration Statement; and
(viii) make every reasonable effort to obtain the withdrawal
of any order suspending the effectiveness of any registration
statement, or any part thereof.
Each Holder agrees by acquisition of Registrable Securities that upon
receipt of any notice from the Company of the happening of any event of the
kind described in Section 2.2(a)(v), such Holder will forthwith discontinue its
disposition of Registrable Securities pursuant to the registration statement
relating to such Registrable Securities until such time as the supplement is
provided.
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(b) Delay or Suspension of Registration. Notwithstanding anything
to the contrary set forth in this Agreement, the Company shall not be required
to file any registration statement, or to amend or supplement any registration
statement previously filed, as the case may be, when, but only so long as, the
Company is in possession of material non-public information which, in the
exercise of its reasonable judgment, the Company deems advisable not to
disclose in a registration statement (such circumstances being referred to as a
"Suspension Event"), which material information may relate, including without
limitation, to a financing project or a pending acquisition, merger or other
material corporate reorganization to which the Company is or is expected to be
a party; provided, however, that the Company shall advise each Holder seeking
registration of Registrable Securities in writing as soon as any such delay is
no longer applicable, and in no event will any such delay be exercised by the
Company more than once in any twelve (12) month period and, provided further,
however, that such delay shall not exceed thirty (30) days, and provided
further, however, that the 180 day time period referred to in Sections 2.1(a)
and 2.2(a)(ii) and (iv), and any other time periods with which a Holder must
comply during such registration periods hereunder shall be tolled for the
period of delay exercised by the Company.
(c) Following the effectiveness of a registration statement and
the filings with any state securities commission, each Holder agrees that it
will not effect any sales of the Registrable Securities pursuant to such
registration statement or any such filing at any time after it has received
notice from the Company to suspend sales as a result of the occurrence or
existence of any Suspension Event or so that the Company may correct or update
the registration statement or such filing. The Holder may recommence effecting
sales pursuant to the registration statement or such filings after the earlier
of thirty (30) days or receipt of further notice to such effect from the
Company, which notice shall be given by the Company not later than five (5)
days after the conclusion of any such Suspension Event.
(d) Expenses of Registration. The Company shall bear all expenses
incident to the Company's performance of or compliance with this Agreement,
including, without limitation, all registration and filing fees, fees and
expenses of compliance with securities or blue sky laws, listing fees, printing
expenses, messenger and delivery expenses, fees and expenses (not to exceed
$2,500) of no more than one counsel representing the Holders in connection with
any Shelf Registration Statement, and fees and disbursements of counsel for the
Company and all independent certified public accountants and other persons
retained by the Company in connection with any Shelf Registration Statement
(all such expenses being herein referred to as the "Registration Expenses").
Except as otherwise provided above, the Company shall not bear any fees or
disbursements of counsel for any Holder, transfer taxes or underwriting
discounts and commissions.
(e) Listing of the Registerable Securities. The Company shall take
such actions as are necessary and within its control to cause the Registrable
Securities to become listed, and thereafter to continue to be listed, for
trading on the New York Stock Exchange.
Section 2.3 Information to be Furnished. Each Holder seeking to
register Registrable Securities in a given registration statement shall furnish
the following information and documents within a reasonable period of time (as
determined by the Company) prior to the filing of such
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registration statement, or an amendment or supplement thereto, as the case may
be, upon the request of the Company:
(a) Each such Holder shall furnish to the Company all information
required by the Securities Act to be furnished by sellers of securities for
inclusion in such registration statement, together with all such other
information which such Holders have or can reasonably obtain and which may
reasonably be required by the Company in order to have such registration
statement become effective and such securities qualified for sale under
applicable state securities laws.
(b) The Company, before filing such registration statement, or an
amendment or supplement thereto, as the case may be, will furnish copies of
such documents to legal counsel selected by such Holders. In addition, the
Company will make available for inspection by such Holders or any underwriter,
attorney or other agent of such Holders or underwriter all information
reasonably requested by such persons. All information provided to such
Holders, underwriter or any attorney or agent of the Holders or underwriter
shall be kept strictly confidential by such Holders, underwriter or attorney or
agent of such Holders or underwriter.
(c) Each such Holder also shall notify the Company in writing upon
completion of such offer or sale or at such time as such Holder no longer
intends to make offers or sales under such registration statement.
Section 2.4 Conditions to Company's Obligations. The obligations of
the Company to cause the Registrable Securities owned by a Holder to be
registered under the Act are subject to each of the following limitations,
conditions and qualifications:
(a) If any such Holder does not provide the information reasonably
requested by the Company in connection with any registration statement as
promptly as practicable after receipt of such request, but in no event later
than twenty-one (21) days thereafter, the Company's requirements to effect such
registration with respect to the Registrable Securities held by such Holder
shall be suspended until receipt of such information.
(b) In connection with and as a condition to the Company's
obligations with respect to a demand registration resulting from receipt by the
Company of a Registration Notice, each Holder covenants and agrees that (i)
upon receipt of any notice from the Company contemplated by Section 2.2(a)(v)
or Section 2.2(b), such Holder shall not offer or sell any securities pursuant
to the registration statement until such Holder receives copies of the
supplemented or amended prospectus contemplated by Section 2.2(a)(v) hereof and
receives notice that any post-effective amendment has become effective, and, if
so directed by the Company, such Holder will deliver to the Company (at the
expense of the Company) all copies in its possession, other than permanent file
copies then in such Holder's possession, of the prospectus as amended or
supplemented at the time of receipt of such notice; (ii) such Holder and any of
its officers, directors or Affiliates, if any, will comply with the provisions
of Rules 101 and 102 of Regulation M under the Exchange Act as applicable to it
in connection with sales of Registrable Securities pursuant to the registration
statement; and (iii) such Holder and any of its officers, directors or
Affiliates, if any, will enter into such written agreements as the Company
shall reasonably request to ensure compliance with clause (ii) above.
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Section 2.5 Indemnification.
(a) Indemnification by the Company. The Company shall, and hereby
does, indemnify and hold harmless each Holder, its directors and officers and
any underwriter engaged in connection with the sale of Registrable Securities
pursuant to this Agreement, and each other Person, if any, who controls such
Holder or any such underwriter within the meaning of the Section 15 of the
Securities Act or Section 20 of the Exchange Act, against any losses, claims,
damages or liabilities, joint or several, to which such Holder or any such
director or officer or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Shelf Registration
Statement or any other registration statement under which Registrable
Securities were registered under the Securities Act, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein in light of the circumstances under which they were made not
misleading, and the Company will reimburse such Holder and each such director,
officer, underwriter and controlling person of such Holder for any legal or any
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, liability, action or proceeding; provided that
the Company shall not be liable in any such case to the extent that any such
loss, claim, damage, liability (or action or proceeding in respect thereof) or
expense arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such Shelf Registration
Statement or other registration statement, any such preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement in reliance upon
and in conformity with written information furnished to the Company by such
Holder expressly for use in the preparation thereof; and provided further that
the Company shall not be liable to any Person, in any such case to the extent
that any such loss, claim, damage, liability (or action or proceeding in
respect thereof) or expense arises out of such Person's failure to send or give
a copy of the final prospectus, as the same may be then supplemented or
amended, to the Person asserting an untrue statement or alleged untrue
statement or omission or alleged omission at or prior to the written
confirmation of the sale of securities covered by such registration statement
to such Person if such statement or omission was corrected in such final
prospectus. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of such Holder or any such director,
officer, underwriter or controlling person and shall survive the transfer of
such Registrable Securities by such Holder.
(b) Indemnification by the Holders. Each Holder agrees to
indemnify and hold harmless (in the same manner and to the same extent as set
forth in Section 2.5(a)) the Company, each director of the Company, each
officer of the Company and each other Person, if any, who controls the Company
within the meaning of Section 15 of the Securities Act, with respect to any
statement or alleged statement in or omission or alleged omission from a Shelf
Registration Statement or any other registration statement under which
Registrable Securities were registered under the Securities Act, any
preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, if such statement or alleged
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company by such Holder
expressly for use in the preparation of such Shelf Registration Statement or
other registration statement, preliminary prospectus, final prospectus, summary
prospectus,
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amendment or supplement. Such indemnity shall remain in full force and effect,
regardless of any investigation made by or on behalf of the Company or any such
director, officer or controlling Person, and shall survive the transfer of such
Registrable Securities by such Holder.
(c) Notices of Claims, etc. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding paragraphs of this Section 2.5,
such indemnified party will, if a claim in respect thereof is to be made
against an indemnifying party, give written notice to the latter of the
commencement of such action; provided that the failure of any indemnified party
to give notice as provided herein shall not relieve the indemnifying party of
its obligations under the preceding paragraphs of this Section 2.5, except to
the extent that the indemnifying party is actually materially prejudiced by
such failure to give notice. In case any such action is brought against an
indemnified party, unless in such indemnified party's reasonable judgment a
conflict of interest between such indemnified and indemnifying parties may
exist in respect of such claim, the indemnifying party shall be entitled to
participate in and to assume the defense thereof, jointly with any other
indemnifying party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party shall not be liable to such
indemnified party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the consent of the
indemnified party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving
by the claimant or plaintiff to such indemnified party of a release from all
liability in respect to such claim or litigation.
(d) Indemnification Payments. The indemnification required by
this Section 2.5 shall be made by periodic payments of the amount thereof
during the course of the investigation or defense, as and when bills are
received or expense, loss, damage or liability is incurred.
(e) Contribution. If the indemnification provided for in this
Section 2.5 from the indemnifying party is unavailable to an indemnified party
hereunder in respect of any losses, claims, damages, liabilities or expenses
referred to therein, then the indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative fault of
the indemnifying party and indemnified parties in connection with the actions
which resulted in such losses, claims, damages, liabilities or expenses, as
well as any other relevant equitable considerations. The relative fault of
such indemnifying party and indemnified parties shall be determined by
reference to, among other things, whether any action in question, including any
untrue statement of material fact or omission or alleged omission to state a
material fact, has been made by, or relates to information supplied by, such
indemnifying party or indemnified parties, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action. The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in Section 2.5(c), any legal or
other fees or expenses reasonably incurred by such party in connection with any
investigation or proceeding.
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The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 2.5(e) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding
paragraph. No Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
If indemnification is available under this Section 2.5, the
indemnifying parties shall indemnify each indemnified party to the full extent
provided herein without regard to the relative fault of said indemnifying party
or indemnified party or any other equitable consideration provided for in this
Section 2.5(e).
(f) The obligation of the indemnifying party to indemnify the
indemnified party under this Section 2.5 shall, in each case, be in addition to
any liability which the indemnifying party may otherwise have hereunder or
otherwise at law or in equity.
Section 2.6 Rule 145.
(a) The Company covenants that, so long as it is subject to the
reporting requirements of the Exchange Act, it shall file any reports required
to be filed by it under the Exchange Act and the rules and regulations adopted
by the Commission thereunder so as to enable any Holder to sell Registrable
Securities in compliance with Rule 145 under the Securities Act.
(b) In connection with any sale, transfer or other disposition by
a Holder of any Registrable Securities to be made in compliance with Rule 145
under the Securities Act, the Company shall cooperate with such Holder to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold and not bearing any Securities Act legend,
and enable certificates for such Registrable Securities to be for such number
of shares and registered in such names as the selling Holder may reasonably
request at least two (2) business Days prior to any sale of Registrable
Securities.
Section 2.7 Forms. All references in this Agreement to a particular
form of registration statement are intended to include, and shall be deemed to
include, references to all successor forms which are intended to replace, or to
apply to similar transactions as, the forms herein referenced.
ARTICLE
ARTICLE III.
MISCELLANEOUS
Section 3.1 Amendments and Waivers. This Agreement may be modified
or amended only by a writing signed by the Company and the Holders who hold an
amount of Registrable Securities at least equal to two thirds (by number of
shares) of all the Registrable Securities then outstanding that are held by
Holders.
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Section 3.2 No Waiver. No failure to exercise and no delay in
exercising, on the Company's or the Holder's part, any right, power or
privilege hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein provided are cumulative and not
exclusive of any rights or remedies provided by law.
Section 3.3 Survival of Agreements. All agreements and covenants
contained herein or made in writing by or on behalf of the Company in
connection with the transactions contemplated hereby shall survive the
execution and delivery of this Agreement.
Section 3.4 Assignment. Except as provided in the following
sentence, ERPM and any Permitted Transferee may not assign or otherwise
transfer its rights and obligations under this Agreement without the express
prior written consent of the Company. ERPM may assign its rights and
obligations under this Agreement to any Affiliate of ERPM (subject to the other
provisions of this Section 3.4, the "Permitted Transferee") without the consent
of the Company. An assignment as permitted by the preceding sentence may only
be made in connection with, and with respect to, a transfer of Registrable
Securities to the applicable party. In connection with any assignment of
rights and obligations under this Agreement, the applicable assignor and
assignee shall provide written notice of such assignment to the Company. No
assignee shall be deemed to be a Permitted Transferee hereunder until the
Company has received a notice with respect to the applicable assignment as
provided in the preceding sentence.
Section 3.5 Binding Effect and Benefits. This Agreement shall be
binding upon and shall inure to the benefit of the Company and ERPM
and their permitted assigns.
Section 3.6 Entire Agreement. This Agreement constitutes the full
and entire understanding and agreement between the parties with regard to the
subjects hereof.
Section 3.7 Severability of Provisions. In case any provision of
this Agreement shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
Section 3.8 Certain Litigation Costs. In the event of litigation
between the Company and a Holder regarding the matters encompassed by this
Agreement, the prevailing party in a final non-appealable judgment from a court
of competent jurisdiction (following such final judgment) shall be promptly
reimbursed by the other party (or parties) thereto for all of its reasonably
incurred out-of-pocket costs and expenses connected directly to the litigation
matters upon which such party has prevailed.
Section 3.9 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if delivered
personally or mailed by certified mail (returned receipt requested) or sent by
recognized overnight delivery service to the parties at the following addresses
or at such other addresses as shall be specified by like notice.
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If to the Company:
American Realty Trust, Inc.
c/o Basic Capital Management, Inc.
00000 Xxxxx Xxxxxxx Xxxxxxxxxx
Xxxxx 000
Xxxxxx, Xxxxx 00000
Attn: Xxxxxx X. Xxxxxxx
Telecopy Number: (000) 000-0000
if to the ERPM:
Equitable Realty Portfolio Management, Inc.
0000 Xxxxxxxxx Xxxxxxxx Xxxx
Xxxxx 000-X
Xxxxxxx, Xxxxxxx 00000-0000
Attn: Xxxxx X. Xxxxxx
Telecopy Number: (000) 000-0000
Notice so given shall be deemed to have been given when received.
Section 3.10 Construction. This Agreement shall be
governed by and construed in accordance with the laws of the State of Texas,
without giving effect to the conflict of laws provisions thereof. The
descriptive headings of the several sections and subsections hereof are for
convenience only and shall not control or effect the meaning of construction of
any of the provisions hereof.
Section 3.11 Counterparts. This Agreement may be executed
in any number of counterparts, each of which shall be deemed to be an original,
but all of which together shall constitute a single original instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
AMERICAN REALTY TRUST, INC.
By: /s/ Xxxx X. Xxxxx
---------------------------------
Name: Xxxx X. Xxxxx
-------------------------------
Title: President
------------------------------
EQUITABLE REALTY PORTFOLIO
MANAGEMENT, INC.
By: /s/ Xxxxxxx X. Xxxxx, Xx.
---------------------------------
Name: Xxxxxxx X. Xxxxx, Xx.
-------------------------------
Title: Vice-President
------------------------------
