INTERCOMPANY AGREEMENT
THIS INTERCOMPANY AGREEMENT (the "Agreement") is made and entered into as
of the ___ day of ______, 1998, by and between Kranzco Realty Trust, a Maryland
real estate investment trust ('Kranzco"), and New America International, Inc.,
a Maryland corporation, which conducts business under the name New America
International (together with its subsidiaries and affiliated entities "NAI").
W I T N E S S E T H:
WHEREAS, Kranzco is a real estate investment trust (a "REIT") under
sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the
"Code") primarily engaged in the business of owning, managing, operating,
leasing, acquiring and expanding neighborhood and community shopping centers;
WHEREAS, NAI, among other things, operates a network (the "NAI Network")
of independently owned, licensed real estate brokers throughout the United
States;
WHEREAS, Kranzco may in certain circumstances determine that it is
prevented from pursuing, or is limited in the manner in which it pursues,
various business opportunities due to its status as a REIT; and
WHEREAS, it is the objective of the parties hereto that to the extent of
their common interests, each party will provide the other with a right of first
opportunity or notification with respect to certain business opportunities made
to each of them, as more fully described herein;
NOW, THEREFORE, in consideration of the premises and mutual undertakings
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by each of the parties hereto, the
undersigned parties hereby agree as follows:
1. Definitions. Except as may be otherwise herein expressly provided,
the following terms and phrases shall have the meanings set forth below:
(a) "REIT Opportunity" means any opportunity, principally within the
United States, to (i) acquire, develop, lease, sell or make any investment in
retail real estate, real estate mortgages, real estate derivatives, or entities
that invest exclusively in or have a substantial portion of their assets in any
of the foregoing, so long as such investment would be consistent with the
requirements of the Code and regulations relating to Kranzco's status as a
REIT; or (ii)
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make any REIT-Qualified Investment. "REIT-Qualified Investment" means an
investment, at least 95% of the gross income from which would qualify under the
95% gross income test set forth in section 856(c)(2) of the Code (or could be
structured so to qualify) and the ownership of which would not cause Kranzco to
violate the asset limitations set forth in section 856(c)(4) of the Code (or
could be structured not to cause Kranzco to violate the section 856(c)(4)
limitations) and which otherwise meets the federal income tax requirements
applicable to REITs, or (ii) any other investments which may be structured in a
manner so as to be REIT-Qualified Investments, as determined by Kranzco.
Kranzco shall have the right from time to time to provide written notice to NAI
specifying certain criteria, reasonably acceptable to NAI, for a REIT
Opportunity in addition to the criteria specified above in this definition of
REIT Opportunity. Any such written notice from Kranzco may be canceled by
written notice given by Kranzco at any time or, with NAI's consent, which shall
not be unreasonably withheld, modified by Kranzco by written notice at any
time. The definition of REIT Opportunity shall be modified as appropriate from
time to time in accordance with any such written notices sent by Kranzco and
reasonably acceptable to NAI.
(b) "Services" means real estate brokerage services, local management
and other maintenance services, and certain other real estate related services
then provided by NAI, including sealed bid sales, due diligence, real estate
auctions and trade barter.
2. Kranzco Right of First Opportunity; Notification Right.
(a) Right of First Opportunity.
(i) During the term of this Agreement, if any REIT Opportunity
becomes available to NAI in which NAI is acting, intends to act or will act as
principal or participate for its own account (a "Principal REIT Opportunity"),
NAI shall first offer such Principal REIT Opportunity to Kranzco. The offer
shall be made by written notice (the "NAI Notice") from NAI to Kranzco, which
NAI Notice shall contain a detailed description of the material terms and
conditions of the Principal REIT Opportunity. Kranzco shall have ten days (the
"Ten-Day Period") from the date of receipt of the NAI Notice to notify NAI in
writing that it has accepted or rejected the Principal REIT Opportunity. If
Kranzco does not respond by the end of the Ten-Day Period, Kranzco shall be
deemed to have rejected the Principal REIT Opportunity. If Kranzco accepts a
Principal REIT Opportunity, but subsequently decides not to pursue such
opportunity, or for any other reason fails to consummate the Principal REIT
Opportunity, Kranzco shall immediately provide written notice that it is no
longer pursuing such Principal REIT Opportunity to NAI. A Principal REIT
Opportunity shall not include the receipt of any commissions in cash or in kind
(including an equity interest in a REIT Opportunity) in connection with NAI
serving as a broker or intermediary in connection with the sale or lease of
retail real estate.
(ii) If Kranzco rejects a Principal REIT Opportunity, or accepts
such Principal REIT Opportunity but thereafter provides, or is required by the
provisions hereof to
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provide, written notice to NAI that it is no longer pursuing such Principal
REIT Opportunity, NAI shall, for a period of one year after the Kranzco
Withdrawal Date (as hereinafter defined), be entitled to consummate the
Principal REIT Opportunity or provide any other person or entity the right to
consummate such Principal REIT Opportunity (A) at a price, and on terms and
conditions, that are not more favorable to NAI in any material respect than the
price and terms and conditions set forth in the NAI Notice relating to such
Principal REIT Opportunity (in the case of price, a change of 10% or more shall
be deemed to be material) or (B) if Kranzco, at any time after the NAI Notice,
negotiated a different price, terms or conditions with a third party where such
Principal REIT Opportunity is derived from, or made available by, a third party
and such different price, terms or conditions were communicated to NAI, then at
a price, and on terms and conditions, that are not more favorable to NAI in any
material respect, than, the price and terms and conditions negotiated by
Kranzco with such third party. If NAI does not enter into a binding agreement
to consummate the Principal REIT Opportunity within such one-year period, or if
the price and terms and conditions are more favorable to NAI in any material
respect than the price and terms and conditions set forth in the NAI Notice
(or, if applicable, than the price and terms and conditions negotiated by
Kranzco with a third party subsequent to the NAI Notice), NAI shall again be
required to comply with the procedures set forth above in Section 2(a)(i) if it
desires to consummate such Principal REIT Opportunity. Kranzco Withdrawal Date
means any one of the following dates, as applicable: (A) the date that Kranzco
notifies NAI that Kranzco has rejected the Principal REIT Opportunity, (B) if
Kranzco does not respond to NAI regarding the Principal REIT Opportunity, the
expiration date of the Ten-Day Period, or (C) if Kranzco accepts the Principal
REIT Opportunity but subsequently ceases to pursue the opportunity, the earlier
of (i) 30 days after the date on which Kranzco ceases to pursue the Principal
REIT Opportunity, (ii) the date of receipt by NAI of written notice from
Kranzco that Kranzco is no longer pursuing the Principal REIT Opportunity or
(iii) notice from NAI, without objection within 15 days from Kranzco, that NAI
asserts Kranzco is not pursuing the Principal REIT Opportunity.
(iii) NAI agrees to use good faith efforts to assist Kranzco in
structuring and consummating any Principal REIT Opportunity which Kranzco is
considering or has accepted on terms determined by Kranzco (including without
limitation structuring such opportunity as a "REIT-Qualified Investment").
(b) Notification of Certain Non-Principal REIT Opportunities. In
addition to the right of first opportunity provided in Section 2(a) hereof with
respect to Principal REIT Opportunities, during the term of this Agreement NAI
shall notify Kranzco in writing of any REIT Opportunity that becomes available
or known to NAI (through its broker members or otherwise) and which is not a
Principal REIT Opportunity and which in the reasonable opinion of NAI meets the
acquisition and investment criteria of Kranzco (provided to NAI by Kranzco from
time to time) (a "Non-Principal REIT Opportunity"). In the event Kranzco
determines to pursue such Non-Principal REIT Opportunity, NAI shall use
good-faith efforts to cause its broker members to, assist Kranzco in
considering and consummating such Non-Principal REIT
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Opportunity. In the event Kranzco consummates a transaction that constitutes a
Non-Principal REIT Opportunity, Kranzco shall pay NAI a fee to be mutually
agreed to by NAI and Kranzco.
(c) Notification Right of Other Investment Opportunities. In the
event that NAI develops or becomes aware of any acquisition or investment
opportunity with respect to real estate during the term of this Agreement
(other than a REIT Opportunity) in which NAI intends to or has the opportunity
to act as principal or participate in for its own account, and NAI is not
interested in pursuing such opportunity, or the opportunity is otherwise
unavailable to NAI, NAI shall immediately notify Kranzco in writing of such
opportunity with such writing to contain a description of all material terms
concerning such opportunity and be delivered to Kranzco with a copy of any
written material or information in NAI's possession regarding such opportunity.
(d) Other Obligations of NAI with respect to the Kranzco Right of
First Opportunity. In furtherance of providing REIT Opportunities for Kranzco
and the resulting rights of first opportunity granted to it hereunder, NAI,
without any additional consideration, shall (i) disseminate acquisition and
investment criteria provided by Kranzco to NAI's broker members, (ii)
disseminate information regarding space available for lease from Kranzco
(including tenant criteria) to its broker members, (iii) provide Kranzco
reasonable access to NAI personnel, NAI broker members and NAI's computer data
bases (other than confidential client information), (iv) cooperate with Kranzco
to develop new shopping centers or re-develop distressed shopping centers for
sale to Kranzco in a mutually agreeable manner, (v) provide Kranzco access to
local property managers within areas in which Kranzco owns retail properties
and (vi) disseminate such other materials and information regarding Kranzco and
its properties as Kranzco may reasonably request.
(e) Limitation on Strategic Alliance. Without the consent of Kranzco,
NAI shall not enter into any type of strategic relationship with any other REIT
or real estate investment or operations type entity, including, without
limitation, any equity investment by any other REIT or real estate investment
or operations type entity in NAI (other than as a result of a purchase of
Common Stock of NAI in the public market), any equity investment by NAI in any
other REIT or real estate investment or operations type entity, entering into
any agreements which provide such entities with rights of first opportunity or
contains cooperation provisions of the type or relating to the matters
contained in this Agreement (other than with respect to consulting
arrangements). Notwithstanding the foregoing, NAI shall be permitted to solicit
assignments from other REITs or real estate investment or operations type
entities with respect to the purchase or sale of real estate or the provision
of real estate related services, subject to Kranzco's rights of first
opportunity and notification contained in this Section 2.
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3. NAI Opportunity to Provide Services.
(a) During the term of this Agreement, if Kranzco requires Services
(a "Services Opportunity"), Kranzco shall engage in discussions with NAI
regarding such Services Opportunity prior to retaining another service provider
to perform such Services unless, in the reasonable judgment of Kranzco,
offering such Services Opportunity to NAI in accordance with this Section 3(a)
would be detrimental to Kranzco. Notwithstanding the foregoing, (1) Kranzco
shall have no obligation to retain NAI to perform any Services for Kranzco and
(2) any Services provided by NAI to Kranzco shall (i) be at market rates and
(ii) on terms and conditions as attractive as the best available for comparable
services offered by NAI or any broker member or affiliated member (to the
extent within NAI's control) of NAI to third parties.
(b) In the event Kranzco desires to purchase any retail real estate
based upon an opportunity provided to Kranzco by someone other than NAI (a
"Purchase Opportunity"), Kranzco shall notify NAI of such Purchase Opportunity
and shall use good-faith efforts to cause the broker for such Purchase
Opportunity to share any brokerage commissions for such Purchase Opportunity
with NAI in accordance with industry practice; provided, however, Kranzco shall
not be required to comply with this Section 3(b) if the Purchase Opportunity is
based upon an exclusive brokerage arrangement or, if in the reasonable judgment
of Kranzco, compliance with this Section 3(b) would be detrimental to the
relationship between Kranzco and such broker or would impede, inhibit or slow
down the proposed transaction. In connection with a Purchase Opportunity in
which NAI will be sharing in the brokerage commission, NAI agrees to perform,
without any consideration, any due diligence services requested by Kranzco.
(c) In the event NAI desires to offer to Kranzco tenants any Services
currently provided by NAI, (a "Tenant Services Opportunity"), NAI shall notify
Kranzco in writing of such Tenant Services Opportunity. Promptly following the
receipt of such notice, Kranzco shall provide NAI with a list of the mailing
addresses of its tenants solely for purpose of NAI soliciting such Tenant
Services Opportunity. If NAI notifies Kranzco of a Tenant Services Opportunity,
Kranzco shall not for a period of six months after NAI notifies Kranzco of a
Tenant Services Opportunity provide a list of the mailing addresses of its
tenants to a competitor of NAI with respect to such Tenant Services
Opportunity.
4. General Terms and Conditions for Rights of First
Opportunity/Notification Rights.
(a) Unless waived or unless agreed upon in connection with a REIT
Opportunity or opportunity to perform Services, each party shall bear its own
expenses with respect to any opportunity to which this Agreement is applicable,
and each party agrees that it shall not be entitled to any compensation from
the other party with respect to any such opportunity.
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(b) A party shall not be required to comply with the right of first
opportunity and notification requirements set forth in this Agreement during
any period in which the other party or any Controlled Affiliate (as hereinafter
defined) of such other party is in default of this Agreement or any other
agreement entered into by the parties hereto or any of their Controlled
Affiliates, if such default is material and remains uncured for fifteen days
after receipt of notice thereof. A "Controlled Affiliate" of a party means any
entity controlled by, controlling or under common control with such party, but
shall not include NAI member brokers not owned by NAI.
(c) Any opportunity which is offered to and accepted by Kranzco under
this Agreement may be entered into by or on behalf of Kranzco or by any
designee which is a Controlled Affiliate of Kranzco. Any opportunity which is
offered to and accepted by NAI under this Agreement may be entered into by or
on behalf of NAI or by any designee which is a Controlled Affiliate of NAI.
(d) All right of first opportunity and notification rights set forth
in this Agreement shall be subordinated to any third party consent and
confidentiality requirements; no party shall be required to comply with the
first opportunity and notification rights set forth in this Agreement if such
compliance would violate any third party requirements.
(e) While it is the intention of the parties to align their businesses
in accordance with the terms of this Agreement, each party shall act
independently in its own best interests, and neither party shall be considered
a partner or agent of the other party or to owe any fiduciary or other common
law duties to the other party.
5. Certain Employee Matters.
(a) NAI and Kranzco shall make reasonable and ongoing efforts to
ensure that members of management of each of NAI and Kranzco are given
appropriate salary, bonus options and other compensation as may be reasonably
necessary to incentivize management to enhance value to shareholders of both
NAI and Kranzco. The Board of Directors of NAI and the Board of Trustees of
Kranzco shall direct each of their compensation committees to take into
consideration the objective set forth in the previous sentence in establishing
compensation levels and performance criteria for management of NAI and Kranzco.
(b) In furtherance of the objective set forth in Section 5(a) hereof,
NAI will grant to each director, officer, employee and consultant of NAI set
forth on Schedule I, five-year options to purchase the number of shares of
Common Stock of NAI (set forth opposite his or her name on Schedule I hereto)
at a price of $2.00 per share, in accordance with the 1998 NAI Stock Option
Plan. In addition, NAI will grant to each of three persons listed on Schedule
II, five-year options to purchase 10,000 NAI Shares at an exercise price of
$2.00 per share.
(c) In connection with the transaction contemplated by this
Agreement, NAI and Kranzco agree to use their best efforts to cause, for a
period of three years from the date of
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this Agreement, (i) Xxxxxx Xxxxxxxxx (President and Chief Executive Officer of
Kranzco) to serve as NAI's Co-Chairman, (ii) Xxxxxx Xxxxxx (Chief Financial
Officer of Kranzco) to serve as NAI's Chief Financial Officer, and (iii)
Xxxxxxx Xxxxxxxxx (Vice President of Kranzco) to serve as NAI'S Chief
Information Officer. NAI hereby acknowledges that Xxxxxx Xxxxxxxxx, Xxxxxx
Xxxxxx and Xxxxxxx Xxxxxxxxx, as officers of Kranzco, will have a primary
responsibility to Kranzco and that none of such individuals are committed to
devoting a specific amount of time to NAI's affairs.
6. Consulting Services.
(a) During the term of this Agreement, Kranzco shall provide NAI with
such consulting services relating to management, administrative, corporate,
accounting, financial, legal, equity offerings, insurance, tax, data
processing, human resources and operational matters as NAI shall from time to
time reasonably request; provided, however, that NAI may terminate the
consulting arrangements provided for in this Section 6(a), such terminations to
be effective any time on or after the fifth anniversary of the date of this
Agreement, by providing Kranzco 90 days prior written notice of its intention
to terminate such consulting arrangement,
(b) In consideration for Kranzco entering into this Agreement, and
providing the consulting services set forth in Section 6(a), NAI shall, during
the terms of this Agreement (or until such earlier date as the consulting
agreement is terminated pursuant to Section 6(a) hereof), pay Kranzco an annual
fee of $500,000, payable in equal monthly installments on the first day of each
month.
7. Cooperation in Equity Offerings. If either Kranzco or NAI shall desire
to engage in a public or private offering of its debt or equity securities (the
"Issuing Party"), then such Issuing Party shall give notice to the other party
and such other party shall cooperate with the Issuing Party in connection with
such offering and shall provide such information and personnel as is reasonably
required in connection with such offering, including, without limitation,
making available the personnel and information necessary to permit the Issuing
Party to (i) prepare any required disclosure documents, (ii) prepare any
required filings with the Securities and Exchange Commission or other
regulatory agencies and (iii) obtain any required consents.
8. General Cooperation. Kranzco and NAI hereby agree that it is in the
best interest of both entities and their shareholders that they cooperate to
the fullest extent possible in the conduct of their respective operations with
the goal of enhancing value to their respective shareholders.
9. Confidentiality. The parties hereto acknowledge that the terms and
conditions of any proposed or consummated REIT Opportunity and opportunity to
perform Services are confidential in nature and will not disclose any
information relating thereto or the fact that the other party is considering
such opportunity, except as otherwise permitted by this Agreement.
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10. Specific Performance. Each party hereto hereby acknowledges that the
obligations undertaken by it pursuant to this Agreement are unique and that the
other party hereto would likely have no adequate remedy at law if such party
shall fail to perform its obligations hereunder, and such party therefore
confirms that the other party's right to specific performance of the terms of
this Agreement is essential to protect the rights and interests of the other
party. Accordingly, in addition to any other remedies that a party hereto may
have at law or in equity, such party shall have the right to have all
obligations, covenants, agreements and other provisions of this Agreement
specifically performed by the other party hereto and the right to obtain a
temporary restraining order or a temporary or permanent injunction to secure
specific performance and to prevent a breach or threatened breach of this
Agreement by the other party hereto. Each party submits to the jurisdiction of
the courts of the State of Maryland for this purpose.
11. Affiliates. Each party hereto shall cause all entities that are under
its control to comply with the terms hereof.
12. Term. The term of this Agreement shall commence as of the date first
written above and shall terminate on ________, 2008. Notwithstanding the
foregoing, a party hereto may terminate this Agreement if the other party or
any Controlled Affiliate of such other party is in default of this Agreement or
any other agreement entered into by the parties hereto or any of their
Controlled Affiliates, if such default is material and remains uncured for
fifteen days after receipt of notice thereof.
13. Miscellaneous.
(a) Notices. Notices shall be sent to the parties at the following
addresses:
If to Kranzco:
Xx. Xxxxxx Xxxxxxxxx, President
Kranzco Realty Trust
000 Xxxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Facsimile: (000) 000-0000
If to NAI (including any of its subsidiaries and affiliated
entities):
Xx. Xxxxxx Xxxx, Chief Executive Officer
New America International, Inc.
000 X.X. Xxxxx 000
Xxxxxxxxxx, Xxx Xxxxxx 00000
Facsimile: (000) 000-0000
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Notices may be sent be certified mail, return receipt requested, Federal
Express or comparable overnight delivery service, or facsimile. Notice will be
deemed received on the fourth business day following deposit in U.S. mail and
on the first business day following deposit with Federal Express or other
delivery service, or transmission by facsimile. Any party to this Agreement may
change its address for notice by giving written notice to the other party at
the address and in accordance with the procedures provided above.
(b) Reasonable and Necessary Restrictions. Each of the parties hereto
hereby acknowledges and agrees that the restrictions, prohibitions and other
provisions of this Agreement are reasonable, fair and equitable in scope, term
and duration, are necessary to protect the legitimate business interests of the
parties hereto and are a material inducement to the parties hereto to enter
into the transactions described in and contemplated by the recitals hereto.
Each party hereto covenants that it will not xxx to challenge the
enforceability of this Agreement or raise any equitable defense to its
enforcement.
(c) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective successors and
assigns. This Agreement shall not be assigned without the express written
consent of each of the parties hereto. Notwithstanding the foregoing, this
Agreement may be assigned without the consent of any party hereto in connection
with any merger, consolidation, reorganization or other combination of a party
with or into another entity where such party is not the surviving entity.
(d) Amendments; Waivers. No termination, cancellation, modification,
amendment, deletion, addition or other change in this Agreement, or any
provision hereof, or waiver of any right or remedy herein provided, shall be
effective for any purpose unless such change or waiver is specifically set
forth in a writing signed by the party or parties to be bound thereby. The
waiver of any right or remedy with respect to any occurrence on one occasion
shall not be deemed a waiver of such right or remedy with respect to such
occurrence on any other occasion.
(e) Choice of Law. This Agreement and the rights and obligations of
the parties hereunder shall be governed by the laws of the State of Maryland,
without regard to the principles of choice of law thereof.
(f) Severability. In the event that one or more of the terms or
provisions of this Agreement or the application thereof to any person(s) or in
any circumstance(s) shall, for any reason and to any extent be found by a court
of competent jurisdiction to be invalid, illegal or unenforceable, such court
shall have the power, and hereby is directed, to substitute for or limit such
invalid term(s), provision(s) or application(s) and to enforce such substituted
or limited terms or provisions, or the application thereof. Subject to the
foregoing, the invalidity, illegality or enforceability of any one or more of
the terms or provisions of this Agreement, as the same may be amended from time
to time, shall not affect the validity, legality or enforceability of any other
term or provision hereof.
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(g) Entire Agreement; No Third-Party Beneficiaries. This Agreement
(i) constitutes the entire agreement and supersedes all prior agreements,
understandings, negotiations and discussions, whether written or oral, between
the parties hereto with respect to the subject matter hereof, so that no such
external or separate agreement relating to the subject matter of this Agreement
shall have any effect or be binding, unless the same is referred to
specifically in this Agreement or is executed by the parties after the date
hereof; and (ii) is not intended to confer upon any other person any rights or
remedies hereunder, and shall not be enforceable by any party not a signatory
to this Agreement.
(h) Gender; Number. As the context requires, any word used herein in
the singular shall extend to and include the plural, any word used in the
plural shall extend to and include the singular and any word used in any gender
or the neuter shall extend to and include each other gender or be neutral.
(i) Headings. The headings of the sections hereof are inserted for
convenience of reference only and are not intended to be a part of or affect
the meaning or interpretation of this Agreement or of any term or provision
hereof.
(j) Counterparts. This Agreement may be executed in two or more
counterparts, each of which together shall be deemed to be an original and all
of which together shall be deemed to constitute one and the same agreement.
(k) Non-Recourse. This Agreement and all documents, agreements,
understandings and arrangements relating hereto have been entered into or
executed on behalf of Kranzco by the undersigned in his capacity as a trustee
or officer of Kranzco, which has been formed as a Maryland real estate
investment trust pursuant to an Amended and Restated Declaration of Trust of
Kranzco, dated as of June 17, 1992, as amended and restated, and not
individually, and neither the trustees, officers nor shareholders of Kranzco
shall be personally bound or have any personal liability hereunder. NAI shall
look solely to the assets of Kranzco for satisfaction of any liability of
Kranzco with respect to this Agreement. NAI will not seek recourse or commence
any action against any of the shareholders of Kranzco or any of their personal
assets, and will not commence any action for money judgments against any of the
trustees or officers of Kranzco or seek recourse against any of their personal
assets, for the performance or payment of any obligation of Kranzco hereunder.
14. REIT Compliance. Notwithstanding anything in this Agreement to the
contrary, no party to this Agreement shall (i) be obligated to take any action
or inaction, or (ii) take or cause to be taken any action or inaction that could
cause Kranzco to lose its qualification as a REIT under the Code.
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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed by one of its duly authorized corporate officers, as of the date
first above written.
KRANZCO REALTY TRUST
By:
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Name:
Title:
NEW AMERICA INTERNATIONAL, INC.
By:
---------------------------
Name:
Title:
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