UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Under Rule 14a-12
W. P. CAREY & CO. LLC
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(Name of Registrant as Specified in its Charter)
W. P. CAREY & CO. LLC
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee Computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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pursuant to Exchange Act Rule 0-11: (Set forth the amount on which the
filing fee is calculated and state how it was determined)
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previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
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[WPCAREY LOGO]
April 29, 2005
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD WEDNESDAY, JUNE 8, 2005
Dear W. P. Carey & Co. LLC Shareholder:
The 2005 Annual Meeting of Shareholders of W. P. Carey & Co. LLC will be
held at The Waldorf-Astoria Hotel, 301 Park Avenue, New York, New York on
Wednesday, June 8, 2005 at 2:00 p.m. for the following purposes:
- To elect four Class II directors, each to hold office for a three-year
term and until their respective successors are elected and qualified.
- To amend and restate the W. P. Carey & Co. LLC Amended and Restated
Limited Liability Company Agreement to eliminate the classified board
structure and provide for the election of directors annually.
- To transact such other business as may properly come before the meeting.
Only shareholders who owned stock at the close of business on April 11,
2005 are entitled to vote at the meeting. W. P. Carey & Co. LLC mailed this
Proxy Statement, proxy and its Annual Report to shareholders on or about April
29, 2005.
By Order of the Board of Directors
/s/ Susan C. Hyde
SUSAN C. HYDE
Executive Director and Secretary
WHETHER OR NOT YOU ATTEND THE ANNUAL MEETING, IT IS IMPORTANT THAT YOUR SHARES
BE REPRESENTED AND VOTED AT THE MEETING. YOU CAN VOTE YOUR SHARES BY USING THE
TELEPHONE OR THROUGH THE INTERNET. INSTRUCTIONS FOR USING THESE SERVICES ARE SET
FORTH ON THE ENCLOSED PROXY. YOU MAY ALSO VOTE YOUR SHARES BY MARKING YOUR VOTES
ON THE ENCLOSED PROXY, SIGNING AND DATING IT AND MAILING IT IN THE BUSINESS
REPLY ENVELOPE PROVIDED. IF YOU ATTEND THE ANNUAL MEETING, YOU MAY WITHDRAW YOUR
PROXY AND VOTE IN PERSON.
W. P. CAREY & CO. LLC
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PROXY STATEMENT
APRIL 29, 2005
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QUESTIONS & ANSWERS
WHO IS SOLICITING MY PROXY?
The directors of W. P. Carey & Co. LLC are sending you this Proxy Statement and
enclosed proxy.
WHO IS ENTITLED TO VOTE?
W. P. Carey & Co. LLC's shareholders as of the close of business April 11, 2005
(the "Record Date") are entitled to vote at the Annual Meeting.
HOW DO I VOTE?
You may vote your shares either by attending the Annual Meeting, by telephone,
through the Internet, or by completing the enclosed proxy card. To vote by
telephone, call the specially designated telephone number set forth on the
enclosed proxy card. To vote through the Internet, use the Internet voting site
listed on the enclosed proxy card. To vote by proxy, sign and date the enclosed
proxy card and return it in the enclosed envelope. If you return your proxy but
fail to mark your voting preference, your shares will be voted FOR each of the
nominees and FOR adoption of the Amended and Restated Limited Liability Company
Agreement. We suggest that you return a proxy even if you plan to attend the
meeting.
MAY I REVOKE MY PROXY?
Yes, you may revoke your proxy at any time before the meeting by notifying W. P.
Carey & Co. LLC's Secretary or submitting a new proxy, or by voting in person at
the meeting. The mailing address is 50 Rockefeller Plaza, New York, New York
10020. You should mail your notice of revocation of proxy to that address.
HOW MANY SHARES MAY VOTE?
At the close of business on the Record Date, April 11, 2005, W. P. Carey & Co.
LLC had 37,735,178 listed shares outstanding and entitled to vote. Every
shareholder is entitled one vote for each share held.
WHAT IS A "QUORUM?"
A "quorum" is the presence, either in person or represented by proxy, of a
majority of the shares entitled to vote at the meeting. There must be a quorum
for the meeting to be held.
HOW MANY VOTES ARE REQUIRED AT THE MEETING FOR SHAREHOLDER APPROVAL?
Assuming a quorum is present, the affirmative vote of a majority of the issued
and outstanding shares entitled to vote at the meeting is required for the
approval of the Amended and Restated Limited Liability Company Agreement. The
affirmative vote of a majority of the shares actually cast on the matter at the
meeting is required for the election of directors and the approval of any other
routine matter that may be presented at the meeting. In each case, abstentions
and broker "non-votes," which arise when a broker cannot vote on a particular
matter because the matter is not routine and the beneficial owner of the shares
has not given applicable instructions to the broker, are counted for quorum
purposes, but are not counted as votes for or against any matter. For these
reasons, for any matter before the shareholders at the meeting, abstentions and
broker "non-votes" have no effect on whether the votes cast at the meeting are
enough for approval of the matter.
HOW WILL VOTING ON SHAREHOLDER PROPOSALS BE CONDUCTED?
We do not know of other matters that are likely to be brought before the
meeting. However, if any other matters properly come before the Annual Meeting,
your signed proxy gives authority to the persons named in the enclosed proxy to
vote your shares on such matters in accordance with their best judgment.
WHO WILL PAY THE COST FOR THIS PROXY SOLICITATION AND HOW MUCH WILL IT COST?
W. P. Carey & Co. LLC will pay the cost of preparing, assembling and mailing
this Proxy Statement, the Notice of Meeting and the enclosed proxy. In addition
to the solicitation of proxies by mail, we may utilize some of the officers and
employees of our wholly-owned subsidiary, Carey Asset Management Corp. (who will
receive no compensation in addition to their regular salaries) to solicit
proxies personally and by telephone. Currently, we do not intend to retain a
solicitation firm to assist in the solicitation of proxies, but if sufficient
proxies are not returned to us, we may retain an outside firm to assist in proxy
solicitation for a fee estimated not to exceed $10,000, plus out-of-pocket
expenses. We may request banks, brokers and other custodians, nominees and
fiduciaries to forward copies of the proxy statement to their principals and to
request authority for the execution of proxies, and will reimburse such persons
for their expenses in so doing. We expect the total cost of this proxy
solicitation, assuming an outside solicitation firm is not needed, to be
approximately $5,000.
WHEN ARE SHAREHOLDER PROPOSALS FOR THE 2006 ANNUAL MEETING DUE?
We must receive any proposal that a shareholder intends to present at W. P.
Carey & Co. LLC's 2006 Annual Meeting of shareholders no later than December 15,
2005 in order to be included in the Proxy Statement and form of proxy relating
to that meeting.
References in this Proxy Statement to W. P. Carey & Co. LLC or the Company
include W. P. Carey & Co. LLC's affiliates and subsidiaries, except where the
context otherwise indicates.
W. P. CAREY & CO. LLC WILL PROVIDE SHAREHOLDERS, WITHOUT CHARGE, A COPY OF
W. P. CAREY & CO. LLC'S ANNUAL REPORT ON FORM 10-K FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION FOR THE YEAR ENDED DECEMBER 31, 2004, INCLUDING THE
FINANCIAL STATEMENTS AND MANAGEMENT'S REPORT OF INTERNAL CONTROLS OVER FINANCIAL
REPORTING AND SCHEDULES ATTACHED THERETO, UPON WRITTEN REQUEST TO MS. SUSAN C.
HYDE, DIRECTOR OF INVESTOR RELATIONS, AT W. P. CAREY & CO. LLC, 50 ROCKEFELLER
PLAZA, NEW YORK, NEW YORK 10020.
PROPOSAL ONE
ELECTION OF DIRECTORS
W. P. Carey & Co. LLC currently has a classified Board of Directors
consisting of three Class I directors, four Class II directors and four Class
III directors, who will serve until the Annual Meetings of Shareholders to be
held in 2007, 2005 and 2006, respectively, and until their respective successors
are duly elected and qualified. Directors in a class are elected for a term of
three years to succeed the directors in such class whose terms expire at such
annual meeting. However, if the proposal to approve the Amended and Restated
Limited Liability Company Agreement is adopted, the Board of Directors will
cease to have a classified board. In such event, all current directors and those
elected at this year's Annual Meeting will serve until next year's annual
meeting, at which time their terms will end and all newly elected directors will
serve concurrent one-year terms thereafter.
NOMINATING PROCEDURES
The Nominating and Corporate Governance Committee considers candidates for
Board membership suggested by its members and other Board members, as well as
management and shareholders. A shareholder who wishes to recommend a prospective
nominee for the Board should notify our Corporate Secretary or any member of the
Nominating and Corporate Governance Committee in writing with the information
required by our Bylaws, which is set forth in more detail in "Shareholder
Proposals and Other Communications," below.
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Once the Nominating and Corporate Governance Committee has identified a
prospective nominee, the Committee makes an initial determination as to whether
to conduct a full evaluation of the candidate. This initial determination is
based on whatever information is provided to the Committee with the
recommendation of the prospective candidate, as well as the Committee's own
knowledge of the prospective candidate, which may be supplemented by inquiries
to the person making the recommendation or others. The preliminary determination
is based primarily on the need for additional Board members to fill vacancies or
expand the size of the Board and the likelihood that the prospective nominee can
satisfy the evaluation factors described below. If the Committee determines, in
consultation with the Chairman of the Board and other Board members as
appropriate, that additional consideration is warranted, it may request a search
firm to gather additional information about the prospective nominee's background
and experience and to report its findings to the Committee. The Committee then
evaluates the prospective nominee's qualifications. As set forth in our
Corporate Governance Guidelines, there are no firm prerequisites to qualify as a
candidate for the Board, although the Board seeks candidates who possess the
background, skills, expertise, characteristics and time to make a significant
contribution to the Board, W. P. Carey & Co. LLC and its shareholders. At least
annually, the Nominating and Corporate Governance Committee reviews the
qualifications and backgrounds of the directors, as well as the overall
composition of the Board.
The Committee also considers such other relevant factors as it deems
appropriate, including the balance of management and independent directors, the
need for Audit Committee or other expertise and the qualifications of other
potential nominees. In connection with its evaluation, the Committee determines
whether to interview the prospective nominee, and if warranted, one or more
members of the Committee, and others as appropriate, interview prospective
nominees in person or by telephone. After completing this evaluation and
interview, the Committee makes a recommendation to the full Board as to the
persons who should be nominated by the Board, and the Board determines the
nominees after considering the recommendation and report of the Committee.
NOMINEES FOR THE BOARD OF DIRECTORS
Nominees for election as Class II directors are Francis J. Carey, Eberhard
Faber, IV, George E. Stoddard and Karsten von Koller. If elected, the nominees
will serve as directors until the Annual Meeting of W. P. Carey & Co. LLC in
2008, and until their successors are elected and qualified. However, if the
proposal to approve the Amended and Restated Limited Liability Company Agreement
is adopted, each of the Class I directors (who would otherwise serve until 2007)
and each of the Class II nominees has agreed that each will resign his position
on the Board of Directors, effective at next year's annual meeting. Directors of
all three classes will therefore serve only until the 2006 annual meeting, at
which time all of the then-nominees will be nominated for concurrent one-year
terms, and the classification of the Board will cease. Unless otherwise
specified, proxies will be voted for the election of the named nominees. If a
nominee is unavailable for election, the Board may reduce its size or designate
a substitute. If a substitute is designated, proxies voting on the original
nominee will be cast for the substituted nominee. No circumstances are presently
known that would render the nominees unavailable. Each of the nominees is now a
member of the Board of Directors.
Detailed information on each member of the Board of Directors, including
each Class II nominee to be elected at the meeting, is provided below.
CLASS II DIRECTOR NOMINEES TO SERVE UNTIL THE YEAR 2008
FRANCIS J. CAREY
AGE: 79
Director Since: 1996
Mr. Carey was elected in 2000 as Vice Chairman of the Board of Directors
and Chairman of the Executive Committee of the Board of Directors of W. P. Carey
& Co. LLC. Mr. Carey retired from his position as Vice Chairman in March 2005;
he continues to serve as Chief Ethics Officer of the Company. Mr. Carey served
as Chairman, Chief Executive Officer and a Director of Carey Diversified LLC
from 1997 to
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2000. From 1987 to 1997, Mr. Carey held various positions with W. P. Carey &
Co., Inc. and its affiliates, including President and Director of W. P. Carey &
Co., Inc., and President and Director of CPA(R):10, CIP(R) and CPA(R):12. Mr.
Carey also served as Director of W. P. Carey & Co., Inc. from its founding in
1973 until 1997 and President of that company from 2000 to the present. He has
served since 1990 as President and a Trustee of the W. P. Carey Foundation.
Prior to 1987, he was senior partner in Philadelphia, head of the real estate
department nationally and a member of the executive committee of Reed Smith LLP,
counsel for W. P. Carey & Co. LLC. He served as a member of the executive
committee and Board of Managers of the Western Savings Bank of Philadelphia from
1972 until its takeover by another bank in 1982, and is a former chairman of the
Real Property, Probate and Trust Section of the Pennsylvania Bar Association. He
served as a member of the Board of Overseers of the School of Arts and Sciences
at the University of Pennsylvania from 1983 to 1990. He has served as a trustee
of Germantown Academy in Fort Washington, Pennsylvania from 1961 to the present,
and as its President from 1966 to 1972. He has also served as a member of the
Board of Trustees and executive committee of the Investment Program Association
from 1990 to 2000, and as its Chairman from 1998 to 2000, and served on the
Business Advisory Council of the Business Council for the United Nations from
1994 to 2002. He has served since 2002 on the Board of Trustees of the Maryland
Historical Society and since 2004 as Senior Warden of St. Martin's in the Field
Episcopal Church in Biddeford Pool, Maine. He holds A.B. and J.D. degrees from
the University of Pennsylvania and completed executive programs in corporate
finance and accounting at Stanford University Graduate School of Business and
the Wharton School of the University of Pennsylvania. Mr. Carey is the brother
of Wm. Polk Carey.
EBERHARD FABER, IV*
AGE: 68
Director Since: 1998
Mr. Faber was elected to the Board of Directors of W. P. Carey & Co. LLC in
1998 and is currently Chairman of the Board of King's College, Wilkes-Barre, PA.
Mr. Faber held various posts with Eberhard Faber Inc., the worldwide
manufacturer of writing products and art supplies, serving as Chairman and CEO
from 1973 until 1987, when the company merged into Faber-Castell Corporation. He
served as a Director of the Federal Reserve Bank of Philadelphia from 1980 to
1986, chairing its Budget and Operations Committee, and was Chairman of the
Board of Citizen's Voice Newspaper from 1992 to 2002. Currently, he is a member
of the Northeast Pennsylvania Advisory Board of PNC Bank, N.A., where he served
as a Director from 1994 to 1998, Trustee of the Geisinger Wyoming Valley
Hospital and the Eberhard L. Faber Foundation, and a Borough Councilman of Bear
Creek Village. In addition to graduating from Princeton University magna cum
laude, he was a member of Phi Beta Kappa while serving as Chairman of The Daily
Princetonian, and was a Fulbright Scholar and teaching fellow at the University
of Caen in France.
GEORGE E. STODDARD
AGE: 89
Director Since: 2000
Mr. Stoddard was appointed to the Board of Directors of W. P. Carey & Co.
LLC in 2000 and serves as Chairman of the Investment Committee. He is also the
Co-Chief Investment Officer and Senior Managing Director of W. P. Carey & Co.
LLC. From 1979 to 2000, Mr. Stoddard was Chairman of the Investment Committee of
W. P. Carey & Co., Inc. Mr. Stoddard was until 1979 officer-in-charge of the
Direct Placement Department of The Equitable Life Assurance Society of the
United States (Equitable), with responsibility for all activities related to
Equitable's portfolio of corporate investments acquired through direct
negotiation. Mr. Stoddard was associated with Equitable for over 30 years. He
holds an A.B. degree from Brigham Young University, an M.B.A. from Harvard
Business School and an LL.B. from Fordham University Law School.
KARSTEN VON KOLLER*
AGE: 65
Director Since: 2003
Dr. von Koller was elected to the Board of Directors of W. P. Carey & Co.
LLC in December 2003. Since October 1, 2004 he has served as Chairman of Lone
Star Germany, GmbH, Frankfurt am Main.
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Dr. von Koller is the former Chairman and Member of the Board of Managing
Directors of Eurohypo AG. Prior to this, from 1984 through 2001, he was a member
of the Board of Managing Directors of RHEINHYP Rheinische Hypothekenbank AG
(Commerzbank group) where he was responsible for the bank's commercial real
estate lending activities outside Germany. Dr. von Koller was an Executive Vice
President of Berliner Handels-und Frankfurter Bank (BHF-BANK), Frankfurt, and
was responsible for the bank's corporate customer business in northern and
western Germany and in western industrial countries from 1981 through 1984.
Before holding this position, from 1977 through 1980, he served as Senior Vice
President and co-manager of the New York branch of BHF-BANK. From 1971 through
1976, he served in the syndicated loan and investment banking department of
BHF-BANK, Frankfurt am Main. Dr. von Koller studied law at the Universities of
Bonn and Munich and is a graduate of the Harvard Business School.
CLASS I CONTINUING DIRECTORS
GORDON F. DUGAN
AGE: 38
Director Since: 1997
Mr. DuGan, President and CEO of W. P. Carey & Co. LLC, joined W. P. Carey &
Co. as Assistant to the Chairman in 1988 and in 1995 was elevated to Senior Vice
President in the Acquisitions Department. From October 1995 until February 1997
he was chief financial officer of a Colorado-based wireless communications
equipment manufacturer. Mr. DuGan rejoined W. P. Carey & Co. as Deputy Head of
Acquisitions in February 1997, and was elected to Executive Vice President and
Managing Director in June 1997, was elevated to President in 1999, elevated to
Co-CEO in 2002, and became CEO in March 2005. Mr. DuGan serves as a director,
Vice Chairman and CEO of CPA(R):12, CPA(R):14, CPA(R):15 and CPA(R):16 - Global,
and was Co-Chief Executive Officer of CIP(R) prior to its merger with CPA(R):15
in 2004. He serves as Trustee of the W. P. Carey Foundation. He also serves on
the Board of the National Association of Real Estate Investment Trusts (NAREIT),
the New York Pops and the Hewitt School and is a member of the Young Presidents
Organization. Mr. DuGan received his B.S. in Economics from the Wharton School
at the University of Pennsylvania.
RALPH F. VERNI*
AGE: 62
Director Since: 2003
Mr. Verni was elected to the Board of Directors of W. P. Carey & Co. LLC in
December 2003. Mr. Verni is currently serving on the Advisory Board of
Commonwealth Capital Ventures, L.P. I, II and III, venture capital funds. In
addition he serves on the Board of Directors and Compensation Committee for the
Macgregor Group, a Boston-based computer software firm serving the investment
management industry. He is also a member of Zurich Financial's five-person
Investment Advisory Board and the Board and Audit Committee of First Pioneer
Farm Credit, ACA, an agricultural lending institution chartered under the
Federal Farm Credit System. Mr. Verni also served as a Director of CIP(R),
CPA(R):12 and CPA(R):15 from 2001 until 2003. Until 2000, he served as
President, CEO and Director of Redwood Investment Systems, a start-up software
firm developing web-based and wireless solutions for investment professionals.
Prior to his service at Redwood Investment Systems, Mr. Verni was President and
CEO of State Street Research & Management (State Street Research), Metropolitan
Life's investment management subsidiary located in Boston. Mr. Verni joined
State Street Research in 1992 after serving 10 years as Executive Vice
President, Board member and Chief Investment Officer of The New England Mutual
Life Insurance Company (The New England). While at The New England, he founded
and served as President and Chief Executive Officer of New England Investment
Companies (CDC-NVEST today), a holding company of over ten money management
firms. At State Street Research and The New England, Mr. Verni served as
Chairperson of their various mutual funds. Prior to joining The New England, he
spent sixteen years in a variety of information systems and investment
management positions at The Equitable Life Assurance Society of the United
States (part of AXA Group today). Mr. Verni received a B.A. from Colgate
University, an M.B.A. from Columbia University, an Advanced Professional
Certificate in Finance from the NYU Graduate School of Business, and a
Certificate
5
from the AIMR/Harvard Investment Management Workshop, and is a Chartered
Financial Analyst. He is an Emeritus Trustee of Colgate University's Board of
Directors and former Chairman of its Investment Committee, where he currently
serves as an Advisory Member. He is an Emeritus Member of the Advisory Committee
for the MIT Center for Real Estate, having served as its first Chairperson.
Currently he is a member of the Boston Economic Club, the Commercial Club of
Boston, the New York Society of Security Analysts and the CFA Association.
REGINALD WINSSINGER*
AGE: 62
Director Since: 1998
Mr. Winssinger was elected to the Board of Directors of W. P. Carey & Co.
LLC in 1998. Mr. Winssinger is founder and Chairman of National Portfolio, Inc.,
an Arizona-based firm involved in acquisition, financing, management and
construction of commercial, multi-family, industrial and land development real
estate projects. He spent ten years at the Winssinger family real estate
company, a third-generation Belgian real estate enterprise, before coming to the
United States in 1979 to expand their investment activity. Over a 20-year period
he created and managed a $500 million portfolio of U.S. real estate investment
for U.S. and European investors. He later formed Horizon Real Estate Group,
Inc., doing business as NAI Horizon in Phoenix, Arizona, a full service real
estate firm providing brokerage, property management, construction management
and real estate consulting services. That group has now expanded its activity to
the Las Vegas market. Mr. Winssinger currently manages multiple companies with
real estate investments primarily in Arizona, California and Texas. He also
serves as a director of Pierce-Eislen, Inc., and is the Honorary Consul of
Belgium to Arizona. He attended the Sorbonne and is an alumnus of the University
of California at Berkeley.
CLASS III CONTINUING DIRECTORS
WM. POLK CAREY
AGE: 74
Director Since: 1996
Mr. Carey, Chairman of the Board of Directors of W. P. Carey & Co. LLC, has
been active in lease financing since 1959 and a specialist in net leasing of
corporate real estate property since 1964. He also served as the Co-Chief
Executive Officer of W. P. Carey & Co. LLC from 2002 until March 2005. Before
founding W. P. Carey & Co., Inc. in 1973, he served as Chairman of the executive
committee of Hubbard, Westervelt & Mottelay (now Merrill Lynch Hubbard), head of
Real Estate and Equipment Financing at Loeb Rhoades & Co. (now Lehman Brothers),
head of Real Estate and Private Placements, director of Corporate Finance and
Vice Chairman of the Investment Banking Board of duPont Glore Forgan Inc. A
graduate of the University of Pennsylvania's Wharton School, Mr. Carey also
received his Sc.D. honoris causa from Arizona State University and is a Trustee
of The Johns Hopkins University and of other educational and philanthropic
institutions. He serves as Chairman of the Penn Institute for Economic Research.
Mr. Carey also serves as Chairman of the Board of CPA(R):12, CPA(R):14,
CPA(R):15 and CPA(R):16 - Global, and was Chairman and Co-Chief Executive
Officer of CIP(R) prior to its merger with CPA(R):15 in 2004. Mr. Carey is the
brother of Francis J. Carey.
DR. LAWRENCE R. KLEIN*
AGE: 84
Director Since: 1998
Dr. Klein was elected to the Board of Directors of W. P. Carey & Co. LLC in
1998 and is Benjamin Franklin Professor Emeritus of Economics and Finance at the
University of Pennsylvania and its Wharton School, having joined the faculty of
the University in 1958. He is a holder of earned degrees from the University of
California at Berkeley, the Massachusetts Institute of Technology, and has been
awarded the Alfred Nobel Memorial Prize in Economic Sciences, as well as a
number of honorary degrees. Founder of Wharton Econometric Forecasting
Associates, Inc., Dr. Klein has been counselor to various corporations,
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governments and government agencies, including WealthEffect.com, the Federal
Reserve Board and the President's Council of Economic Advisers. Dr. Klein joined
W. P. Carey & Co., Inc. in 1984 as Chairman of the Economic Policy Committee and
as a Director. He also serves as a Trustee of the W. P. Carey Foundation.
NATHANIEL S. COOLIDGE*
AGE: 66
Director Since: 2002
Mr. Coolidge was elected to the Board of Directors of W. P. Carey & Co. LLC
in 2002 and currently serves as Chairman of its Audit Committee. Mr. Coolidge,
former Senior Vice President of John Hancock Mutual Life Insurance Company,
retired in 1996 after 23 years of service. From 1986 to 1996, Mr. Coolidge
headed the Bond and Corporate Finance Department, which was responsible for
managing its entire fixed income investments portfolio. Prior to 1986, Mr.
Coolidge served as Second Vice President and Vice President. Mr. Coolidge is a
graduate of Harvard University and served as a U.S. naval officer.
CHARLES C. TOWNSEND, JR.*
AGE: 77
Director Since: 1998
Mr. Townsend was elected to the Board of Directors of W. P. Carey & Co. LLC
in 1998 and currently serves as Lead Director. Mr. Townsend is an Advisory
Director of Morgan Stanley & Co., having held such position since 1979. He is
also a director of Cass County Iron Co. Mr. Townsend was a Partner and a
Managing Director of Morgan Stanley & Co. from 1963 to 1978. Mr. Townsend holds
a B.S.E.E. from Princeton University and an M.B.A. from Harvard University. Mr.
Townsend served as a director of CIP(R) and CPA(R):14 until 2000.
* Independent Director
EXECUTIVE OFFICERS OF W. P. CAREY & CO. LLC
W. P. Carey & Co. LLC's executive officers are elected annually by the
Board of Directors. Detailed information regarding the executive officers who
are not directors as of the date of this Proxy Statement is set forth below.
JOHN J. PARK
AGE: 40
Mr. Park is a Managing Director and Chief Financial Officer of W. P. Carey
& Co. LLC. Mr. Park became a First Vice President of W. P. Carey & Co. in April
1993 and a Senior Vice President in October 1995. Mr. Park joined W. P. Carey &
Co., Inc. as an Investment Analyst in December 1987 and became a Vice President
in July 1991. Mr. Park received a B.S. in Chemistry from the Massachusetts
Institute of Technology in 1986 and an M.B.A. in Finance from the Stern School
of New York University in 1991. Mr. Park serves on the Board of the Coalition of
Publicly Traded Partnerships. Mr. Park is also Managing Director and Chief
Financial Officer of CPA(R):12, CPA(R):14, CPA(R):15 and CPA(R):16 - Global, and
held the same positions with CIP(R) prior to its merger with CPA(R):15 in 2004.
DOUGLAS E. BARZELAY
AGE: 57
Mr. Barzelay joined W. P. Carey & Co. LLC as General Counsel in January
2005. Prior to joining W. P. Carey & Co. LLC, Mr. Barzelay was a partner at the
law firm Patterson, Belknap, Webb & Tyler LLP in New York where his practice
included corporate and securities matters, international transactions and
mergers and acquisitions. From 1986 through 1995, he held several positions at
Dime Bancorp, Inc. including as General Counsel from 1989 through 1995, where he
was responsible for all legal affairs of the company and its in-house legal
department. Mr. Barzelay received a B.A. from Yale University in 1969 and a J.D.
from
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Harvard Law School in 1973. Mr. Barzelay is also General Counsel of CPA(R):12;
CPA(R):14; CPA(R):15 and CPA(R):16 - Global.
THOMAS E. ZACHARIAS
AGE: 51
Mr. Zacharias, Managing Director and Chief Operating Officer, joined W. P.
Carey & Co. LLC in April 2002. He currently also serves as Managing Director and
Chief Operating Officer of CPA(R):12, CPA(R):14 and CPA(R):15, and as President
of CPA(R):16 - Global. Prior to joining W. P. Carey & Co. LLC, Mr. Zacharias was
a Senior Vice President of MetroNexus North America, a Morgan Stanley Real
Estate Funds Enterprise capitalized for the development of internet data
centers. Prior to joining MetroNexus in October 2000, Mr. Zacharias was a
Principal at Lend Lease Development U.S., a subsidiary of Lend Lease
Corporation, a global real estate investment management company. Between 1981
and 1998, Mr. Zacharias was a senior officer at Corporate Property Investors
which at the time of its merger into Simon Property Group in 1998, was the
largest private equity REIT. He has over 24 years experience in acquisitions,
financing, development, leasing and asset management in real estate. Mr.
Zacharias received his undergraduate degree, magna cum laude, from Princeton
University in 1976, and a Masters in Business Administration from Yale School of
Management in 1979. He is a member of the Urban Land Institute, International
Council of Shopping Centers and NAREIT, and currently serves as a Trustee of
Groton School in Groton, Massachusetts. Mr. Zacharias previously served as an
independent director of CIP(R) from 1997 to 2001, CPA(R):12 from 1997 to 2000,
CPA(R):14 from 1997 to 2001 and CPA(R):15 in 2001.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS, DIRECTORS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of shares as of the April 11, 2005 Record Date by each of W. P. Carey
& Co. LLC's directors, Chief Executive Officer and executive officers. The
business address of the individuals listed is 50 Rockefeller Plaza, New York, NY
10020. Wm. Polk Carey beneficially owns 35.53%, Francis J. Carey beneficially
owns 1.36% Gordon F. DuGan beneficially owns 1.72%, and John J. Park
beneficially owns 1.02%, respectively, of the shares of W. P. Carey & Co. LLC.
No other director or officer beneficially owns more than 1% of the shares of W.
P. Carey & Co. LLC. The directors and all executive officers as a group
(including current executive officers not named in the Summary Compensation
Table) own approximately 40.27% of the shares.
AMOUNT OF SHARES
NAME BENEFICIALLY OWNED(1) PERCENTAGE
---- --------------------- ----------
Francis J. Carey(2)(11)..................................... 511,939 1.36%
Wm. Polk Carey(3)(11)....................................... 13,408,299 35.53%
Gordon F. DuGan(4)(11)...................................... 649,894 1.72%
Eberhard Faber, IV(5)(6).................................... 26,761 *
Lawrence R. Klein........................................... 7,796 *
Nathaniel S. Coolidge(10)................................... 4,185 *
Charles C. Townsend, Jr.(6)(9).............................. 17,833 *
Reginald Winssinger......................................... 20,018 *
George E. Stoddard(7)(11)................................... 96,270 *
Karsten von Koller(12)...................................... 4,159 *
Ralph F. Verni(12).......................................... 4,159 *
John J. Park(8)(11)......................................... 383,651 1.02%
All Directors and Executive Officers as a Group (14
individuals)(2)-(12)...................................... 15,195,109 40.27%
---------------
* Less than 1%
8
(1) Beneficial ownership has been determined in accordance with the rules of
the Securities and Exchange Commission. Except as noted, and except for any
community property interest owned by spouses, the listed individuals have
sole investment power and sole voting power as to all shares of which they
are identified as being the beneficial owners.
(2) The amount shown includes 363,500 shares which Mr. Carey has the right to
acquire through the exercise of stock options within 60 days under the 1997
Listed Share Incentive Plan.
(3) Includes 5,736,506 shares held by W. P. Carey & Co., Inc. for which Mr.
Carey is deemed to be the beneficial owner. This amount also includes
332,725 shares which Mr. Carey has the right to acquire through the
exercise of stock options within 60 days under the 1997 Listed Share
Incentive Plan. This amount also includes 3,010,730 shares which W. P.
Carey & Co., Inc. has the right to acquire through the exercise of
warrants, which warrants were acquired in connection with the consolidation
of certain CPA(R) REITs with Carey Diversified LLC (the predecessor of W.
P. Carey & Co. LLC) in 1998.
(4) Includes 75,000 shares which Mr. DuGan has the right to acquire through the
exercise of stock options within 60 days under the 1997 Listed Share
Incentive Plan.
(5) Includes 4,675 shares held by the Faber Family Trust, of which Mr. Faber is
a trustee and a beneficiary. Does not include 1,590 shares held by the
Faber Foundation.
(6) The amount shown includes 4,000 shares which each of these directors has
the right to acquire pursuant to stock options exercisable within 60 days
under the W. P. Carey & Co. LLC Non-Employee Director Plan.
(7) The amounts shown include 25,000 shares which Mr. Stoddard has the right to
acquire through the exercise of stock options within 60 days under the 1997
Listed Share Incentive Plan.
(8) The amounts shown include 37,000 shares which Mr. Park has the right to
acquire through the exercise of stock options within 60 days under the 1997
Listed Share Incentive Plan. This amount also includes 50,978 shares held
indirectly by his wife and 1,060 shares held indirectly by his children.
(9) The amount shown includes 2,100 shares held in trust for the benefit of Mr.
Townsend's children and grandchildren, with respect to which Mr. Townsend
disclaims beneficial ownership.
(10) The amount shown includes 2,666 shares which Mr. Coolidge has the right to
acquire pursuant to stock options exercisable within 60 days under the W.
P. Carey & Co. LLC Non-Employee Director Plan.
(11) The amounts shown include 880 shares which each executive officer has the
right to acquire within 60 days under the Company's employee stock purchase
plan, assuming each individual purchased the maximum number of shares he or
she is eligible to purchase and assuming a per-share purchase price of
$28.4155 (based on 85% of the price of the Company's stock on the first day
of trading under the semi-annual purchase period).
(12) The amount shown includes 1,333 shares which each of these directors has
the right to acquire pursuant to stock options exercisable within 60 days
under the W. P. Carey & Co. LLC Non-Employee Director Plan.
COMMITTEES OF THE BOARD OF DIRECTORS
Members of the Board of Directors have been appointed to serve on various
committees of the Board of Directors. The Board of Directors has currently
established a Compensation Committee, an Audit Committee and a Nominating and
Corporate Governance Committee, the functions of which are summarized below. The
Board of Directors has also established an Executive Committee, which has the
authority, subject to certain limitations, to exercise the powers of the Board
of Directors during intervals between meetings of the full Board of Directors,
and an Economic Policy Committee, which is available to render advice on
economic policy matters affecting the Company.
- COMPENSATION COMMITTEE. The Compensation Committee's responsibilities
include setting compensation principles that apply generally to Company
employees; reviewing and making recommendations to the Board of Directors
with respect to compensation for Directors; reviewing the compensation
9
structure for all current key executives, including incentive
compensation plans and equity-based plans; reviewing goals and objectives
relevant to executive officers' compensation, evaluating the executive
officers' performance, and approving their compensation levels and annual
and long-term awards; and reviewing and approving the number of shares,
price per share and period of duration for stock grants under any
approved share incentive plan. There were six Compensation Committee
meetings held during 2004.
- AUDIT COMMITTEE. The Audit Committee has been established to assist the
Board of Directors in monitoring the integrity of the financial
statements and management's report of internal controls over financial
reporting of the Company, the compliance by the Company with legal and
regulatory requirements and the independence, qualifications and
performance of the Company's internal audit function and independent
accountants. Among the responsibilities of the Audit Committee are to
engage an Independent Registered Public Accounting Firm, review with the
Independent Registered Public Accounting Firm the plans and results of
the audit engagement, approve professional services provided by the
Independent Registered Public Accounting Firm, review the independence of
the Independent Registered Public Accounting Firm and consider the range
of audit and non-audit fees. The Committee ratifies the engagement of the
internal auditors and reviews the scope of their internal audit plan. The
Committee also reviews and discusses with management, the internal
auditors and the Independent Registered Public Accounting Firm, the
Company's internal controls and reviews the results of the internal audit
program. There were twelve Audit Committee meetings held during 2004.
- NOMINATING AND CORPORATE GOVERNANCE COMMITTEE. The Nominating and
Corporate Governance Committee is responsible for developing and
implementing policies and practices relating to corporate governance,
including monitoring implementation of W. P. Carey & Co. LLC's corporate
governance policies. In addition, the Committee develops and reviews
background information for candidates for the Board of Directors,
including those recommended by shareholders, and makes recommendations to
the Board regarding such candidates. The Nominating and Corporate
Governance Committee met four times during 2004.
The Board has adopted written charters for each of the Compensation, Audit
and Nominating and Corporate Governance Committees, each of which can be viewed
on our website, www.wpcarey.com, under the heading "WPC Investor Relations."
Written copies of each may also be obtained upon a request submitted to our
Investor Relations department. A copy of the W. P. Carey & Co. LLC Audit
Committee Charter is also attached as Appendix A to this Proxy Statement.
Certain members of the Board are also members of the Investment Committee
of Carey Asset Management Corp., a subsidiary of the Company (Carey Asset
Management). The Investment Committee, which provides services both to the
Company and to its affiliated CPA(R) REITs, reviews proposed property
acquisitions to ensure they satisfy applicable investment criteria. The
Investment Committee is not directly involved in originating or negotiating
potential investments, but instead functions as a separate and final step in the
investment process. Directors of W. P. Carey & Co. LLC who serve on the
Investment Committee include Mr. Stoddard (Chairman), Mr. Coolidge, Mr. Klein,
Mr. Verni and Mr. von Koller. Frank Hoenemeyer, formerly Vice Chairman, Director
and Chief Investment Officer of the Prudential Insurance Company of America, who
is not affiliated with either the Company or the CPA(R) REITs, is also a member
of the Investment Committee.
BOARD MEETINGS AND DIRECTORS' ATTENDANCE
There were four Board meetings held in 2004. No incumbent director attended
fewer than 75% of the total number of Board meetings in 2004 held during the
time each incumbent was a director. Under our Corporate Governance Guidelines,
each director is required to make every effort to attend each Board meeting and
applicable Committee meetings, except in unavoidable circumstances. Nine of our
directors attended our 2004 Annual Meeting.
The independent directors, at the Board of Directors' meeting in December
2004, selected Charles C. Townsend, Jr. as Lead Director, whose primary
responsibility is to preside over periodic executive sessions of the Board in
which management directors and other members of management will not participate.
The Lead Director will serve in this position for a one-year term.
10
BOARD COMMITTEE MEMBERSHIP ROSTER
NOMINATING AND ECONOMIC
NAME EXECUTIVE COMPENSATION AUDIT CORPORATE GOVERNANCE POLICY
---- --------- ------------ ----- -------------------- --------
Wm. Polk Carey...................... X
Francis J. Carey.................... X*
Gordon F. DuGan..................... X
George E. Stoddard.................. X
Charles C. Townsend, Jr. ........... X X* X
Eberhard Faber, IV.................. X X X*
Nathaniel S. Coolidge............... X*
Reginald Winssinger................. X X
Lawrence R. Klein................... X X*
Karsten von Koller.................. X
Ralph F. Verni...................... X**
---------------
* Chairman of Committee
** Financial Expert
The Board of Directors has determined that all directors who serve on the
Compensation, Audit and Nominating and Corporate Governance Committees are
"independent" as defined in the New York Stock Exchange listing standards. That
is, the Board of Directors has determined that none of such directors has a
relationship to W. P. Carey & Co. LLC that may interfere with his independence
from W. P. Carey & Co. LLC and its management.
COMPENSATION OF THE BOARD OF DIRECTORS
W. P. Carey & Co. LLC pays its directors who are not its officers fees for
their services as directors. Such directors receive annual compensation of
$65,000. The annual compensation is comprised of $7,500 in cash payable
quarterly, $7,500 payable quarterly in the form of restricted shares or options
to purchase shares and a $1,250 cash fee per meeting attended. Messrs. Townsend,
Coolidge and Faber each receive an additional $10,000 for serving as the
Chairman of the Compensation, Audit and Nominating and Corporate Governance
Committees, respectively. Officers or employees of W. P. Carey & Co. LLC or its
subsidiaries who are directors are not paid any director fees. Directors who are
members of the Investment Committee of Carey Asset Management receive a fee of
$1,500 per Investment Committee meeting. The Non-Employee Directors' Plan
authorizes the issuance of up to 300,000 shares.
11
EXECUTIVE COMPENSATION
All management functions of W. P. Carey & Co. LLC are provided by its
wholly-owed subsidiaries, Carey Asset Management and Carey Management Services,
Inc. All policy-making functions are carried out by executive officers of Carey
Asset Management Corp. or Carey Management Services, Inc. who hold the same
titles as officers of W. P. Carey & Co. LLC. The following tables set forth
compensation information relating to Mr. Wm. Polk Carey and Mr. DuGan, W. P.
Carey & Co. LLC's Co-Chief Executive Officers during 2004, and the other
executive officers of W. P. Carey & Co. LLC during 2004.
SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
-----------------------------
NUMBER OF
ANNUAL COMPENSATION VALUE OF SECURITIES
----------------------------- RESTRICTED STOCK UNDERLYING ALL OTHER
YEAR SALARY BONUS AWARDS OPTIONS COMPENSATION(9)
---- -------- ---------- ---------------- ---------- ----------------
Wm. Polk Carey(1)............. 2004 $300,000 $1,000,000(5) -- 8,163(7) $32,789
Chairman and Co-CEO 2003 250,000 1,000,000 -- -- 33,525
2002 250,000 1,000,000 -- 6,818(7) 28,655
Gordon F. DuGan(2)............ 2004 600,000 1,649,115(5) -- 10,980(7) 32,789
President and Co-CEO 2003 500,000 1,000,000 -- 101,106(8) 33,525
2002 237,500 1,237,500 -- 6,349(7) 28,655
Francis J. Carey(3)........... 2004 250,000 300,000(5) -- 1,611(7) 32,789
Vice Chairman 2003 250,000 300,000 -- -- 33,525
2002 212,500 300,000 -- -- 28,655
George E. Stoddard............ 2004 250,000 300,000 -- 1,587(7) 32,789
Chief Investment Officer 2003 250,000 300,000 -- -- 33,525
2002 250,000 300,000 -- -- 28,655
John J. Park.................. 2004 250,000 1,000,000(5,6) $499,976(6) 2,978(7) 32,789
Managing Director and 2003(4) 200,000 500,000 594,000 50,000 33,525
Chief Financial Officer 2002 200,000 450,000 -- -- 28,655
---------------
(1) Mr. Wm. Polk Carey was Co-CEO until March 2005.
(2) Mr. DuGan became CEO in March 2005.
(3) Mr. Francis Carey retired as Vice Chairman in March 2005. He remains a
Director and Chairman of the Executive Committee and Chief Ethics Officer.
(4) In February 2004 the Compensation Committee approved a grant of 20,000
restricted shares and 50,000 options in partial payment of 2003
compensation to Mr. Park. The options are exercisable in years seven and
eight from the date of grant. The shares of restricted stock vested or will
vest in six annual installments, beginning on the first anniversary of the
date of grant. Pursuant to this vesting schedule 2,000 shares vest after
each of the first two years, 3,000 shares vest after each of the third and
fourth years and 5,000 shares vest after each of the fifth and sixth years.
See also footnote (6).
(5) A portion of the 2004 bonus amounts included in this column with respect to
Messrs Wm. Polk Carey, DuGan, Francis Carey and Park were deferred and are
to become payable only if and when CPA(R):16 - Global achieves a
non-compounded cumulative distribution return to its shareholders of 6%.
The amounts so deferred were $200,000 for Mr. Wm. Polk Carey, $250,000 for
Mr. DuGan, $60,000 for Mr. Francis Carey, and $100,000 for Mr. Park.
Additional amounts of salary and bonus payments reported in this table have
been deferred under the Company's Partnership Equity Unit ("PEP") Plan.
(6) Mr. Park received a special bonus award of $1,000,000 in September 2004 in
connection with the merger of CIP(R) and CPA(R):15. One half of this amount
was paid in cash and the remainder in 16,233 shares of restricted stock.
These shares of restricted stock vested or will vest in four equal annual
installments, beginning February 15, 2005. The total number of restricted
shares held by Mr. Park at December 31, 2004 was 37,733, with a value of
$1,326,692 based on the closing market price of $35.16
12
for the Company's shares on that date. Mr. Park receives dividends on all
restricted shares held by him as and at the rate payable by the Company to
its shareholders from time to time.
(7) Options granted in connection with the Company's PEP Plan.
(8) Includes 1,106 options granted in connection with the Company's PEP Plan,
and 100,000 options granted in February 2004 in partial payment of 2003
compensation to Mr. DuGan, exercisable in years five to nine from the date
of the grant.
(9) Amounts in this column are contributions by the Company to its
profit-sharing plan on behalf of the named executive officers.
OPTIONS GRANTED IN FISCAL YEAR 2004
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
% OF TOTAL
NUMBER OF OPTIONS EXPIRATION GRANT DATE
NAME SECURITIES (451,155) EXERCISE PRICE DATE PRESENT VALUE(5)
---- ---------- ---------- -------------- ---------- ----------------
Wm. Polk Carey............... 0 -- -- -- --
Gordon F. DuGan.............. 100,000(1) $29.70 2/15/2014 $195,000
9,279(2) $29.78 6/30/2014 21,156
1,701(3) $35.16 12/31/2014 4,235
Total...................... 110,980 24.60% 220,392
Francis J. Carey............. 1,574(2) $29.78 6/30/2014 3,589
37(3) $35.16 12/31/2014 92
Total...................... 1,611 0.36% 3,681
George E. Stoddard........... 1,587(2) 0.35% $29.78 6/30/2014 3,618
John J. Park................. 50,000(4) $29.70 2/15/2014 97,000
2,947(2) $29.78 6/30/2014 6,719
31(3) $35.16 12/31/2014 77
Total...................... 52,978 11.74% 103,796
GRAND TOTAL.................. 167,156 37.05% 659,355
TOTAL OPTIONS GRANTED........ 451,155
---------------
(1) These options were granted on 2/15/2004 and vest in equal annual
installments on the fifth through the ninth anniversaries of the date of
grant.
(2) These options were granted on 6/30/2004 in connection with the Company's PEP
Plan and vest in equal annual installments on the fifth through the ninth
anniversaries of the date of the grant.
(3) These options were granted on 12/31/2004 in connection with the Company's
PEP Plan and vest in equal annual installments on the fifth through the
ninth anniversaries of the date of the grant.
(4) These options were granted on 2/15/2004 and vest in two equal installments
on the seventh and eighth anniversaries of the date of the grant.
(5) Grant date present values have been calculated using Black-Scholes
methodology, using the assumptions detailed below with respect to individual
grants. The 100,000 options granted to Mr. DuGan on 2/15/2004 at a strike
price of $29.70 carry a value of $1.95 per option (utilizing assumptions of
weighted average volatility of 21.39%, weighted average dividend of 8.15%,
weighted average life of 7.0 years, and a weighted average risk-free rate of
return of 3.59%). The 50,000 options granted to Mr. Park on 2/15/2004 at a
strike price of $29.70 carry a weighted average value of $1.94 per option
(utilizing assumptions of weighted average volatility of 21.39%, weighted
average dividend of 8.15%, weighted average life of 7.5 years, and a
weighted average risk-free rate of return of 3.73%). All options granted on
13
6/30/2004 at a strike price of $29.78 carry a weighted average value of
$2.28 per option (utilizing assumptions of weighted average volatility of
21.52%, weighted average dividend of 7.97%, weighted average life of 7.0
years, and a weighted average risk-free rate of return of 4.23%). All
options granted on 12/31/2004 at a strike price of $35.16 carry a weighted
average value of $2.49 per option (utilizing assumptions of weighted average
volatility of 20.66%, weighted average dividend of 7.79%, weighted average
life of 7.0 years, and a weighted average risk-free rate of return of
3.92%).
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 2004
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END
ACQUIRED ON VALUE --------------------------- ---------------------------
EXERCISE (#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------------ -------- ----------- ------------- ----------- -------------
Wm. Polk Carey.......... -- -- 271,816 75,890 $4,016,283 $854,308
Francis J. Carey........ -- -- 402,000 1,611 6,705,320 8,468
Gordon F. DuGan......... -- -- 50,000 143,435 608,000 971,146
George E. Stoddard...... -- -- 25,000 1,587 472,750 8,538
John J. Park............ -- -- 24,666 65,312 299,939 438,836
EQUITY COMPENSATION PLAN INFORMATION
WEIGHTED-
AVERAGE EXERCISE
NUMBER OF SECURITIES PRICE OF
TO BE ISSUED UPON OUTSTANDING NUMBER OF SECURITIES
EXERCISE OF OPTIONS, REMAINING AVAILABLE FOR
OUTSTANDING OPTIONS, WARRANTS AND FUTURE ISSUANCE UNDER
PLAN CATEGORY WARRANTS AND RIGHTS RIGHTS EQUITY COMPENSATION PLANS
------------- -------------------- ---------------- -------------------------
Equity compensation plans approved by
security holders.................... 5,165,617(1) $22.05 2,619,430
Equity compensation plans not approved
by security holders................. -- -- 330,235(2)
(1) Includes warrants to acquire 3,010,730 shares of the Company's stock, which
are held by W. P. Carey & Co. Inc. and were acquired in connection with the
consolidation of certain CPA(R) REITs with the predecessor of the Company in
1998. Of such warrants, 2,284,800 are exercisable at $21 per share and
725,930 are exercisable at $23 per share, in each case until January 2009.
(2) Consists of shares issuable under the Company's employee share purchase
plan. Eligible employees may purchase shares semi-annually with up to a
maximum of 10% of eligible compensation (or $25,000 if less). The purchase
price is 85% of the lower of the market price of the Company's stock on the
first and last day of each semi-annual purchase period. The terms of the
Plan do not limit the aggregate number of shares subject to purchase during
any one purchase period.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee's responsibilities include setting the Company's
executive compensation philosophy and objectives, recommending compensation for
non-management Directors, setting the compensation of executive officers, and
monitoring the Company's general compensation programs. Each member of the
Compensation Committee is an "independent director" (as defined in the Corporate
Governance Listing Standards of the NYSE).
Principles and Objectives. The Compensation Committee's overall objective
is to maintain a compensation system that fosters the long-term goals of the
Company and its shareholders. Central to achieving these goals is the motivation
of our senior leadership group to achieve both the Company's financial and
qualitative objectives. Nurturing a management team that works co-operatively to
meet the challenges of a constantly-
14
changing world is an important part of the value system of our company, as is
our insistence on observance of the highest ethical standards. Our compensation
system needs to remain flexible, and to incorporate qualitative as well as
quantitative judgments, in order to encourage not only achievement of tangible
goals, but maintenance of consistent standards of teamwork, creativity, good
judgment and integrity. We do not believe it would be wise to adopt any rigid
formulae -- whether based on market compensation data or on quantitative
performance measures -- that would restrict our exercise of our best judgment in
taking into account all of the many aspects of performance that make up an
individual's contribution to our Company's success.
Practices. Our decisions regarding executive officer compensation are
primarily based on our assessment of each individual's current and past
contributions, and ability to contribute in the future, to enhancing long-term
shareholder value. We use base salary, annual bonuses, and stock-based awards,
as well as a range of benefits, as tools to help achieve our compensation
objectives. Our approach to the mix of compensation among these elements tends
to favor variable annual bonus awards over fixed base salary, while also
including stock awards and deferred compensation to help promote a long-term
perspective and align management's interest with that of shareholders. In making
discretionary awards -- primarily of cash bonuses, but also from time to time of
stock-based compensation -- we first review the Company's performance against
financial goals that are set at the beginning of each year, to help assure that
our executives remain keenly focused on achieving those objectives. We therefore
also review such additional factors as unforeseen changes in the Company's
operating environment during the current year and the Company's performance over
a multi-year period. We then review individual factors, which include the
nature, scope and level of the individual's responsibilities, and any individual
goals established for an executive or special responsibilities undertaken during
the year, and make judgments about the individual's contributions to the
Company's overall performance. As part of this process, we evaluate the
executive's leadership, teamwork, and commitment to the values of the
organization. This review includes both self-evaluations as well as assessments
by their direct supervisors.
Our process begins each year with a review, assisted by our independent
compensation consultant, of market data concerning compensation of executives in
comparable positions, including both overall compensation levels and individual
components of that compensation. These data are used in setting base salaries
for the coming year. In reviewing market compensation data for this and other
purposes, our intention is to assure that our total compensation remains both
competitive and appropriate in light of market practices.
As part of our process for setting individual bonuses, we also begin early
in the year by reviewing the Company's financial goals for the coming year.
Individual bonuses are then determined after the close of each year. We do not
set individual target bonus ranges, but do review -- again with the assistance
of our independent compensation consultant -- updated comparative market data on
compensation. We then review the Company-wide and individual performance factors
described above, to arrive at a judgment concerning individual bonus awards.
We also evaluate whether to make any stock-based awards. These awards, when
made, consist primarily of grants of restricted stock, which typically vest over
a four-year period following the date of grant, and options, which typically
vest from the fifth through ninth years after the date of grant. We monitor
market compensation data regarding the levels of stock-based compensation awards
to executives in comparable positions, but do not make annual grants as a matter
of course. We may make individual grants in lieu of or in addition to cash
compensation, or in other special circumstances such as the hiring or promotion
of an executive.
Also, although not an aspect of cash or incentive compensation, the Company
seeks to attract and retain executives by providing a variety of benefit plans
and programs, including a profit-sharing plan and a 401(k) plan (both of which
are open to all eligible employees), an employee stock purchase plan under which
all eligible employees may purchase certain amounts of Company stock at a
discount, and a deferred compensation plan, as well as by providing perquisites.
These benefits are generally designed to be competitive with those provided by
other companies with which we compete for talent.
15
Compensation for 2004:
Base Salary. In January 2004, and as noted above, we reviewed, with the
assistance of our independent compensation consultant, market data concerning
base salaries and total cash compensation levels for similarly situated
executives, at a peer group of publicly-traded REITs, based on available
information for the year 2002 (the latest year for which such data was then
available). As a result of this review, we increased base salaries for several
senior executives. At the request of Mr. Wm. Polk Carey, his base salary has for
many years been set well below competitive levels; nevertheless, we determined
that an increase of $50,000 for 2004 to $300,000, was appropriate. We also
determined that an increase in Mr. DuGan's base salary from $500,000 to $600,000
for 2004 was appropriate in light of his additional duties as head of the
Company's Investment Department.
Bonuses. Bonus payments for 2004 reflected our evaluation of both the
Company's and the individual executive's performance as well as the individual's
responsibilities, as discussed above. In particular, we gave weight to the
Company's asset growth, investment volume, level of fundraising for the CPA(R)
REITs, and funds from operations (FFO) growth during 2004, measured against the
Company's targets, as well as to the successful completion of the merger of
CIP(R) and CPA(R):15. Based on our overall evaluations, we generally awarded
year-end bonuses at the same levels as for 2003, except with respect to Mr.
DuGan, who in addition to a $1,000,000 bonus that was awarded based on his
performance as President and Co-CEO (the same amount as for 2003), also received
an aggregate additional bonus of $649,115 for his leadership of the Company's
Investment Department. This additional bonus was determined under formulae
related to compensation of members of that Department that have been in place
for several years. We also determined that there would be a 20% deferral of
bonuses for Wm. Polk Carey, Mr. DuGan (with part of Mr. DuGan's bonus related to
his leadership of the Investment Department subject to a 25% deferral), Mr.
Francis Carey and Mr. Park. These annual bonuses are being deferred, together
with bonus payments to officers in the Investment Department generally, and will
become payable if and when CPA(R):16 - Global achieves a non-compounded
cumulative 6% distribution return to its shareholders, which in turn will
trigger payment of deferred advisory fees to the Company. Mr. Park also received
a special bonus during the year, payable half in cash and the remainder in
restricted stock, in connection with his leadership in effecting the successful
merger of CIP(R) and CPA(R):15.
Stock-based awards. As described above, Mr. Park received a portion of his
bonus award for 2004 in the form of restricted stock. Other than awards to Mr.
DuGan and Mr. Park made with respect to 2003, and regular awards of options that
are made in connection with amounts of compensation deferred under the Company's
PEP Plan, there were no additional stock-based awards to executive officers for
2004.
The Company has been advised by counsel that it is not subject to Section
162(m) of the Internal Revenue Code.
Submitted by the Compensation
Committee:
Charles C. Townsend, Jr., Chairman
Eberhard Faber, IV
Reginald H. Winssinger
16
EMPLOYMENT AGREEMENTS
Each of Gordon F. DuGan, Chief Executive Officer, and John J. Park,
Managing Director and Chief Financial Officer, serves pursuant to an employment
agreement entered into with W. P. Carey & Co., Inc. on April 7, 1997, which has
been assumed by the Company, and which agreement contemplates services to be
rendered for the Company and its subsidiaries. Messrs. DuGan and Park's
employment terms under these agreements were initially through December 31, 2001
and 2000, respectively, but automatically renew each year for an additional
one-year period unless affirmatively terminated with 90-days' advance notice by
either of them or by the Company. The agreements provide for each to receive
base salary (at least at the rate in effect in 1997, but which may be increased)
and incentive compensation to be set by the Company. The agreements provide for
participation in benefit programs, for reimbursement of reasonable business
expenses, and for indemnification from claims arising out of the executive's
performance of services for the Company and its subsidiaries.
Each of Mr. DuGan's and Mr. Park's agreements provides that upon
termination of employment on account of death, disability (as defined in the
agreement), or for cause, payment is to be made of unpaid salary and other
compensation (including disposition fees) already earned, along with payment of
vested employee benefits. In the event of involuntary termination without cause
(other than a termination due to disability or death), termination by the
executive with good reason, and voluntary termination of employment by the
executive within one year after a change of control, each agreement also
provides for severance benefits to be paid on a monthly basis until the earlier
of the first anniversary of the executive's termination of employment or the
violation of any of the agreement's non-compete, confidentiality, or
nonsolicitation requirements. Each monthly severance payment will equal the sum
of the executive's monthly base salary as in effect immediately before his
termination of employment, and an amount equal to 1/12 of any commission,
disposition fees, and other incentive payments (including bonuses) paid to the
executive during the 12 month period ending at the end of the month preceding
the termination of employment. The amount of any severance payments, however,
will be reduced by 75% of any amounts paid to the executive for services,
whether as an employee, consultant or otherwise, during the period that
severance benefits are payable. Each of the agreements also currently states
that, rather than paying severance monthly, the employer can pay a lump sum
equal to a discounted present value of the severance payments to be paid.
For purposes of each agreement, prior to a change in control, the executive
may only be treated as having terminated employment for good reason if the
Company has materially breached its obligations under the agreement. After a
change in control, each executive will generally be treated as having terminated
employment for good reason if the executive terminates employment within 90 days
following any of the following (if they occur without his consent and are not
timely cured): a material adverse change in his duties and responsibilities, a
reduction in his base salary (other than a proportionate adjustment applicable
generally to similarly situated executives), or the relocation of his principal
place of business to a location more than 35 miles outside of Manhattan, New
York. Under the agreements, a change in control will generally occur if a
majority of the members of the Board of the Company is not made up of
individuals nominated by the Board or by members of the family of Wm. Polk Carey
or by the board of certain related entities. After a change in control, the list
of activities that can result in an involuntary termination being treated as
being a termination for cause is limited. The agreements include provisions
barring certain competitive activities for up to 18 months following termination
of employment, and barring solicitation of certain Company employees for two
years following termination of employment.
Mr. DuGan's and Mr. Park's employment agreements have previously been
disclosed as exhibits to the Company's Annual Report on Form 10-K for the year
ended December 31, 2004.
17
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors reports as follows with
respect to the audit of W. P. Carey & Co. LLC's fiscal 2004 audited financial
statements and management's report of internal controls over financial
reporting.
The audit functions of the Committee focus on the adequacy of W. P. Carey &
Co. LLC's internal controls and financial reporting procedures, the performance
of W. P. Carey & Co. LLC's internal audit function and the independence and
performance of W. P. Carey & Co. LLC's independent accountants,
PricewaterhouseCoopers LLP. The Committee meets periodically with management to
consider the adequacy of internal controls and the objectivity of W. P. Carey &
Co. LLC's financial reporting. The Committee discusses these matters with
appropriate internal financial personnel as well as independent accountants. W.
P. Carey & Co. LLC has also engaged KPMG to manage its internal audit function.
The Committee held four regularly scheduled quarterly meetings during 2004, and
also met eight additional times.
Management has primary responsibility for W. P. Carey & Co. LLC's financial
statements and management's report of internal controls over financial reporting
and the overall reporting process, including W. P. Carey & Co. LLC's system of
internal controls. The independent accountants audit the annual financial
statements and management's report of internal controls over financial reporting
prepared by management, express an opinion on the conformity of the audited
financial statements and management's report of internal controls over financial
reporting with accounting principles generally accepted in the United States of
America and discuss with the Committee any issues they believe should be raised
with us. The Committee monitors these processes, relying without independent
verification on the information provided to us and on the representations made
by management and the independent accountants.
The Committee has reviewed and discussed the audited financial statements
and management's report of internal controls over financial reporting with the
management of W. P. Carey & Co. LLC. The directors who serve on the Audit
Committee are all "independent" as defined in the New York Stock Exchange
listing standards and applicable rules of the Securities and Exchange
Commission. That is, the Board of Directors has determined that none of us has a
relationship to W. P. Carey & Co. LLC that may interfere with our independence
from W. P. Carey & Co. LLC and its management.
The Committee has discussed with the independent accountants the matters
required to be discussed by Statement on Auditing Standards No. 61. The
Committee has received written disclosures and the letter from the independent
accountants required by Independence Standards Board Standard No. 1 and has
discussed with the accountants the accountants' independence from W. P. Carey &
Co. LLC. Based on review and discussions of the audited financial statements and
management's report of internal controls over financial reporting of W. P. Carey
& Co. LLC with management and discussions with the independent accountants, the
Audit Committee recommended to the Board of Directors that the audited financial
statements and management's report of internal controls over financial reporting
for the fiscal year ended December 31, 2004 be included in the Annual Report on
Form 10-K for filing with the Securities and Exchange Commission. The Board of
Directors has adopted a formal written charter for the Audit Committee, which
charter is reviewed annually.
Submitted by the Audit Committee:
Nathaniel S. Coolidge, Chairman
Eberhard Faber, IV
Charles C. Townsend, Jr.
Ralph F. Verni
18
FINANCIAL EXPERT
The Board of Directors has determined that Ralph F. Verni, an independent
director and member of the Audit Committee, is a "financial expert" as defined
in Item 401 of Regulation S-K under the Securities Act of 1933, as amended.
FEES BILLED BY PRICEWATERHOUSECOOPERS LLP DURING FISCAL YEARS 2004 AND 2003
The following table sets forth the approximate aggregate fees billed to W.
P. Carey & Co. LLC during fiscal years 2004 and 2003 by PricewaterhouseCoopers
LLP, categorized in accordance with SEC definitions and rules:
2004 2003
---------- ----------
Audit Fees(1)............................................... $ 429,600 $ 508,900
Audit Related Fees(2)....................................... 229,800 53,200
Tax Fees(3)................................................. 1,121,200 1,094,100
All Other Fees(4)........................................... -- --
---------- ----------
Total Fees................................................ $1,780,600 $1,656,200
---------------
(1) AUDIT FEES: This category consists of fees for professional services
rendered for the audit of W. P. Carey & Co. LLC's fiscal 2004 and 2003
financial statements and management's report of internal controls over
financial reporting included in the Annual Reports on Form 10-K, (including
services incurred with respect to rendering an opinion under Section 404 of
the Sarbanes-Oxley Act of 2002) the review of the financial statements and
management's report of internal controls over financial reporting included
in the Quarterly Reports on Form 10-Q for the quarters ended March 31, June
30, and September 30, 2004 and 2003, and other audit services including
certain statutory audits and SEC registration statement review and the
related issuance of comfort letters and consents.
(2) AUDIT RELATED FEES: This category consists of audit related services
performed by PricewaterhouseCoopers LLP and includes primarily services
related to the Section 404 internal control readiness assistance and
accounting consultations in connection with transactions and the audit of
the benefit plan.
(3) TAX FEES: This category consists of fees billed to W. P. Carey & Co. LLC by
PricewaterhouseCoopers LLP for tax compliance and consultation services.
(4) ALL OTHER FEES: No fees were billed for other services rendered by
PricewaterhouseCoopers LLP for the years ended 2004 and 2003.
PRE-APPROVAL POLICIES
The Audit Committee's policy is to pre-approve all audit and permissible
non-audit services provided by the independent accountants. These services may
include audit services, audit-related services, tax services and other services.
Pre-approval is generally provided for up to one year and any pre-approval is
detailed as to the particular service or category of services. The independent
accountant and management are required to report periodically to the Audit
Committee regarding the extent of services provided by the independent
accountant in accordance with this pre-approval, and the fees for the services
performed to date. The Audit Committee may also pre-approve particular services
on a case-by-case basis. For fiscal year 2004, pre-approved non-audit services
included all of those services described above for "Audit Related Fees" and "Tax
Fees."
SHAREHOLDER PROPOSALS AND OTHER COMMUNICATIONS
SHAREHOLDER PROPOSALS
The date by which shareholder proposals must be received by W. P. Carey &
Co. LLC for inclusion in proxy materials relating to the 2006 Annual Meeting of
Shareholders is December 15, 2005.
In order to be considered at the 2006 Annual Meeting, shareholder
proposals, including shareholder nominations for director, must comply with the
advance notice and eligibility requirements contained in
19
W. P. Carey & Co. LLC's By-Laws. The By-Laws provide that shareholders are
required to give advance notice to W. P. Carey & Co. LLC of any business to be
brought by a shareholder before an annual shareholders' meeting. For business to
be properly brought before an annual meeting by a shareholder, the shareholder
must give timely written notice thereof to the Secretary of W. P. Carey & Co.
LLC. In order to be timely, a shareholder's notice must be delivered to or
mailed and received at the principal executive offices of the Company not fewer
than 90 days nor more than 120 days prior to the first anniversary of the
preceding year's annual meeting. In the event that the date of the annual
meeting is advanced by more than 30 days or delayed by more than 60 days from
such anniversary date, notice by the shareholder to be timely must be delivered
not earlier than the 120th day prior to such annual meeting and not later than
the close of business on the later of the 90th day prior to such annual meeting
or the tenth day following the day on which public announcement of the date of
such meeting is first made.
The notice shall set forth:
- as to each person whom the shareholder proposes to nominate for election
or reelection as a director, all information relating to such person that
is required to be disclosed in solicitations of proxies for election of
directors, or is otherwise required, in each case pursuant to Regulation
14A under the Securities Exchange Act of 1934, as amended (including such
person's written consent to being named in the proxy statement as a
nominee and to serving as a director if elected);
- as to any other business that the shareholder proposes to bring before
the meeting, a brief description of the business desired to be brought
before the meeting, the reasons for conducting such business at the
meeting and any material interest in such business of such shareholder
and of the beneficial owner, if any, on whose behalf the proposal is
made; and
- as to the shareholder giving the notice and the beneficial owner, if any,
on whose behalf the nomination or proposal is made, (i) the name and
address of such shareholder, as they may appear on the Company's books,
and of such beneficial owner and (ii) the class and number of shares of
W. P. Carey & Co. LLC which are owned beneficially and of record by such
shareholder and such beneficial owner.
A copy of the Company's By-Laws is available upon request. Such requests
and any shareholder proposals should be sent to Susan C. Hyde, Secretary, W. P.
Carey & Co. LLC, 50 Rockefeller Plaza, New York, NY 10020. These procedures
apply to any matter that a shareholder wishes to raise at the 2006 Annual
Meeting, including those matters raised other than pursuant to 17 C.F.R.
sec. 240.14a-8 of the rules and regulations of the SEC. A shareholder proposal
that does not meet the above requirements will be considered untimely, and any
proxy solicited by W. P. Carey & Co. LLC may confer discretionary authority to
vote on such proposal.
COMMUNICATION WITH THE BOARD
Shareholders who wish to send communications on any topic to the Board, the
Lead Director or the independent directors as a group may do so by writing to
the Lead Director, W. P. Carey & Co. LLC, 50 Rockefeller Plaza, New York, NY
10020. The Nominating and Corporate Governance Committee has approved a process
for handling communications to the Board in which the Corporate Secretary, Susan
C. Hyde, monitors communications from shareholders and provides copies or
summaries of such communications to the directors as she considers appropriate.
The Board will give appropriate attention to written communications that are
submitted by shareholders, and will respond if and as appropriate. Absent
unusual circumstances or as contemplated by committee charters and subject to
any required assistance or advice from legal counsel, Ms. Hyde is primarily
responsible for monitoring communications from shareholders and for providing
copies or summaries of such communications to the directors as she considers
appropriate.
20
PERFORMANCE GRAPH
The graph below provides an indicator of cumulative shareholder returns for
W. P. Carey & Co. LLC as compared with the S&P 500 Stock Index and the NAREIT
Equity Index.
(PERFORMANCE GRAPH)
---------------------------------------------------------------------------------------------------------------------------------
1/1/1998 12/31/1998 12/31/1999 12/31/2000 12/31/2001 12/31/2002 12/31/2003 12/31/2004
---------------------------------------------------------------------------------------------------------------------------------
WPC 100.00 106.71 100.88 119.21 165.63 189.54 247.99 302.10
---------------------------------------------------------------------------------------------------------------------------------
NAREIT Equity Index 100.00 82.50 78.69 99.43 113.29 117.61 161.29 212.22
---------------------------------------------------------------------------------------------------------------------------------
S&P 500 Index 100.00 128.58 155.62 139.84 122.75 95.62 123.05 136.43
---------------------------------------------------------------------------------------------------------------------------------
DIRECTOR INDEPENDENCE
In March 2004, the Board of Directors adopted W. P. Carey & Co. LLC's
Corporate Governance Guidelines. The Guidelines adopted by the Board meet or
exceed the new listing standards adopted during that year by the New York Stock
Exchange. The Guidelines can be found in the "WPC Investor Relations" section of
W. P. Carey & Co. LLC's website (www.wpcarey.com). A copy may also be obtained
upon request from our Secretary, Susan C. Hyde.
Pursuant to the Guidelines, the Board undertook its annual review of
director independence in March 2005. During this review, the Board considered
transactions and relationships between each director or any member of his or her
immediate family and W. P. Carey & Co. LLC and its subsidiaries and affiliates,
including those reported under "Certain Relationships and Related Transactions"
below. The Board also examined transactions and relationships between directors
or their affiliates and members of our senior management or their affiliates. As
provided in the Guidelines, the purpose of this review was to determine whether
any such relationships or transactions were inconsistent with a determination
that the director is independent.
The New York Stock Exchange also requires that the Board of Directors
determine whether a director is "independent" for purposes of the Exchange's
listing standards. The Nominating and Corporate Governance Committee has asked
each director to specify in writing the nature of any material relationships the
director may have with the Company, including, but not limited to, any
relationships that would specifically preclude a
21
finding of "independence" under the Listing Standards. Upon review of these
disclosures, the Board has affirmatively determined that none of the directors
noted as "independent" in this proxy statement has a material relationship with
W. P. Carey & Co. LLC that would preclude such director's independence.
As a result of this review, the Board affirmatively determined that Messrs.
Coolidge, Faber, Klein, Townsend, Verni, von Koller and Winssinger are
independent of the Company and its management under the standards set forth in
the Corporate Governance Guidelines. Messrs. Wm. Polk Carey, Francis Carey,
DuGan and Stoddard are considered affiliated directors because of their
relationship to, or employment as senior executives of, W. P. Carey & Co. LLC
and its affiliates.
CODES OF ETHICS
W. P. Carey & Co. LLC's Board of Directors has adopted a Code of Ethics
which sets forth the standards of business conduct and ethics applicable to all
of our employees, including our principal executive officers and directors. The
Board of Directors has also adopted a Code of Ethics for Chief Executive
Officers and Senior Financial Officers, which contains additional standards for
senior officers. Both of these codes are available on the Company's website
(www.wpcarey.com) in the "WPC Investor Relations" section. We also intend to
post amendments to or waivers from the Code of Ethics (to the extent applicable
to our chief executive officer, principal financial officer and principal
accounting officer) or to the Code of Ethics for Chief Executive Officers and
Senior Financial Officers at this location on the website. Francis J. Carey has
been appointed the Company's Chief Ethics Officer.
CERTAIN TRANSACTIONS
PAYMENTS BY W. P. CAREY & CO. LLC TO RELATED PARTIES
In connection with the acquisition of the operations of Carey Management
LLC in June 2000, the purchase agreement between the Company and Carey
Management LLC provided for a total of up to 2,000,000 shares to be issued over
four years, if certain performance criteria were achieved, to shareholders of
Carey Management LLC, including shares issued in satisfaction of vested
interests held by such individuals in certain benefit plans of Carey Management
LLC. During 2004, 500,000 shares were issued in connection with W. P. Carey &
Co. LLC meeting the performance criteria for the applicable period ended during
2003, making a total of 1,900,000 of the 2,000,000 possible shares that were
earned and paid over the four year period. The agreement has now terminated. Of
the shares issued in 2004, 166,657 were distributed to Mr. Wm. Polk Carey,
32,593 to Mr. DuGan, 1,860 to Mr. Francis Carey and 15,210 to Mr. Park, and
218,260 were distributed to W. P. Carey & Co. Inc.
PAYMENTS TO W. P. CAREY & CO. LLC FROM RELATED PARTIES
Carey Asset Management earns fees as the advisor to the four affiliated
CPA(R) REITs. During 2004, the CPA(R) REITs retained CAM to provide advisory
services in connection with identifying and analyzing prospective property
investments as well as providing day-to-day management services. For services
provided to each of CPA(R):12; CPA(R):14 and CPA(R):15, the advisor earns an
asset management fee and a performance fee, each equal to a percentage of
average invested assets. The payment of the performance fees, however, is
subordinated to specified returns to shareholders. During 2004, the asset
management and performance fees earned by the advisor totaled $45.804 million,
of which approximately half, representing the performance fees, was paid in
restricted shares of the applicable CPA(R) REIT. For services provided to
CPA(R):16 - Global, the advisor earns an asset management fee equal to a
percentage of the average invested assets of CPA(R):16 - Global, of which
one-half is deferred until a threshold return to investors has been received.
During 2004, the asset management fee paid to the advisor was $819 thousand, and
an additional $819 thousand will become payable only if the threshold is met. In
addition, during 2004, in return for performing services related to the CPA(R)
REITs' real estate purchases (other than in connection with the merger of
CPA(R):15 with CIP(R)), the advisor earned structuring, development, acquisition
and mortgage placement fees of $43.185 million, payment of $14.875 million of
which was subordinated and deferred. During 2004, the CPA(R) REITs paid
22
$7.986 million to the advisor in respect of previously subordinated and deferred
fees plus interest thereon. In connection with the merger of CPA(R):15 with
CIP(R), the advisor received acquisition fee and expense payments of $11.493
million, of which $5.108 million was deferred; as well as disposition fees and
subordinated incentive fees, relating to providing a liquidity event for CIP(R),
of $46.359 million. During 2004, CPA(R):16 - Global paid an acquisition expense
allowance of $1.983 million to the advisor in connection with the completion of
acquisitions. Also during 2004, Carey Financial Corporation, an affiliate of W.
P. Carey & Co. LLC, became entitled to receive sales commissions and selected
dealer fees of $32.776 million and $7.636 million, respectively, which were, in
turn, reallowed to unaffiliated broker/dealers, in connection with CPA(R):16 -
Global's best efforts offering of common stock. CPA(R):16 - Global also
reimbursed the advisor for certain of its expenses related to such offering
during 2004, in the aggregate amount of $8.997 million. Because the CPA(R) REITs
do not have their own employees, the advisor employs, directly and through its
affiliate, Carey Management Services, Inc., officers and other personnel to
provide services to the CPA(R) REITs. During 2004, $6.843 million was paid to
the advisor by the CPA(R) REITs to cover such personnel expenses, which amount
includes both cash compensation and employee benefits. Under a similar
arrangement, W. P. Carey & Co., Inc. paid $771 thousand in 2004 to CAM for the
expenses of personnel who performed services for W. P. Carey & Co., Inc. In
addition, pursuant to a cost-sharing arrangement among the advisor, the CPA(R)
REITs, W. P. Carey & Co., Inc. and other affiliates of the advisor, each pays
its proportionate share, based on adjusted revenues, of office rental expenses
at 50 Rockefeller Plaza and of certain other overhead expenses.
LIVHO, INC. TRANSACTION
In connection with the consolidation of the nine CPA(R) partnerships in
1998, W. P. Carey & Co. LLC obtained a hotel in Livonia, Michigan which was not
subject to a lease. W. P. Carey & Co. LLC would be taxed as a corporation if it
received more than a small percentage of its income from the operation of a
hotel. In order to avoid taxation as a corporation, W. P. Carey & Co. LLC in
1998 leased the hotel to Livho Inc., a corporation wholly-owned by Francis J.
Carey, its chairman, pursuant to a two-year lease which was subsequently
modified and extended. Livho Inc.'s rent for 2004 was $1,800,000. Livho, Inc.'s
net loss for 2004 was approximately $1,033,000. Francis J. Carey, as sole
shareholder, did not receive a dividend payment from Livho, as excess cash flow
was applied to rental arrearages due to W. P. Carey & Co. LLC. In March 2005,
the Company approved a plan to sell this property. If the property is sold
pursuant to this plan it is unlikely that Mr. Carey will receive any dividend
payments.
REGINALD WINSSINGER INVESTMENTS
W. P. Carey & Co. LLC director Reginald Winssinger and members of his
family are co-investors with W. P. Carey & Co. LLC in several of the Company's
properties that are located in France. Specifically, Mr. Winssinger and/or his
family members purchased, at the time of and on the same terms as the purchase
of the properties by W. P. Carey & Co. LLC: (i) a 7.2% ownership interest in the
properties leased to multiple tenants in Pantin, France for an original
investment of $139,000, (ii) a 7.2% ownership interest in the property leased to
Tellit Assurances for an original investment of $76,289, (iii) a 7.2% ownership
interest in the property leased to Direction Regional Des Affaires Sanitaires et
Sociales for an original investment of $39,552, (iv) a 5.8% ownership interest
in the property leased to Societe de Traitements DSM Food Specialties for an
original investment of $45,826 and (v) a 15% ownership interest in the
properties leased to Bouyges Telecom SA for an original investment of $525,383.
These properties were purchased between May 1998 and December 2001.
PROPOSAL TWO
AMENDMENT AND RESTATEMENT OF THE W. P. CAREY & CO. LLC AMENDED AND
RESTATED LIMITED LIABILITY COMPANY AGREEMENT TO ELIMINATE THE CLASSIFIED
BOARD STRUCTURE AND PROVIDE FOR THE ELECTION OF DIRECTORS ANNUALLY
W. P. Carey & Co. LLC's Amended and Restated Limited Liability Company
Agreement currently provides that the Board of Directors shall be divided into
three classes, as nearly equal in numbers as the total number of directors
constituting the entire Board of Directors permits, with the term of office of
one class
23
expiring each year. Each year, the shareholders are requested to elect
approximately one-third of the Company's directors to serve for three-year
terms. The term of the Class II directors is set to expire at the 2005 annual
meeting of shareholders, and the terms of the Class I and III directors are set
to expire at the 2007 and 2006 annual meetings, respectively.
In April 2005, the Board of Directors unanimously approved and adopted,
subject to shareholder approval, an amendment to the Company's Limited Liability
Company Agreement to eliminate the classified structure of the Board of
Directors. If this amendment is approved by the shareholders, each director will
hereafter be elected for a one-year term.
The proposed Amended and Restated Limited Liability Company Agreement is
attached to this Proxy Statement as Appendix B and must be approved by the
holders of a majority of the outstanding shares entitled to vote at the annual
meeting.
The Board of Directors believes that it is beneficial to W. P. Carey & Co.
LLC and its shareholders to declassify the Board structure. The elimination of
the classified board structure will allow the Company's shareholders to vote on
all of the directors each year, thereby creating an environment in which all
directors are equally accountable at all times for the Company's performance.
The Board believes that accountability is an important component of good
corporate governance practices and that such practices enhance the Company's
ability to compete and succeed in a highly competitive environment. Also, the
Board believes that the shareholders will have greater flexibility to elect
directors and exercise influence over the Company if directors are subject to
re-election each year.
Among the arguments for retaining a classified Board structure are that the
classified Board structure is designed to help the Board maintain greater
continuity of experience, in that a majority of directors at any given time will
have at least one year of experience with the business and operation of the
Company. Also, a classified Board reduces the possibility of a hostile takeover
of the Company, because a majority of the Board will not be subject to
re-election in any single year. Taking these benefits of classification into
consideration, the Board of Directors nevertheless believes that sound corporate
governance policies and shareholder accountability are of foremost importance to
shareholders.
It will not be known until the conclusion of this year's annual meeting
whether the proposal to amend the Limited Liability Company Agreement will be
approved, and therefore only the Class II directors will be elected at this
year's annual meeting. However, each of the Class I directors and each of the
Class II nominees has agreed that, if this Proposal Two is adopted, each will
resign his position on the Board of Directors, effective at next year's annual
meeting. Thus, if Proposal 2 is adopted, directors of all three classes will
serve only until the 2006 annual meeting, at which time all of the then-nominees
will be elected to concurrent one-year terms, and the classification of the
board will cease.
In connection with amending and restating the Amended and Restated Limited
Liability Company Agreement, certain provisions have been revised to eliminate
or change outdated material. None of such changes is substantive or affects the
rights of shareholders in any way.
The Board of Directors unanimously recommends a vote "FOR" approval of the
Amended and Restated Limited Liability Company Agreement.
24
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based on a review of its records and written representations, W. P. Carey &
Co. LLC believes that during 2004, its officers and directors complied with the
beneficial ownership reporting requirements of the Securities Exchange Act,
except for the following:
NUMBER OF
TRANSACTIONS NOT
NUMBER OF REPORTED ON A
NAME OF REPORTING PERSON LATE REPORTS TIMELY BASIS
------------------------ ------------ ----------------
Francis J. Carey............................................ 1 1
Wm. Polk Carey.............................................. 2 2
Gordon F. DuGan............................................. 3 4
Eberhard Faber, IV.......................................... 1 1
Lawrence R. Klein........................................... 1 1
John J. Park................................................ 1 2
Charles C. Townsend, Jr. ................................... 1 1
George E. Stoddard.......................................... 1 1
Ralph F. Verni.............................................. 1 1
Dr. Karsten von Koller...................................... 2 1
Reginald Winssinger......................................... 1 1
During 2004, the Company made a number of administrative errors and
corrected several administrative errors for prior years, relating to certain
purchases by Mr. Wm. Polk Carey and other transactions by directors and
officers. These administrative errors resulted in several transactions not being
reported in a timely manner, as reflected above. The Company has made changes in
its administrative processes in an effort to minimize such errors going forward.
INDEPENDENT PUBLIC ACCOUNTANTS
From W. P. Carey & Co. LLC's inception, it has engaged the firm of
PricewaterhouseCoopers LLP as its Independent Registered Public Accounting Firm.
It is in the process of engaging PricewaterhouseCoopers LLP as auditors for
2005. A representative of PricewaterhouseCoopers LLP will be present at the
Annual Meeting to make a statement, if he or she desires to do so, and to
respond to appropriate questions from shareholders.
25
APPENDIX A
W. P. CAREY & CO. LLC
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
CHARTER
I. GENERAL
The Audit Committee is appointed by the Board to assist the Board in
monitoring (1) the integrity of the financial statements of the Company, (2) the
compliance by the Company with legal and regulatory requirements and (3) the
independence, qualifications and performance of the Company's internal audit
function and independent auditors.
The Audit Committee shall consist of no fewer than three members. The
members of the Audit Committee shall meet the independence and experience
requirements of the New York Stock Exchange, the Securities Exchange Act of 1934
and the rules and regulations of the Securities and Exchange Commission. The
members of the Audit Committee shall be appointed by the Board on the
recommendation of the Nominating Committee. Each Committee member shall be able
to read and understand financial statements and be financially literate. No
person who beneficially owns 20% or more of the Company's equity securities may
chair the Audit Committee or vote at any Audit Committee proceedings.
The Audit Committee shall have the authority to retain special legal,
accounting or other consultants to advise the Committee, and the Company shall
provide appropriate funding therefor. The Audit Committee may request any
officer or employee of the Company or the Company's outside counsel or
independent auditor to attend a meeting of the Committee or to meet with any
members of, or consultants to, the Committee.
The Audit Committee shall make regular reports to the Board.
II. RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties the Audit Committee shall:
DOCUMENTS/REPORTS REVIEW
1. Review and reassess the adequacy of this Charter annually and submit it
to the Board for approval.
2. Review the annual audited financial statements with management,
including major issues regarding accounting and auditing principles and
practices, the adequacy of internal controls that could significantly affect the
Company's financial statements and the Company's disclosures under the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" section of the Company's Form 10-K. Recommend to the board of
directors that the audited financial statements be included in the company's
Annual Report on Form 10-K filed with the Securities and Exchange Commission.
3. Review the regular internal reports to management prepared by those
responsible for the internal audit function and management's response.
4. Review with financial management and the independent auditors the 10-Q
prior to its filing or prior to the release of earnings. The Chair of the
Committee may represent the entire Committee for purposes of this review.
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INDEPENDENT AUDITORS
5. Appoint or replace the independent auditors, considering independence
and effectiveness and approve the fees and other compensation to be paid to the
independent auditors. The independent auditors are ultimately accountable to the
Audit Committee and the Board, and shall report directly to the Audit Committee.
The Audit Committee may consult with management but may not delegate these
responsibilities.
6. Review the performance of the independent auditors. Such review shall
include a consideration of whether, in order to assure continuing auditor
independence, the lead audit partner or the audit firm itself must be rotated.
7. Review with the independent auditors, out of the presence of management,
internal controls, the fullness and accuracy of the organization's financial
statements and any management letter provided by the auditor and the Company's
response to that letter.
8. Approve the fees paid to the independent auditors.
9. Preapprove all services to be performed by the independent auditors,
including any non-audit services, and cause the Company to properly disclose any
approvals of non-audit services by the Audit Committee. Such preapprovals may be
delegated to a subcommittee of one or more Committee members, provided that
decisions of such subcommittee to grant preapprovals shall be presented to the
full Audit Committee at its next scheduled meeting.
FINANCIAL REPORTING PROCESSES
10. In consultation with the independent auditors and those responsible for
the internal audit function, review the integrity of the organization's
financial reporting processes, both internal and external.
11. Consider the independent auditors judgments about the quality and
appropriateness of the Company's accounting principles as applied in its
financial reporting.
12. Consider and review, if appropriate, major changes to the Company's
auditing and accounting principles and practices as suggested by the independent
auditors, management, or those responsible for the internal audit function.
13. Meet periodically with management to review the Company's major
financial risk exposures and the steps management has taken to monitor and
control such exposures.
14. Meet regularly and separately with management, personnel responsible
for the internal audit function and with the independent auditors to oversee the
Company's internal audit functions and internal controls.
15. Review and discuss with management earnings press releases, including
the use of "pro forma" or "adjusted" non-GAAP information, as well as financial
information and earnings guidance provided to analysts and rating agencies.
PROCESS IMPROVEMENT
16. Meet with the independent auditor prior to the audit to review the
planning and staffing of the audit.
17. Establish regular and separate systems of reporting to the Audit
Committee by each of management, the independent auditors and those responsible
for the internal audit function regarding any significant judgments made in
management's preparation of the financial statements and the view of each as to
appropriateness of such judgments.
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18. Following completion of the annual audit, review separately with each
of management, the independent auditors and those responsible for the internal
audit function any significant difficulties encountered during the course of the
audit, including any restrictions on the scope of work or access to required
information, and management's response.
19. Review any significant disagreement among management and the
independent auditors or those responsible for the internal audit function in
connection with the preparation of the financial statements.
20. Review with the independent auditors, those responsible for the
internal audit function and management the extent to which changes or
improvements in financial or accounting practices, as approved by the Audit
Committee, have been implemented. (This review should be conducted at an
appropriate time subsequent to implementation of changes or improvements, as
decided by the Committee.)
21. Discuss with the independent auditor the matters required to be
discussed by Statement on Auditing Standards No. 61 relating to the conduct of
the audit.
22. Set clear hiring policies for the Company as to employees or former
employees of the independent auditors.
ETHICAL AND LEGAL COMPLIANCE
23. Review activities, organizational structure and qualifications of those
responsible for the internal audit function.
24. Review, with the organization's counsel, legal compliance matters
including corporate securities trading policies.
25. Review, with the organization's counsel, any legal matter that could
have a significant impact on the organization's financial statements.
26. Perform any other activities consistent with this Charter, the
Company's Bylaws and governing law, as the Committee or the Board deems
necessary or appropriate.
27. Oversee the preparation of and approve the report required by the rules
of the Securities and Exchange Commission to be included in the Company's annual
proxy statement.
28. Evaluate the performance of the Audit Committee annually.
29. Oversee:
(a) the receipt, retention and treatment of complaints received by the
Company regarding accounting, internal accounting controls or auditing
matters; and
(b) the procedure for and review, the submission by employees of the
Company of concerns regarding questionable accounting or auditing matters.
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APPENDIX B
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
W. P. CAREY & CO. LLC
(a Delaware limited liability company)
THIS AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT (the
"Agreement") of W. P. CAREY & CO. LLC, a Delaware limited liability company (the
"Company"), dated as of April 25, 2005, is entered into by and among those
Persons who have executed this Agreement or a counterpart hereof, or who become
parties hereto pursuant to the terms of this Agreement.
WITNESSETH:
WHEREAS, this Agreement shall constitute the Limited Liability Company
Agreement of the Company, and shall be binding upon all Persons (as defined
herein) now or at any time hereafter who are Shareholders (as defined herein).
NOW, THEREFORE, in consideration of the mutual covenants and obligations
set forth in this Agreement, and of other good and valuable consideration, the
receipt of which is hereby acknowledged, the parties hereto, intending legally
to be bound, hereby agree as follows:
ARTICLE 1
Definitions
Capitalized terms used in this Agreement shall have the meanings set forth
below or in the Section of this Agreement referred to below, except as otherwise
expressly indicated or limited by the context in which they appear in this
Agreement. All terms defined in this Article 1 or in the preamble to this
Agreement in the singular have the same meanings when used in the plural and
vice versa.
1.1. "Acquiring Person" shall have the meaning set forth in Section 13.1
of this Agreement.
1.2. "Act" means the Delaware Limited Liability Company Act, Del. Code
Ann. tit. 6, sec.sec.18-101 et seq., as amended from time to time.
1.3. "Adjusted Capital Account Deficit" means with respect to any
Shareholder, the negative balance, if any, in such Shareholder's Capital Account
as of the end of any relevant Fiscal Year, determined after giving effect to the
following adjustments:
(a) credit to such Capital Account any portion of such negative
balance which such Shareholder (i) is treated as obligated to restore to
the Company pursuant to the provisions of Section 1.704-1(b)(2)(ii)(c) of
the Treasury Regulations, or (ii) is deemed to be obligated to restore to
the Shareholder pursuant to the penultimate sentences of Section
1.704-2(g)(1) and 1.704-2(i)(5) of the Treasury Regulations; and
(b) debit to such Capital Account the items described in Sections
1.704-1(b)(2)(ii)(d)(4), (5) and (6) of the Treasury Regulations.
1.4. "Affiliate" means, with respect to any Person, (i) any Person
directly or indirectly controlling, controlled by or under common control with
such Person; (ii) any Person owning or controlling 10% or more of the
outstanding voting securities of such Person; (iii) any officer, director or
partner of such Person or of any Person specified in (i) or (ii) above; and (iv)
any Person in which any officer, director or partner of any Person specified in
(iii) above is an officer, director or partner.
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1.5. "Agreement" means this Amended and Restated Limited Liability Company
Agreement of the Company, as may be amended, restated, supplemented or otherwise
modified from time to time as herein provided.
1.6. "Announcement Date" shall have the meaning set forth in Section 12.3
of this Agreement.
1.7. "Associate" shall have the meanings set forth in Sections 12.1 and
13.1 of this Agreement.
1.8. "Beneficial Owner" shall have the meaning set forth in Section 12.1
of this Agreement.
1.9. "Board of Directors" or "Board of Managers" or "Board" means the
board on which all of the Company's Managers sit, in their capacities as
Managers.
1.10. "Book Gain" or "Book Loss" means the gain or loss recognized by the
Company for Section 704(b) book purposes in any Fiscal Year by reason of any
sale or disposition with respect to any of the assets of the Company. Such Book
Gain or Book Loss shall be computed by reference to the Book Value of such
property or assets as of the date of such sale or disposition (determined in
accordance with Section 1.12 of this Agreement), rather than by reference to the
tax basis of such property or assets as of such date, and each and every
reference herein to "gain" or "loss" shall be deemed to refer to Book Gain or
Book Loss, rather than to tax gain or tax loss, unless the context manifestly
otherwise requires.
1.11. "Book Value" means, with respect to any asset of the Company, such
asset's adjusted basis for federal income tax purposes, except as follows:
(a) the initial Book Value of any asset contributed by a Shareholder
to the Company shall be the gross fair market value of such asset, without
reduction for liabilities, as determined by the contributing Shareholder
and the Company on the date of contribution thereof;
(b) if the Managing Member reasonably determines that an adjustment is
necessary or appropriate to reflect the relative economic interests of the
Shareholders, the Book Values of all Company assets shall be adjusted in
accordance with Sections 1.704-1(b)(2)(iv)(f) and (g) of the Treasury
Regulations to equal their respective gross fair market values, without
reduction for liabilities, as reasonably determined by the Managing Member,
as of the following times:
(1) a Capital Contribution (other than a de minimis Capital
Contribution) to the Company by a new or existing Shareholder as
consideration for a Share; or
(2) the distribution by the Company to a Shareholder of more than a
de minimis amount of Company assets as consideration for the repurchase
of a Share; or
(3) the liquidation of the Company within the meaning of Section
1.704-1(b)(2)(ii)(g) of the Treasury Regulations;
(c) the Book Value of Company assets distributed to any Shareholder
shall be the gross fair market values of such assets (taking Section
7701(g) of the Code into account) without reduction for liabilities, as
reasonably determined by the Managing Member as of the date of
distribution; and
(d) The Book Value of Company assets shall be increased (or decreased)
to reflect any adjustments to the adjusted basis of such assets pursuant to
Sections 734(b) or 743(b) of the Code, but only to the extent that such
adjustments are taken into account in determining Capital Accounts pursuant
to Section 1.704-1(b)(2)(iv)(m) of the Treasury Regulations (as set forth
in Section 3.3); provided, however, that Book Values shall not be adjusted
pursuant to this paragraph (d) to the extent the Managing Member reasonably
determines that an adjustment pursuant to paragraph (b) above is necessary
or appropriate in connection with a transaction that would otherwise result
in an adjustment pursuant to this paragraph (d).
At all times, Book Value shall be adjusted by any Depreciation taken into
account with respect to the Company's or a CPA(R) Partnership's assets for
purposes of computing Profit and Loss.
1.12. "Business Combination" shall have the meaning set forth in Section
12.1 of this Agreement.
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1.13. "Bylaws" means the bylaws of the Company, as amended from time to
time, governing various aspects of the operation of the Company and the rights
and obligations of its Shareholders, Board of Directors, officers and other
agents. The Bylaws shall be deemed an amendment and supplement to and part of
this Agreement after they are adopted by the Board of Directors in accordance
with Section 7.1(a). All provisions of the Bylaws not inconsistent with law or
this Agreement shall be valid and binding.
1.14. "Capital Account" shall have the meaning ascribed thereto in Section
3.3 of this Agreement.
1.15. "Capital Contributions" means the total amount of cash and the fair
market value of other property contributed to the Company by the Shareholders.
1.16. "Capital Transactions" means (a) any sale, exchange, taking by
eminent domain, damage, destruction or other disposition of all or any part of
the assets of the Company, other than tangible personal property disposed of in
the ordinary course of business; or (b) any financing or refinancing of any
Company indebtedness; provided, that the receipt by the Company of Capital
Contributions shall not constitute Capital Transactions.
1.17. "Certificate" means the "Certificate of Formation" of the Company,
as originally filed with the office of the Secretary of State of the State of
Delaware, as amended, restated, supplemented or otherwise modified from time to
time as herein provided.
1.18. "Code" means the Internal Revenue Code of 1986, as amended from time
to time, and any subsequent federal law of similar import, and, to the extent
applicable, any Treasury Regulations promulgated thereunder.
1.19. "Company" means the limited liability company heretofore formed and
continued hereby in accordance with this Agreement by the parties hereto, as
such limited liability company may from time to time be constituted.
1.20. "Company Interest" means a limited liability company interest in the
Company, and, if the context so allows, the percentage of a limited liability
company interest as compared to all of the aggregate Capital Accounts of all
Shareholders (as such percentage may be changed from time to time to reflect
adjustments as provided for in this Agreement); it being understood and agreed
that this term shall not be deemed to apply to any debt incurred by the Company
(directly or indirectly), including but not limited to through custodial, trust,
or similar or other arrangements.
1.21. "Consent" means either the consent given by vote at a duly called
and held meeting or the prior written consent, as the case may be, of a Person
to do the act or thing for which the consent is solicited, or the act of
granting such consent, as the context may require.
1.22. "Control Shares" shall have the meaning set forth in Section 13.1 of
this Agreement.
1.23. "CPA(R) Partnership" means Corporate Property Associates, a
California limited partnership, Corporate Property Associates 4, a California
limited partnership, Corporate Property Associates 6, a California limited
partnership, Corporate Property Associates 9, L.P., a Delaware limited
partnership or any of them.
1.24. "Depreciation" means, for each Fiscal Year, an amount equal to the
depreciation, amortization or other cost recovery deduction allowable with
respect to an asset for such year or other period for federal income tax
purposes; provided, that if the Book Value of an asset differs from its adjusted
basis for federal income tax purposes at the beginning of any such year or other
period, Depreciation shall be an amount that bears the same relationship to the
Book Value of such asset as the depreciation, amortization, or other cost
recovery deduction computed for federal income tax purposes with respect to such
asset for the applicable period bears to the adjusted tax basis of such asset at
the beginning of such period, or if such asset has a zero adjusted tax basis,
Depreciation shall be an amount determined under any reasonable method selected
by the Board of Directors.
1.25. "Determination Date" shall have the meaning set forth in Section
12.3 of this Agreement.
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1.26. "Director" shall have the same meaning as Manager.
1.27. "Distribution Payment Date" means each such date as the Board of
Directors shall declare for a distribution to Shareholders.
1.28. "Entity" means any general partnership, limited partnership,
corporation, joint venture, trust, limited liability company, limited liability
partnership, business trust, cooperative, or association. An Entity may or may
not be an Affiliate of the Company or of a Company Affiliate.
1.29. "Fiscal Year" means the fiscal year of the Company and shall be the
same as its taxable year, which shall be the calendar year unless otherwise
determined by the Board of Directors in accordance with the Code.
1.30. "Five Year Tolling Period" shall have the meaning set forth in
Section 12.2 of this Agreement.
1.31. "Future Shares" shall have the meaning set forth in Section 3.1 of
this Agreement.
1.32. "Independent Director" means a Director of the Company who, in the
opinion of the Board of Directors of the Company, is free from any relationship
that would interfere with the exercise of independent judgment. A Director of
the Company who is an Affiliate of the Company or an officer or employee of the
Company or its Subsidiaries or Affiliates would not qualify as an Independent
Director.
1.33. "Interested Shares" shall have the meaning set forth in Section 13.1
of this Agreement.
1.34. "Interested Party" shall have the meaning set forth in Section 12.1
of this Agreement.
1.35. "Limited Partner" means a limited partner of a CPA Partnership.
1.36. "Listed Shareholders" means the holders of Listed Shares.
1.37. "Listed Shares" shall have the meaning set forth in Section 3.1 of
this Agreement.
1.38. "Managers" means those individuals serving on the Board of Directors
of the Company, including successor or additional Managers duly elected in
accordance with the terms of this Agreement in their capacities as "Managers" of
the Company within the meaning of the Act.
1.39. "Market Value" shall have the meaning set forth in Section 12.1 of
this Agreement.
1.40. "Members" means all Persons who become Members as herein provided
and who are listed as members of the Company in the books and records of the
Company, in such Persons' capacity as "Members" of the Company within the
meaning of the Act.
1.41. "Nonrecourse Deductions" has the meaning set forth in Sections
1.704-2(b)(1) and 1.704-2(c) of the Treasury Regulations.
1.42. "Nonrecourse Liabilities" has the meaning set forth in Section
1.704-2(b)(3) of the Treasury Regulations.
1.43. "Partner Minimum Gain" means an amount, with respect to each Partner
Nonrecourse Debt, equal to the Partnership Minimum Gain that would result if
such Partner Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Treasury Regulations Section 1.704-2(i)(3).
1.44. "Partner Nonrecourse Debt" has the meaning set forth in Treasury
Regulations Section 1.704-2(b)(4).
1.45. "Partner Nonrecourse Deductions" has the meaning set forth in
Treasury Regulations Section 1.704-2(i)(2), and the amount of Partner
Nonrecourse Deductions with respect to a Partner Nonrecourse Debt for a Company
taxable year shall be determined in accordance with the rules of Treasury
Regulations Section 1.704-2(i)(2).
1.46. "Partnership Minimum Gain" has the meaning set forth in Treasury
Regulations Section 1.704-2(b)(2), and the amount of Partnership Minimum Gain,
as well as any net increase or decrease in a
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Partnership Minimum Gain, for a Company taxable year shall be determined in
accordance with the rules of Treasury Regulations.
1.47. "Permitted Selling Expenses" means the out-of-pocket expenses
actually incurred directly by a CPA(R) Partnership in the course of selling a
particular Property, or by securing such Property; or, if no such actual sale
has occurred in the case in question, the out-of-pocket expenses which would
have been incurred directly by such CPA(R) Partnership (based on local
conditions and practices existing at the time) had such CPA(R) Partnership sold
a particular Property.
1.48. "Person" means any individual or Entity, and the heirs, executors,
administrators, legal representatives, successors, and assigns of such Person
where the context so admits.
1.49. "Profit" and "Loss" means, for each Fiscal Year or other period for
which allocations to Shareholders are made, an amount equal to the Company's
taxable income or loss for such year or period, determined in accordance with
Section 703(a) of the Code (provided, that for this purpose, all items of
income, gain, loss, or deduction required to be stated separately pursuant to
Section 703(a)(1) of the Code shall be included in taxable income or loss), with
the following adjustments:
(a) Any income of the Company that is exempt from federal income tax
and not otherwise taken into account in computing Profit or Loss pursuant
to this provision shall be added to such taxable income or loss;
(b) Any expenditure of the Company described in Section 705(a)(2)(B)
of the Code or treated as Code Section 705(a)(2)(B) expenditures pursuant
to Section 1.704-1(b)(2)(iv)(i) of the Treasury Regulations, and not
otherwise taken into account in computing Profit or Loss pursuant to this
provision, shall be subtracted from such taxable income or loss;
(c) Book Gain or Book Loss from a Capital Transaction shall be taken
into account in lieu of any tax gain or tax loss recognized by the Company
by reason of such Capital Transaction; and
(d) In lieu of the depreciation, amortization, and other cost recovery
deductions taken into account in computing such taxable income or loss,
there shall be taken into account Depreciation for such Fiscal Year or
other period, computed as provided in this Agreement.
If the Company's taxable income or loss for such Fiscal Year or other
period, as adjusted in the manner provided above, is a positive amount, such
amount shall be the Company's Profit for such Fiscal Year or other period; and
if a negative amount, such amount shall be the Company's Loss for such Fiscal
Year or other period.
1.50. "Property" means the land and the buildings thereon which the
Company or a CPA(R) Partnership owns at a particular time.
1.51. "Relative" means, with respect to any Person, any parent, spouse,
brother, sister, or natural or adopted lineal descendant or spouse of such
descendant of such Person.
1.52. "Sale" means the sale or other disposition of a Partnership Property
to a third party which is unaffiliated with the current CPA(R) Partnership (or
respective general partner) owning such Property; provided, however, that this
term shall not include the pledge, mortgage or encumbrance of a Property, or of
any interest therein, in connection with the financing, refinancing or other
leveraging of such Property or otherwise or any assignment of any leases or
rents related to such Property.
1.53. "Shareholders" means all Persons who hold Shares, and shall have the
same meaning as the word "Members".
1.54. "Shares" means Company Interests and includes Listed Shares and
Future Shares.
1.55. "Subsidiary" shall have the meaning set forth in Section 12.1 of
this Agreement.
1.56. "Tax Matters Partner" shall have the meaning ascribed thereto in
Section 3.5 of this Agreement.
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1.57. "Transfer" (or "Transferred") means to give, sell, assign, devise,
bequeath, or otherwise dispose of, transfer, or permit to be transferred, during
life or at death. The word "Transfer," when used as a noun, shall mean any
Transfer transaction.
1.58. "Transferee" means any Person to whom Shares are Transferred by a
Shareholder for any reason or by any means.
1.59. "Treasury Regulations" means the federal income tax regulations,
including any temporary or proposed regulations, promulgated under the Code, as
such Treasury Regulations may be amended from time to time (it being understood
that all references herein to specific sections of the Treasury Regulations
shall be deemed also to refer to any corresponding provisions of succeeding
Treasury Regulations).
1.60. "Valuation Date" shall have the meaning set forth in Section 12.3 of
this Agreement.
1.61. "Working Capital Reserves" means funds held in reserves which are
maintained as working capital for the Company and available for any
contingencies relating to the ownership of the Property and the operation of the
Company. Amounts held in the Working Capital Reserves may at any time, in the
discretion of the Board of Directors, be added to the liquidation proceeds
allocable to the respective Shares (depending upon the characterization of such
amounts when received by the Company), but may not be otherwise removed from the
respective Working Capital Reserves.
ARTICLE 2
Continuation, Purpose and Term
2.1. Continuation. The parties hereto hereby agree to continue the
limited liability company known as W. P. Carey & Co. LLC, as a limited liability
company under the provisions of the Act.
2.2. Company Name. The name of the Company is "W. P. Carey & Co. LLC."
The business of the Company shall be conducted under such name or such other
names as the Board of Directors or the Shareholders may from time to time
determine on and pursuant to the terms of this Agreement.
2.3. The Certificate. The Managing Member, and any other Person
designated as such by the Board of Directors, shall be an "Authorized Person"
within the meaning of the Act and is hereby authorized to execute, file and
record all such certificates and documents, including amendments to the
Certificate, and to do such other acts as may be appropriate to comply with all
requirements for the formation, continuation, and operation of a limited
liability company, the ownership of property, and the conduct of business under
the laws of the State of Delaware and any other jurisdiction in which the
Company may own property or conduct business.
2.4. Principal Place of Business. The principal place of business shall
be located at 50 Rockefeller Plaza, New York, New York 10020, or at such
location as may hereafter be determined by the Board of Directors. The principal
business office, as well as the registered office and the registered agent, of
the Company may be changed by the Board of Directors from time to time in
accordance with the then applicable provisions of the Act and any other
applicable laws, as well as the terms and conditions of this Agreement.
2.5. Term of Company. The term of the Company commenced on the date of
the filing of the Certificate and shall continue until the Company is dissolved
pursuant to the provisions of Article 10 hereof.
2.6. Purposes. The purposes of the Company are (a) to own and invest in
or engage in activities related to investment in net leased properties
(including, without limitation, industrial, commercial, retail and warehouse
distribution properties); provided, however, that the investment criteria shall
be established by the Board of Directors from time to time in its sole
discretion subject to the requirement that such criteria be consistent with the
purposes of the Company; (b) to acquire, own and dispose of general and limited
partner interests, and stock, warrants, options or other equity interests in
Entities, and to exercise all rights and powers granted to the owner of any such
interests; (c) to invest in any type of investment and to engage in any other
lawful act or activity for which limited liability companies may be formed under
the Act, and by such statement all lawful acts and activities shall be within
the purposes of the Company, except for express
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limitations, if any; (d) to engage in any other activities relating to, and
compatible with, the purposes set forth above; and (e) to take such other
actions, or do such other things, as are necessary or appropriate (in the sole
discretion of the Board of Directors) to carry out the provisions of this
Agreement.
2.7. Powers. In furtherance of its purposes, but subject to all of the
provisions of this Agreement, the Company shall have the power and is hereby
authorized to (a) invest (at any time during the term of the Company) in real
property for the purpose of engaging in net lease transactions with respect
thereto and in other assets which are designed to accomplish the foregoing
purpose or in any manner consistent with the Company's then-existing investment
criteria and objectives, and to reinvest the proceeds (to the extent permitted
by this Agreement) of any Sales by the Company of Company assets; (b) act as
general or limited partner, member, joint venturer, manager or shareholder of
any Entity, and to exercise all of the powers, duties, rights and
responsibilities associated therewith; (c) take any and all actions necessary,
convenient or appropriate as the holder of any such interests or positions; (d)
make mortgage loans; (e) operate, purchase, maintain, finance, improve, own,
sell, convey, assign, mortgage, lease, construct, demolish or otherwise dispose
of any real property or personal property that may be necessary, convenient or
incidental to the accomplishment of the purposes of the Company; (f) borrow
money and issue evidences of indebtedness in furtherance of any or all of the
purposes of the Company, and secure the same by mortgage, pledge or other lien
or encumbrance on any assets of the Company; (g) invest any funds of the Company
pending distribution or payment of the same pursuant to the provisions of this
Agreement; (h) prepay in whole or in part, refinance, recast, increase, modify
or extend any indebtedness of the Company and, in connection therewith, execute
any extensions, renewals or modifications of any mortgage or security agreement
securing such indebtedness; (i) enter into, perform and carry out contracts of
any kind, including, without limitation, contracts with any Person affiliated
with any of the Shareholders, necessary to, in connection with or incidental to
the accomplishment of the purposes of the Company; (j) establish reserves for
capital expenditures, working capital, debt service taxes, assessments,
insurance premiums, repairs, improvements, depreciation, depletion, obsolescence
and general maintenance of buildings or other property out of the rents, profits
or other income received; (k) employ or otherwise engage employees, managers,
contractors, advisors and consultants, and pay reasonable compensation for such
services, and enter into employee benefit plans of any type; (l) purchase or
repurchase Shares from any Person for such consideration as the Board of
Directors may determine in its reasonable discretion (whether more or less than
the original issuance price of such Share or the then trading price of such
Share); (m) enter into rights plans or other plans relating to Shares, options
or bonuses, and to issue Shares, options or warrants thereunder (or other
derivatives relating thereto) for any consideration (even if such consideration
is less than the market value of such Shares); and (n) do such other things and
engage in such other activities as may be necessary, convenient or advisable
with respect to the conduct of the business of the Company, and have and
exercise all of the powers and rights conferred upon limited liability companies
formed pursuant to the Act.
2.8. Effectiveness of this Agreement. This Agreement shall govern the
operations of the Company and the rights and restrictions applicable to the
Shareholders, to the extent permitted by law. Pursuant to Section 18-101(7)(a)
of the Act, all Persons who become holders of Shares in the Company shall be
bound by the provisions of this Agreement and shall be admitted as Members. The
acceptance by a Person of a certificate issued to such Person evidencing the
Shares acquired in connection with the Consolidation and the acceptance by a
Person of a certificate issued to such Person evidencing the acquisition of
Shares from the Company or another Shareholder shall be deemed to constitute a
direction to the Managing Member to execute this Agreement on such Person's
behalf and a request that the records of the Company reflect such admission; and
shall be deemed to be a sufficient act to comply with the requirements of
Section 18-101(7)(a) of the Act and to so cause that Person to become a
Shareholder and to bind that Person to the terms and conditions of this
Agreement (and to entitle that Person to the rights of a Shareholder hereunder).
B-7
ARTICLE 3
Classes of Shares; Admissions of Shareholders; Capitalization
3.1. Classes of Shares.
(a) The Company shall have the authority to issue the following classes and
Series of Shares:
(i) Shares which are designated "Listed Shares";
(ii) One or more other classes or series of Shares, as to which the
Board of Directors shall have the exclusive authority, by resolution or
resolutions providing for the issuance of Shares or of a particular class
or series thereof, to fix and determine the voting powers, full or limited
or no voting power, and such designations, preferences, and relative,
participating, optional or other special rights, and qualifications,
limitations, or restrictions thereof, as may be desired by the Board of
Directors from time to time, to the fullest extent now or hereafter
permitted by the laws of the State of Delaware (collectively, all such
other classes and series to be referred to as the "Future Shares").
(b) Each Share shall have the rights and be governed by the provisions set
forth in this Agreement or in the resolutions of the Board of Directors
authorizing the issuance by the Company of such Shares; and none of such Shares
shall have any preemptive rights, or give the holders thereof any rights to
convert into any other securities of the Company, or give the holders thereof
any cumulative voting rights, except as specifically set forth herein or in such
resolutions. Except as otherwise provided herein or in a resolution of the Board
of Directors, each Shareholder shall be entitled to one vote for each Share held
by such Shareholder.
(c) The Board of Directors may cause the Company to issue such numbers of
Listed Shares and Future Shares from time to time as the Board of Directors may
determine in its sole discretion, and the number of such Shares is not limited.
(d) If the Board of Directors determines that it is necessary or desirable
to amend this Agreement or to make any filings under the Act or otherwise in
order to reference the existence or creation of a class or series of Future
Shares, the Board of Directors may cause such amendments and filings to be made,
which filings might take the form of amendments to the Certificate; provided,
however, that, unless specifically required by the Act or this Agreement, no
approval or consent of any Shareholders shall be required in connection with the
making of any such filing or amendment.
(e) The Board of Directors, without any Consent of any Shareholder
required, may effect a split or reverse split of Shares of any Series or class,
by adopting a resolution therefor. If the Board of Directors determines that it
is necessary or desirable to make any filings under the Act or otherwise in
order to reference the existence of such a split or reverse split, the Board of
Directors may cause such filings to be made, which filings might take the form
of amendments to the Certificate; provided, however, that, unless specifically
required by the Act or this Agreement, no approval or consent of any
Shareholders shall be required in connection with the making of any such filing.
(f) Notwithstanding any other provisions of this Agreement, the Board of
Directors may, without the consent of any Shareholder, amend this Agreement to
the extent required to allow the Board of Directors to exercise the powers
granted to it by this Section 3.1
3.2. Additional Shareholders. In the event that the Board of Directors
determines that additional funds are required by the Company for any Company
purpose, or that the Company should for any reason seek to raise additional
capital or acquire Property, the Board may cause the Company to sell Future
Shares for a price equal to what the Board of Directors determines to be the
fair value of such Shares, in exchange for cash, other property, services or any
other lawful consideration to be received by the Company in consideration of
such Shares (to be valued by the Board of Directors in its discretion), or may
cause the Company to obtain funds as a loan from any third party upon such terms
and conditions as the Board of Directors deems appropriate, or any combination
thereof from time to time. The Capital Contribution of any such additional
Shareholders shall be specified by the Board of Directors at the time of
admission of such additional Shareholders.
B-8
3.3. Capital Accounts. A separate capital account (a "Capital Account")
shall be established and maintained for each Shareholder, including any
substitute or additional Shareholder who shall hereafter acquire a Company
Interest, in accordance with the following provisions:
(a) To each Shareholder's Capital Account there shall be credited the
amount of cash and fair market value of the property actually or deemed to
be contributed to the Company by such Shareholder pursuant to Section 3.2
hereof, such Shareholder's allocable share of Profit, and the amount of any
Company liabilities that are assumed by such Shareholder or that are
secured by any Company property distributed to such Shareholder.
(b) To each Shareholder's Capital Account there shall be debited the
amount of cash and the fair market value of any Company property
distributed or deemed distributed to such Shareholder pursuant to any
provision of this Agreement, such Shareholder's allocable share of Loss,
and the amount of any liabilities of such Shareholder that are assumed by
the Company or that are secured by any property contributed by such
Shareholder to the Company.
(c) If any asset of the Company is distributed in kind, the Company
shall be deemed to have realized Profit or Loss thereon in the same manner
as if the Company had sold such asset for an amount equal to the greater of
(i) the fair market value of such asset, or (ii) the fair market value of
any nonrecourse debts to which such asset is then subject, in each case as
determined by the Board of Directors. If at any time after the date of this
Agreement, the Book Value of any Company asset is adjusted pursuant to the
last sentence of the definition of Book Value set forth in Article 1
hereof, the Capital Accounts of all Shareholders shall be adjusted
simultaneously to reflect the aggregate net adjustments, as if the Company
recognized Profit or Loss equal to the respective amounts of such aggregate
net adjustments.
(d) The provisions of this Agreement relating to the maintenance of
Capital Accounts are intended to comply with Section 1.704-1(b)(2)(iv) and
1.704-2 of the Treasury Regulations, and shall be interpreted and applied
in a manner consistent with such Treasury Regulations.
(e) A Shareholder shall not be entitled to withdraw any part of its
Capital Account or to receive any distributions from the Company, except as
provided in Article 5 hereof, nor shall a Shareholder be entitled to make
any loan or Capital Contribution to the Company other than as expressly
provided herein. No loan made to the Company by any Shareholder shall
constitute a capital contribution to the Company.
(f) No Shareholder shall have any liability for the return of the
Capital Contribution of any other Shareholder. A Shareholder who has more
than one class of interest in the Company may have a separate Capital
Account for each different class of interest owned.
3.4. Transfer of Capital Accounts. The original Capital Account
established for each Transferee shall be in the same amount as the Capital
Account or portion thereof of the Shareholder which such Transferee succeeds, at
the time such Transferee is admitted to the Company. The Capital Account of any
Shareholder whose Company Interest shall be increased by means of the Transfer
to it of all or part of the Shares of another Shareholder shall be appropriately
adjusted to reflect such Transfer. Any reference in this Agreement to a Capital
Contribution of, or distribution to, a then-Shareholder shall include a Capital
Contribution or distribution previously made by or to any prior Shareholder on
account of the Shares of such then-Shareholder.
3.5. Tax Matters Partner. The Managing Member shall be the Company's "Tax
Matters Partner" (as such term is defined in Section 6231(a)(7) of the Code),
with all of the powers that accompany such status (except as otherwise provided
in this Agreement). Promptly following the written request of the Tax Matters
Partner, the Company shall, to the fullest extent permitted by law, reimburse
and indemnify the Tax Matters Partner for all reasonable expenses, including
reasonable legal and accounting fees, claims, liabilities, losses and damages
incurred by the Tax Matters Partner in connection with any administrative or
judicial proceeding with respect to the tax liability of the Shareholders. The
provisions of this Section 3.5 shall survive the termination of the Company and
shall remain binding on the Shareholders for as long a period of time as is
B-9
necessary to resolve with the Internal Revenue Service any and all matters
regarding the federal income taxation of the Company or the Shareholders.
ARTICLE 4
Allocations
4.1. General Rules Concerning Allocations. Within 45 days after the end
of each calendar month, the Company shall conduct an interim closing of books as
of the end of the last day of that calendar month. On the basis of the closing
of the books for each calendar month, Profit and Loss for such month shall be
determined in accordance with the accounting methods followed by the Company for
federal income tax purposes.
4.2. Allocations of Profits and Losses. All allocations to the
Shareholders of items included within the Company's Profits and Losses
attributable to each calendar month shall be allocated solely among the
Shareholders recognized as Shareholders as of the last day of that calendar
month, as follows:
(a) The Profits and Losses shall be allocated to the holders of
Shares.
(b) The Tax Matters Partner is authorized to make reasonable
determinations regarding the allocation of Profit and Loss under this
Section 4.2, including determinations relating to the calculation of Profit
or Loss, and such other items of the Company's income, gain, loss,
deduction and credit as may be appropriate to carry out the intent of this
Section 4.2.
4.3. Special Allocations.
(a) Notwithstanding any other provision of this Agreement, to the extent an
allocation of Profit or Loss or any item thereof to any Shareholder pursuant to
Sections 4.1 or 4.2 of this Agreement would be in violation of the requirements
of the Treasury Regulations under Section 704(b) of the Code, the Tax Matters
Partner shall comply with the requirements of such Treasury Regulations and
adjust such allocations to comply with such requirements in a manner that will,
in the reasonable judgment of the Tax Matters Partner, have the least effect on
the amounts to be allocated and distributed under this Agreement. The
Shareholders agree that if this Section 4.3 becomes applicable, the Tax Matters
Partner is authorized to review and adjust the allocations made pursuant to
Sections 4.1 or 4.2 of this Agreement.
(b) Qualified Income Offset. In the event a Shareholder unexpectedly
receives any adjustment, allocation or distribution described in Treasury
Regulation Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6) that causes or
increases an Adjusted Capital Account Deficit, items of Profit shall be
specially allocated to such Shareholder so as to eliminate such negative balance
as quickly as possible. This subparagraph is intended to constitute a "qualified
income offset" under Section 1.704-1(b)(2)(ii)(d) of the Regulations and shall
be interpreted consistently therewith.
(c) Minimum Gain Chargeback (Nonrecourse Liabilities). Except as otherwise
provided in Section 1.704-2(f) of the Regulations, if there is a net decrease in
Partnership Minimum Gain for any Fiscal Year, each Shareholder shall be
specially allocated items of Company income and gain for such year (and, if
necessary, subsequent years) in an amount equal to such Shareholder's share of
the net decrease in Partnership Minimum Gain to the extent required by Treasury
Regulations Section 1.704-2(f). The items to be so allocated shall be determined
in accordance with Sections 1.704-2(f) and (j)(2) of the Treasury Regulations.
This subparagraph is intended to comply with the minimum gain chargeback
requirement in said section of the Treasury Regulations and shall be interpreted
consistently therewith. Allocations pursuant to this subparagraph shall be made
in proportion to the respective amounts required to be allocated to each
Shareholder pursuant hereto.
(d) Partner Minimum Gain Chargeback. Except as otherwise provided in
Section 1.704-2(i)(4) of the Treasury Regulations, if there is a net decrease in
Partner Minimum Gain attributable to a Partner Nonrecourse Debt during any
Fiscal Year, each Shareholder who has a share of the Partner Minimum Gain
attributable to such Partner Nonrecourse Debt, determined in accordance with
Section 1.704-2(i)(5) of the
B-10
Treasury Regulations, shall be specially allocated items of Partnership income
and gain for such year (and, if necessary, subsequent years) in an amount equal
to that Shareholder's share of the net decrease in the Partner Minimum Gain
attributable to such Partner Nonrecourse Debt to the extent and in the manner
required by Section 1.704-2(i) of the Treasury Regulations. The items to be so
allocated shall be determined in accordance with Sections 1.704-2(i)(4) and
1.704-2(j)(2) of the Treasury Regulations. This subparagraph is intended to
comply with the minimum gain chargeback requirement with respect to Partner
Nonrecourse Debt contained in said section of the Treasury Regulations and shall
be interpreted consistently therewith. Allocations pursuant to this subparagraph
shall be made in proportion to the respective amounts to be allocated to each
Shareholder pursuant hereto.
(e) Nonrecourse Deductions. Partner Nonrecourse Deductions for any Fiscal
Year or other applicable period with respect to a Partner Nonrecourse Debt shall
be specially allocated to the Shareholders that bear the economic risk of loss
for such Partner Nonrecourse Debt (as determined under Sections 1.704-2(b)(4)
and 1.704-2(i)(1) of the Treasury Regulations).
4.4. Additional Allocations.
(a) The Tax Matters Partner, in order to preserve uniformity of Shares
within a class, in its sole discretion, may make a special allocation of items
of Company income, gain, loss or deduction but only if such allocations would
not have a material adverse effect on the Shareholders and if they are
consistent with the principles of Section 704 of the Code.
(b) If, and to the extent that any Shareholder is deemed to recognize
income as a result of any transaction between such Shareholder and the Company
resulting from a compensatory transfer of Shares by the Company to such
Shareholder or pursuant to Sections 482, 483, 1272-1274 and 7872 of the Code, or
any similar provision now or hereafter in effect, any corresponding loss or
deduction (or if unavailable, the next available loss or deduction) of the
Company shall be allocated to the Shareholder who was charged with such income.
(c) Adjustments to the Capital Accounts of Shareholders with respect to an
adjustment to the Tax Basis of any asset of the Company pursuant to Section
734(b) or Section 743(b) of the Code shall be made in accordance with the
provisions of Treasury Regulation Section 1.704-1(b)(2)(iv)(m).
4.5. Tax Allocations.
(a) For federal income tax purposes, except as otherwise provided in this
Section 4.5, each item of Profit, gain, Loss and deduction of the Company shall
be allocated among the Shareholders in the same proportion as the corresponding
items are allocated pursuant to Sections 4.2, 4.3 and Section 4.4 hereof.
(b) In the event that the Book Value of any asset contributed to and held
by the Company differs from its basis for federal income tax purposes ("Tax
Basis"), allocations of income, gain, loss or deduction with respect to such
asset shall, solely for tax purposes, be allocated among the Shareholders so as
to take account of any variation between Book Value and Tax Basis in accordance
with the provisions of Section 704(c) of the Code and Treasury Regulations
thereunder. The Tax Matters Partner may elect any reasonable method or methods
for making such allocations.
(c) If the Book Value of any asset of the Company is adjusted pursuant to
Section 1.12 hereof, subsequent allocations of Profit, gain, Loss and deductions
with respect to such asset shall take into account any variation between Book
Value and Tax Basis in accordance with the provisions of Section 704(c) of the
Code and Treasury Regulations thereunder.
The Tax Matters Partner shall have the sole discretion to make special
allocations of items of income, gain, loss and deductions that are consistent
with the principles of Section 704(c) of the Code and to amend the provisions of
this Agreement (without Shareholder action, notwithstanding Section 14.D of this
Agreement), as appropriate, to reflect the proposal or promulgation of Treasury
Regulations under Subchapter K of the Code. The Tax Matters Partner may adopt
and employ such methods for (A) the maintenance of capital accounts for book and
tax purposes, (B) the determination and allocation of adjustments under Sections
704(c), 734 and 743 of the Code, (C) the determination and allocation of taxable
income, tax loss
B-11
and items thereof under this Agreement and pursuant to the Code, (D) the
determination of the identities and tax classification of Shareholders, (E) the
provision of tax information and reports to the Shareholders, (F) the adoption
of reasonable conventions and methods for the valuation of assets and the
determination of tax basis, (G) the allocation of asset values and Tax Basis,
(H) conventions for the determination of depreciation, cost recovery and
amortization deductions and the adoption and maintenance of accounting methods,
(I) the recognition of the transfer of Shares, (J) tax compliance and other
tax-related requirements, including without limitation, the use of computer
software, and to use filing and reporting procedures similar to those employed
by publicly-traded partnerships and limited liability companies, as it
determines in its sole discretion are necessary and appropriate to execute the
provisions of this Agreement and to comply with federal, state and local tax
law, and to achieve uniformity of Shares within a class. The Tax Matters Partner
shall be indemnified and held harmless by the Company for any expenses,
penalties or other liabilities arising as a result of decision made in good
faith on any of the matters referred to in the preceding sentence. If the Tax
Matters Partner determines, based on advice of counsel, that no reasonable
allowable convention or other method is available to preserve the uniformity of
Shares within a class, or the Tax Matters Partner in its discretion so elects,
Shares may be separately identified as distinct classes to reflect differences
in tax consequences.
ARTICLE 5
Distributions, Redemptions and Certain Permitted Conversions
5.1 Special Distributions; Distributions of Cash Flow from Operations or
Financings. This Section 5.1 (except for Section 5.1(b)) applies only to
distributions other than distributions upon the liquidation of the Company (such
subject being governed by Section 5.2 of this Agreement).
(a) If the Board of Directors declares a distribution payable on a
Distribution Date, then the holders of Shares shall be entitled to receive
all such distributions which the Board has declared, with each holder of
Listed Shares entitled to receive a pro-rata portion (with reference to the
number of Listed Shares then-held by such holder of Listed Shares and the
total number of Listed Shares then-held by all Persons) of such available
distributions.
(b) Notwithstanding any other provision of this Agreement, neither the
Company, nor the Board of Directors on behalf of the Company, shall make a
distribution to any Shareholder on account of its Shares if such
distribution would violate the Act or other applicable law.
5.2 Distributions Relating to Liquidation Events.
Upon the dissolution, liquidation or winding-up of the Company, after
satisfaction of all of the Company's liabilities (whether by payment or the
making of reasonable provision for payment therefor), each Shareholder shall be
entitled to receive out of the assets of the Company, an amount in cash or in
kind equal to the sum of (A) its pro-rata portion of all accrued and unpaid
distributions on the Shares; plus (B) its pro-rata portion of any remaining
assets of the Company.
No distribution shall be made to any holder of Listed Shares that would
result in such holder having a deficit balance in its Capital Account until such
time as the balance of each such holder's Capital Account is zero.
A consolidation or merger of the Company with or into any other Entity, or
a sale, lease or exchange of any or all assets of the Company in consideration
for the issuance of equity securities of another Entity, shall not be deemed to
be a dissolution, liquidation or winding up of the Company, provided that the
consolidation, merger, sale, lease or exchange has been approved by the majority
vote of the Shareholders voting together as one class.
5.3 Priority. Notwithstanding any other provision of this Agreement, it
is specifically acknowledged and agreed by each Shareholder that the Company's
failure to pay any amounts to such Shareholder, whether as a distribution,
redemption payment or otherwise, even if such payment is specifically required
hereunder, shall not give such Shareholder creditor status with regard to such
unpaid amount; but rather, such
B-12
Shareholder shall be treated only as a Shareholder of whatever class such Person
is a Shareholder, and not as a creditor, of the Company. This Section 5.3 is, as
permitted by Section 18-606 of the Act, intended to override the provisions of
Section 18-606 of the Act relating to a member's status and remedies as a
creditor, to the extent that such provisions would be applicable in the absence
of this Section 5.3.
5.4. Payments to Shareholders for Services. Any payments by the Company
to a Shareholder for services rendered to or on behalf to the Company shall be
treated as guaranteed payments for services under Section 707(c) of the Code.
5.5. Withholding. (a) With respect to any withholding tax or other
similar tax liability or obligation to which the Company may be subject as a
result of any act or status of any Shareholder or to which the Company becomes
subject with respect to any Share, the Company shall have the right to withhold
amounts distributable to such Shareholder or with respect to such Shares, to the
extent of the amount of such withholding tax or other similar tax liability or
obligation, pursuant to the provision contained in Section 5.5(b).
(b) Each Shareholder hereby authorizes the Company to withhold from,
or pay on behalf of or with respect to such Shareholder any amount of
federal, state, local or foreign taxes that the Managing Member determines
that the Company is required to withhold or pay with respect to any amount
distributable or allocable to such Shareholder pursuant to this Agreement,
including, without limitation, any taxes required to be withheld or paid by
the Company pursuant to Sections 1441, 1442, 1445 or 1446 of the Code. Any
amount paid on behalf of or with respect to a Shareholder shall constitute
a loan by the Company to such Shareholder, which loan shall be repaid by
such Shareholder within fifteen (15) days after notice from the Managing
Member that such payment must be made unless (i) the Company withholds such
payment from a distribution which would otherwise be made to the
Shareholder; or (ii) the Managing Member determines, in its sole and
absolute discretion, that such payment may be satisfied out of the
available funds of the Company which would, but for such payment, be
distributed to the Shareholder. Any amounts withheld pursuant to the
foregoing clauses (i) or (ii) shall be treated as having been distributed
to such Shareholder. In the event that a Shareholder fails to pay when due
any amounts owed to the Company pursuant to this Section 5.5(b), the
Managing Member, in its sole and absolute discretion, may elect to make the
payment to the Company on behalf of such defaulting Shareholder, and in
such event shall be deemed to have loaned such amount to such defaulting
Shareholder and shall succeed to all rights and remedies of the Company as
against such defaulting Shareholder.
ARTICLE 6
Shareholders
6.1. Limited Liability. Except as otherwise provided by the Act, the
debts, obligations and liabilities of the Company, whether arising in contract,
tort or otherwise, shall be solely the debts, obligations and liabilities of the
Company, and the Shareholders shall not be obligated personally for any such
debt, obligation or liability of the Company solely by reason of being a
Shareholder of the Company. The Shareholders shall not be required to lend any
funds to the Company. Each of the Shareholders shall be liable to make payment
of his, her or its respective contributions as and when due hereunder and other
payments as expressly provided in this Agreement. If and to the extent a
Shareholder's contribution shall be fully paid, such Shareholder shall not,
except as required by the express provisions of the Act regarding repayment of
sums wrongfully distributed to Shareholders, be required to make any further
contributions.
6.2. Voting Rights of Shareholders; Authority of Board of Directors.
(a) The Board of Directors, in its sole discretion, has full, complete and
exclusive right, power and authority in the management and control of the
Company business to do any and all things necessary to effectuate the purpose of
the Company; except, however, as expressly set forth herein. The members of the
Board of Directors shall devote such time as is necessary to the affairs of the
Company, and shall receive such compensation from the Company and such
reimbursement for expenses as is permitted by the Bylaws. No
B-13
Person dealing with the Board of Directors shall be required to determine its
authority to make any undertaking on behalf of the Company or to determine any
facts or circumstances bearing upon the existence of such authority.
(b) Notwithstanding Section 6.2(a) above, but subject to Section 10.1(a),
Article 12 and Article 13 hereof, any sale or other disposition of all or
substantially all of the assets of the Company at any one time, any merger or
consolidation of the Company (where the Company is not the surviving Entity) or
vote to dissolve the Company must, (i) receive the approval of the Board of
Directors, and (ii) receive the vote, at a duly held meeting, of more than 50%
in interest of the total then issued and outstanding Shares (or, in the case of
a written Consent without a meeting, more than 50% in interest of the total of
such then-issued and outstanding Shares) (or such greater percentage as is then
required under the Act.
(c) Subject to Sections 7.2(a) and 7.2(b) and Articles 12 and 13 hereof,
the vote, at a duly held meeting, of more than 50% interest of the total then
issued and outstanding Shares (or, in the case of a written Consent without a
meeting, more than 50% in interest of the total of such then-issued and
outstanding Shares) shall be able to remove any Director and elect a replacement
therefor. If such Shareholders intend to vote to remove a Director pursuant to
this Section 6.2(c), they shall provide the removed Director with notice
thereof, which notice shall set forth the date upon which such removal is to
become effective.
(d) The annual meeting of the holders of Shares of the Company for the
election of Directors and for the transaction of such other business as properly
may come before such meeting shall be held in accordance with the Bylaws.
Subject to the provisions of Article 13 relating to meetings of Shareholders and
related subjects, the Bylaws shall govern matters relating to, among other
things, annual and special meetings, notice, waiver of notice, adjournment,
proxies, written consents, procedures, and telephonic meetings, to the extent
not inconsistent with this Agreement.
(e) Notwithstanding any other provision of this Agreement, Shareholders
have voting rights with respect to a particular matter (to the extent provided
herein with regard to categories of Shareholders permitted to vote on particular
matters, and otherwise) only after such matter has first been approved by the
Board of Directors, except with regard to (i) the removal of a Director (and the
election of a replacement therefor) as provided in this Agreement, (ii) the
amendment of this Agreement, (iii) any matter as to which any Share plan or
Share incentive plan adopted by the Company provides otherwise, and (iv) any
matter presented at a special meeting of Shareholders called upon the written
request of holders of at least 10% of the outstanding Shares.
(f) For purposes of this Agreement, in order for a meeting of Shareholders
to be considered duly held with regard to a particular question, a quorum of
more than 50% in interest of the Shares which are entitled to vote at such
meeting on the particular question must be present (in person or by proxy).
ARTICLE 7
Directors and Officers
7.1. General Powers of Directors.
(a) Except as may otherwise be provided by the Act or by this Agreement,
the property, affairs and business of the Company shall be managed by or under
the direction of the Board of Directors, the Board of Directors may exercise all
the powers of the Company (including but not limited to deciding whether to make
various tax elections), and the Shareholders shall have no right to act on
behalf of or bind the Company. The Board of Directors shall have the power and
authority, on behalf of the Company, to (i) hire employees and such other
agents, who may be designated as officers, consultants and Persons necessary or
appropriate to effectuate the purpose of the Company, and (ii) delegate to one
or more Persons (or to committees of the Board of Directors) its rights and
powers to manage and control the affairs of the Company. Such delegation may be
in the Bylaws or by a management agreement or other agreement with such Persons
and such delegation shall not cause the Directors to cease to be "managers"
(within the meaning of the Act) of the Company. The management agreement or
other agreement may designate a Person or Persons to be
B-14
"managers" (within the meaning of the Act) of the Company. The officers shall
not be "managers" (within the meaning of the Act) of the Company. The Directors
shall act only as a Board, and the individual Directors shall have no power as
such. Subject to the provisions of this Agreement and the Bylaws with regard to
Board of Directors, the approval of a matter by a majority of the Directors
present at a meeting at which a quorum is present shall constitute approval by
the Board of Directors (or, in the case of a written Consent without a meeting,
the approval of a matter by all of the Directors shall constitute approval by
the Board of Directors.)
(b) No contract or transaction among the Company and one or more of its
Affiliates, Directors or officers, or among the Company and any other Entity in
which one or more of the Company's Affiliates, Directors or officers are
directors or officers, or have a financial interest, shall be void or voidable
solely for this reason, or solely because the Director or officer is present at
or participates in the meeting of the Board of Directors or of a committee
thereof which authorizes the contract or transaction, or solely because his or
their votes are counted for such purpose, if:
(i) The material facts as to such Affiliate's, Director's or officer's
relationship or interest as to the contract or transaction are disclosed or
are known to the Board of Directors or the committee, and the Board of
Directors or committee in good faith authorizes the contract or transaction
by the affirmative vote of a majority of the disinterested Directors, even
though the disinterested Directors be less than a quorum; or
(ii) The contract or transaction is fair as to the Company.
Interested Directors may be counted in determining the presence of a quorum
at a meeting of the Board of Directors or of a committee which authorizes the
contract or transaction.
Notwithstanding, and instead of, the foregoing provisions of this Section
7.1(b), the Company shall enter into or renew no agreement pursuant to which any
Affiliate of any Director would provide management services for any Property,
unless such agreement is approved by a majority of the Independent Directors;
and, if such approval is obtained in the case of a particular contract, such
approval shall be deemed to satisfy the requirements of this Section 7.1(b).
Furthermore, notwithstanding the foregoing, the Company may acquire
property as tenants-in-common, in joint ventures, or in other joint ownership
arrangements with Affiliates of the Company without approval of the Board other
than that which would be required for transactions with non-Affiliates.
7.2. Number and Term of Office of Directors.
(a) The number of seats constituting the entire Board of Directors shall be
at least two, and, for so long as the Company has a class of its securities
registered under Section 12(b) or 12(g) of the Securities Exchange Act of 1934
(the "Exchange Act"), at least five and no more than 15, with the exact number
of seats on the Board of Directors to be determined from time to time by
resolution of the Board of Directors. At least a majority of the Directors in
office at any point in time while the Company has a class of its securities
registered under Section 12(b) or 12(g) of the Exchange Act must be Independent
Directors. Each Director (whenever elected) shall hold office until his or her
successor has been duly elected and qualified, or until his or her earlier
death, resignation, or removal. A Director shall not be required to be a
Shareholder or a resident of the State of Delaware.
(b) At each Annual Meeting of the Shareholders, Directors shall be elected
for a term of office expiring at the next Annual Meeting of the Shareholders
after their election. Each Director may be re-elected by the Shareholders. The
terms of office of Directors shall not be affected by any decrease or increase
in the number of Directors.
7.3. Officers. Pursuant to the Bylaws, the Company will have officers,
who need not be employees of the Company, who will have the rights and be
subject to the restrictions provided therein.
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ARTICLE 8
Limitations on Liability of, and Indemnification of, Directors and Officers.
(a) No Directors or officers of the Company shall be liable, responsible or
accountable in damages or otherwise to the Company or any of the Shareholders
for any act or omission performed or omitted by him or her, or for any decision,
except in the case of fraudulent or illegal conduct of such Person. For purposes
of this Article 8, the fact that an action, omission to act or decision is taken
on the advice of counsel for the Company shall be evidence of good faith and
lack of fraudulent conduct.
(b) To the fullest extent permitted by law, all Directors and officers of
the Company shall be entitled to indemnification from the Company for any loss,
damage or claim (including any reasonable attorney's fees incurred by such
person in connection therewith) due to any act or omission made by him or her,
except in the case of fraudulent or illegal conduct of such Person; provided,
that any indemnity shall be paid out of the assets of the Company only (or any
insurance proceeds available therefor), and no Shareholder shall have any
personal liability on account thereof.
(c) The termination of any action, suit or proceeding by judgment, order,
settlement or conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the Person acted fraudulently or
illegally.
(d) The indemnification provided by this Article 8 shall not be deemed
exclusive of any other rights to which those indemnified maybe entitled under
any agreement, vote of Shareholders or Directors, or otherwise, and shall inure
to the benefit of the heirs, executors and administrators of such a Person.
(e) Any repeal or modification of this Article 8 shall not adversely affect
any right or protection of a Director or officer of the Company existing at the
time of such repeal of modifications.
The Company may, if the Board of Directors of the Company deems it
appropriate in its sole discretion, obtain insurance for the benefit of the
Company's Directors and officers, or enter into indemnification agreements with
such Directors and officers, relating to the liability of such Persons.
ARTICLE 9
Transfers of Interests; Admission of New Shareholders
9.1. Transfers. The Listed Shares shall be freely transferable. Subject
to the foregoing and in accordance with Section 2.8, any Person who is a
Transferee of Shares shall, upon acceptance of a certificate evidencing the
Shares, (a) automatically become a Shareholder of the Company with no further
action being required on such Person's part, and (b) automatically be bound to
the terms and conditions of this Agreement (and be entitled to the rights of a
Shareholder hereunder).
9.2. New Shareholders. The Company may issue Future Shares pursuant to
Sections 3.1; and, in accordance with Section 2.8, any Person acquiring Future
Shares from the Company shall, upon acceptance of a certificate evidencing the
Shares, (a) automatically become a Shareholder of the Company with no future
action being required on such Person's part, and (b) automatically be bound to
the terms and conditions of the Agreement (and be entitled to the rights of a
Shareholder hereunder).
9.3 Lender Ownership Limit.
(a) No Lender, as defined in Section 9.3(c), may own Shares nor shall
Shares be accepted, purchased, or in any manner acquired by any Lender if such
issuance or transfer would result in a Lender owning Shares.
(b) If any Shares are accepted, purchased, or in any manner acquired by any
Lender resulting in a violation of Section 9.3(a) hereof, any such purchase or
acquisition shall be null and void with respect to such Shares ("Excess
Shares"). If the last clause of the foregoing sentence is determined to be
invalid by virtue of any legal decision, statute, rule or regulation, such
Lender shall be conclusively deemed to have acted as an agent on behalf of the
Company in acquiring the Excess Shares and to hold such Excess Shares on behalf
of the ultimate owner of such Excess Shares. Any Lender who receives dividends,
interest or any other
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distribution paid on account of Excess Shares shall hold and retain these
dividends, interest or any other distribution an agent for the ultimate owner of
such Excess Shares.
While the Excess Shares are so held on behalf of the ultimate owner of such
Excess Shares, such Excess Shares shall not have any voting rights and shall not
be considered for purposes of any Shareholder vote and/or for determining a
quorum for such a vote. The Excess Shares shall be treated as outstanding
Shares.
In the event that a Shareholder knowingly holds Excess Shares and the other
Shareholders' basis for federal income tax purposes is reduced, such Shareholder
shall be required to indemnify the Company for the full amount of any damages
and expenses (including the Company's estimate of the costs (including tax
costs) to the other Shareholders, reasonable attorneys' fees and administrative
costs) resulting from the shift of basis for federal income tax purposes.
Upon discovering the ownership of any Excess Shares, the Managing Member
may (i) cause the Company to immediately redeem such Excess Shares at the
Redemption Price (as defined below) or (ii) grant the Shareholder 30 days to
transfer such Excess Shares to any Person whose ownership of such Excess Shares
would not result in a violation of Section 9.3(a) hereof. Upon such permitted
transfer, the Company shall pay or distribute to the transferee any dividends on
the Excess Shares not previously paid or distributed. If such Excess Shares are
not transferred within such 30 day period, the Company will redeem such Shares
at the Redemption Price (as defined below). For purposes of this Section 9.3,
the "Redemption Price" shall mean the lesser of the price paid for such Excess
Shares by the Shareholder in whose possession the redeemed Shares were Excess
Shares or the fair market value of the Excess Shares.
(c) For purposes of this Section 9.3, the term "Lender" shall mean (i) any
Person who is currently owed money by the Company or any one or more of the
CPA(ii) Partnerships in an amount exceeding $1,000,000 and (ii) any Person
related to a Person described in (i) under the rules of Treas. Reg
sec. 1.752-4(b).
(d) The Managing Member may exempt a Lender from the provisions of this
Section 9.3 upon receipt of an opinion of counsel that other Shareholders will
not suffer any material negative affects as a consequence of such Lender owning
Shares.
(e) If any provision of this Section 9.3 or any application thereof is
determined to be invalid by any federal or state court having jurisdiction over
the issue, 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.
ARTICLE 10
Dissolution and Termination
10.1. Events of Dissolution.
(a) In accordance with Section 18-801 of the Act, and the provisions
therein permitting this Agreement to specify the events of the Company's
dissolution, the Company has perpetual existence but shall be dissolved and the
affairs of the Company wound up upon the occurrence of any of the following
events:
(i) expulsion, bankruptcy (as defined in Section 18-304 of the Act) or
insolvency or dissolution of the Managing Member, absent a vote of
Shareholders holding interests in more than 50% of the profits and capital
of the Company to continue the Company within 90 days following such event;
(ii) the vote of the Shareholders pursuant to Sections 6.2(b) and (e)
hereof; or
(iii) the entry of a decree of judicial dissolution under Section
18-802 of the Act.
The death, retirement, resignation, expulsion, bankruptcy (as defined in
Section 18-304 of the Act) or dissolution of a Shareholder or the occurrence of
any other event that terminates the continued membership of a Shareholder in the
Company, shall not cause the dissolution of the Company except to the extent
specified above in this Section 10.1(a).
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(b) Dissolution of the Company shall be effective on the day on which the
event occurs which gives rise to the dissolution, but the Company shall not
terminate until the assets of the Company shall have been distributed as
provided herein and a certificate of cancellation of the Certificate has been
filed with the Secretary of State of the State of Delaware.
10.2. Application of Assets. In the event of dissolution, the Company
shall conduct only such activities as are necessary to wind up its affairs
(including the sale of the assets of the Company in an orderly manner), and the
assets of the Company shall be applied, first, as required by Section
18-804(a)(1) of the Act, and then in the manner, and in the order of priority,
set forth in Article 5. Notwithstanding anything herein to the contrary, in the
event the Company is liquidated within the meaning of Treasury Regulation
sec.1.704-1(b)(2)(ii)(g), liquidation distributions shall be made by the end of
the taxable year in which the Company liquidates or, if later, within 90 days of
the date of such liquidation. Distributions may be made to a trust for the
purposes of an orderly liquidation of the Company by the trust in accordance
with the Act.
10.3. Gain or Losses in Process of Liquidation. Any gain or loss on the
disposition of Company property in the process of liquidation shall be credited
or charged to the Capital Accounts of Shareholders in accordance with the
provisions of Article 3. Any property distributed in kind in the liquidation
shall be valued and treated as though the property was sold at its fair market
value and the cash proceeds were distributed. The difference between the fair
market value of property distributed in kind and its Book Value shall be treated
as a gain or loss on the sale of such property and shall be credited or charged
to the Capital Account of Shareholders in accordance with Article 3; provided,
that no Shareholder shall have the right to request or require the distribution
of the assets of the Company in kind.
10.4. Procedural and Other Matters.
(a) Upon dissolution of the Company and until the filing of a certificate
of cancellation as provided in Section 10.4(b), the Persons winding up the
affairs of the Company may, in the name of, and for and on behalf of, the
Company, prosecute and defend suits, whether civil, criminal or administrative,
settle and close the business of the Company, dispose of and convey the property
of the Company, discharge or make reasonable provision for the liabilities of
the Company, and distribute to the Shareholders any remaining assets of the
Company, in accordance with this Article 10 and all without affecting the
liability of Shareholders and Directors and without imposing liability on a
liquidating trustee.
(b) The Certificate may be canceled upon the dissolution and the completion
of winding up of the Company, by any Person authorized to cause such
cancellation in connection with such dissolution and winding up.
ARTICLE 11
Appointment of Attorney-in-Fact
11.1. Appointment and Powers.
(a) Each Shareholder hereby irrevocably constitutes and appoints the
Managing Member, with full power of substitution, as his, her or its true and
lawful attorney-in-fact, with full power and authority in his, her or its name,
place and stead to execute, acknowledge, deliver, swear to, file and record at
the appropriate public offices such documents, instruments and conveyances as
may be necessary or appropriate to carry out the provisions or purposes of this
Agreement, including, without limitation, the following: (i) the Certificate;
(ii) all other certificates and instruments and amendments thereto that the
Board of Directors deems appropriate to qualify or continue the Company as a
limited liability company in the jurisdiction in which the Company may conduct
business; (iii) all instruments that the Board of Directors deems appropriate to
reflect a change or modification of this Agreement in accordance with the terms
of this Agreement; (iv) all conveyances and other instruments that the Board of
Directors deems appropriate to reflect the dissolution and termination of the
Company; (v) all fictitious or assumed name certificates required or permitted
to be filed on behalf of the Company; (vi) any and all documents necessary to
admit Shareholders to the Company, or to reflect any change or transfer of a
Shareholder's Shares, or relating to the admission or increased Capital
B-18
Contribution of a Shareholder; (vii) any amendment or other document to be filed
as referenced in Section 3.1(d) or 3.1(f) of this Agreement; and (viii) all
other instruments that may be required or permitted by law to be filed on behalf
of or relating to the Company and that are not inconsistent with this Agreement.
The authority granted by this Section 11.1(i) is a special power of
attorney coupled with an interest, is irrevocable, and shall not be affected by
the subsequent incapacity or disability of the Shareholder; (ii) may be
exercised by a signature for each Shareholder or by a single signature of any
such Person acting as attorney-in-fact for all of them; and (iii) shall survive
the Transfer by a Shareholder of the whole or any portion of his, her or its
Shares.
11.2. Presumption of Authority. Any Person dealing with the Company may
conclusively presume and rely upon the fact that any instrument referred to
above, executed by such Person acting as attorney-in-fact, is authorized,
regular and binding, without further inquiry.
ARTICLE 12
Certain Provisions Relating to
Changes in Control and Business Combinations
12.1. Definitions. For purposes of this Article 12, the following
definitions shall apply:
"ASSOCIATE" when used to indicate a relationship with any Person,
means:
(a) Any Entity (other than the Company or a Subsidiary of the
Company) of which such Person is an officer, manager, member, director
or partner or is, directly or indirectly, the beneficial owner of 10
percent or more of any class of equity securities of such Entity;
(b) Any trust or other estate in which such Person has a
substantial beneficial interest or as to which such Person serves as
trustee or in a similar fiduciary capacity; and
(c) Any Relative of such Person, or any Relative of a spouse of
such Person, who has the same home as such Person or who is a Director
or officer of the Company or a manager, member, director or officer of
any of its Affiliates.
"BENEFICIAL OWNER" When used with respect to Shares, means a Person:
(a) That, individually or with any of its Affiliates or Associates,
beneficially owns Shares directly or indirectly; or
(b) That, individually or with any of its Affiliates or Associates,
has (i) the right to acquire Shares (whether such right is exercisable
immediately or only after the passage of time), pursuant to any
agreement, arrangement, or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or otherwise;
or (ii) the right to vote Shares pursuant to any agreement, arrangement
or understanding; or
(c) That has any agreement, arrangement, or understanding for the
purpose of acquiring, holding, voting, or disposing of Shares with any
other Person that beneficially owns, or whose Affiliates or Associates
beneficially own, directly or indirectly, such Shares.
"BUSINESS COMBINATION" means:
(a) Unless the merger, consolidation or exchange of Shares does not
alter the contract rights of the Shares as expressly set forth in this
Agreement or change or convert in whole or in part the outstanding
Shares, any merger, consolidation or exchange of Shares or any interests
in a Subsidiary with (i) any Interested Party or (ii) any other Entity
(whether or not itself an Interested Party) which is, or after the
merger, consolidation or exchange of interests would be, an Affiliate of
an Interested Party that was an Interested Party prior to the
transaction;
(b) Any sale, lease, transfer or other disposition, other than in
the ordinary course of business or pursuant to a distribution or any
other method affording substantially proportionate treatment to
B-19
the Shareholders, in one transaction or a series of transactions in any
12-month period, to any Interested Party or any Affiliate of any
Interested Party (other than the Company or any of its Subsidiaries) of
any assets of the Company or any Subsidiary having, measured at the time
the transaction or transactions are approved by the Board of Directors
of the Company, an aggregate Book Value as of the end of the Company's
most recently ended fiscal quarter of 10 percent or more of (i) the
total Market Value of the outstanding Shares or (ii) the Company's net
worth as of the end of its most recently ended fiscal quarter;
(c) The issuance or transfer by the Company or any Subsidiary, in
one transaction or a series of transactions, of any Shares or any equity
securities of a Subsidiary which have an aggregate Market Value of five
percent or more of the total Market Value of the outstanding Shares to
any Interested Party or any Affiliate of any Interested Party (other
than the Company or any of its Subsidiaries) except pursuant to the
exercise of warrants or rights to purchase securities pro-rata to all
Shareholders or any other method affording substantially proportionate
treatment to those Shareholders;
(d) The adoption of any plan or proposal for the liquidation or
dissolution of the Company in which anything other than cash will be
received by an Interested Party or any Affiliate of any Interested
Party;
(e) Any reclassification of securities or recapitalization of the
Company, or any merger, consolidation or exchange of Shares with any of
its Subsidiaries which has the effect, directly or indirectly, in one
transaction or series of transactions, of increasing by five percent or
more of the total number of outstanding Shares, the proportionate amount
of the outstanding Shares or the outstanding number of any class of
equity securities of any Subsidiary which is directly or indirectly
owned by any Interested Party or any Affiliate of any Interested Party;
or
(f) The receipt by any Interested Party or any Affiliate of any
Interested Party (other than the Company or any of its Subsidiaries) of
the benefit, directly or indirectly (except proportionately as a holder
of Shares of any loan, advance, guarantee, pledge or other financial
assistance or any tax credit or other tax advantage provided by the
Company or any of its Subsidiaries.
"INTERESTED PARTY" means any Person (other than the Company, and any
Subsidiary of the Company) that:
(a) Is the beneficial owner, directly or indirectly, of 10 percent
or more of the outstanding Shares;
(b) Is an Affiliate or Associate of the Company and at any time
within the two-year period immediately prior to the date in question was
the beneficial owner, directly or indirectly, of 10 percent or more of
the then outstanding Shares; or
(c) Is an Affiliate or Associate of any Person described in clause
(a) or (b) above.
For purposes of determining whether a Person is an Interested Party, the
number of Shares deemed to be outstanding shall include Shares deemed
beneficially owned by the Person through the definitions of Beneficial Owner set
forth above but may not include any other Shares which may be issuable pursuant
to any agreement, arrangement or understanding, or upon exercise of conversion
rights, warrants or options, or otherwise.
"MARKET VALUE" means:
(a) In the case of Shares, the highest closing sale price of Shares
during the 30-day period immediately preceding the date in question on
the composite tape of the New York Stock Exchange-listed stocks, and
(b) In the case of property other than cash or stock, the fair
market value of such property on the date in question as determined by
the Board of Directors in good faith.
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"SUBSIDIARY" means any Person (other than an individual) in which the
Company, directly or indirectly, holds a majority of the voting securities.
12.2 Business Combinations.
(a) Unless an exemption under Section 12.3 hereunder applies, the Company
may not engage in any Business Combination with an Interested Party or any
Affiliate of an Interested Party for a period of five years following the most
recent date on which such Interested Party became an Interested Party (the "Five
Year Tolling Period"), unless:
(1) In addition to any vote otherwise required by law or this
Agreement, the Board of Directors of the Company, prior to the most recent
date upon which the Interested Party became an Interested Party, approved
either the Business Combination or the transaction which resulted in the
Interested Party becoming an Interested Party; and
(2) On or subsequent to the date upon which the Interested Party
became an Interested Party, the Business Combination is (A) approved by at
least two-thirds of the Persons who are then members of the Board of
Directors and (B) authorized at an annual or special meeting of the
Shareholders (and not by written consent) by the affirmative vote of at
least two-thirds in interest of the Listed Shareholders, excluding the
Shares held by an Interested Party who will be (or whose Affiliate will be)
a party to the Business Combination or by an Affiliate or Associate of that
Interested Party, voting together as a single class.
(b) Unless an exemption under Section 12.3 applies, in addition to any vote
otherwise required by law or this Agreement, a Business Combination proposed by
an Interested Party or an Affiliate of the Interested Party after the Five Year
Tolling Period shall be permitted only if recommended by the Board of Directors
who are present at a duly-called meeting at which a quorum is present and
approved by the affirmative vote of at least:
(i) 80% in interest of all Listed Shareholders, voting together as a
single voting group; and
(ii) Two-thirds in interest of the Listed Shareholders, excluding
Shares held by an Interested Party who will (or whose Affiliate will) be a
party to the Business Combination or by an Affiliate or Associate of the
Interested Party.
12.3 Exemptions.
(a) For purposes of this Section 12.3:
"ANNOUNCEMENT DATE" means the first general public announcement of the
proposal or intentions to make a proposal of the Business Combination or
its first communication generally to the Shareholders, whichever is
earlier;
"DETERMINATION DATE" means the most recent date on which the
Interested Party became an Interested Party; and
"VALUATION DATE" means:
(i) For a Business Combination voted upon by the Shareholders, the
later of the day prior to the date of the vote or the day 20 days prior
to the consummation of the Business Combination; and
(ii) For a Business Combination not voted upon by the Shareholders,
the date of the consummation of the Business Combination.
(b) The vote required by Section 12.2(b) does not apply to a Business
Combination if (1) the Business Combination or the transaction which resulted in
the Interested Party becoming an Interested Party shall have been approved by
the Board of Directors prior to the Determination Date or (2) each of the
conditions in items (i) through (iii) below is met:
(i) The aggregate amount of the cash and the Market Value as of the
Valuation Date of consideration other than cash to be received for each
Share in such Business Combination (whether or
B-21
not the Interested Party has previously acquired the particular class or
series of Shares in question) is at least equal to the highest of the
following:
(A) The highest per Share price (including any brokerage
commissions, transfer taxes and soliciting dealers' fees) paid by the
Interested Party for any Shares acquired by it within the five-year
period immediately prior to the Announcement Date of the proposal of the
Business Combination, plus an amount equal to interest compounded
annually from the earliest date on which the highest per Share
acquisition price was paid through the Valuation Date at the rate for
one-year United States Treasury obligations from time to time in effect,
less the aggregate amount of any cash distributions paid and the Market
Value of any distributions paid in other than cash, per Share from the
earliest date through the Valuation Date, up to the amount of the
interest compounded annually for such period; or
(B) The highest per Share price (including any brokerage
commissions, transfer taxes and soliciting dealers' fees) paid by the
Interested Party for any Share acquired by it on, or within the
five-year period immediately before, the Determination Date, plus an
amount equal to interest compounded annually from the earliest date on
which the highest per Share acquisition price was paid to the same class
or series through the Valuation Date at the rate for one-year United
States Treasury obligations from time to time in effect, less the
aggregate amount of any cash distributions paid and the Market Value of
any distributions paid in other than cash, per Share from the earliest
date through the Valuation Date, up to the amount of the interest
compounded annually for such period; or
(C) The highest preferential amount per Share to which the holders
of Shares are entitled in the event of any voluntary or involuntary
dissolution or winding up of the Company; or
(D) The Market Value per Share on the Announcement Date, plus an
amount equal to interest compounded annually from that date through the
Valuation Date at the rate for one-year United Sates Treasury
obligations from time to time in effect, less the aggregate amount of
any cash distributions paid and the Market Value of any distributions
paid in other than cash, per Share from that date through the Valuation
Date, up to the amount of the interest compounded annually for such
period; or
(E) The Market Value per Share on the Determination Date, plus an
amount equal to interest compounded annually from that date through the
Valuation Date at the rate for one-year United States Treasury
obligations from time to time in effect, less the aggregate amount of
any cash distributions paid and the Market Value of any distributions
paid and the Market Value of any distributions paid in other than cash,
per Share from that date through the Valuation Date, up to the amount of
the interest; or
(F) The price per Share equal to the Market Value per Share on the
Announcement Date or on the Determination Date, whichever is higher,
multiplied by the fraction of:
(1) The highest per Share price (including any brokerage
commissions, transfer taxes and solicitation dealers' fees) paid by
the Interested Party for any Shares acquired by it within the
five-year period immediately prior to the Announcement Date, over
(2) The Market Value per Share on the first day in such
five-year period on which the Interested Party acquired the Shares.
(ii) The consideration to be received in such Business Combination by
the holders of any Shares is to be in cash or in the same form as the
Interested Party has previously paid for such Shares, except to the extent
that the Shareholders otherwise elect in connection with their approval of
the proposed transaction under Section 12.2 of this Agreement. If the
Interested Party has paid for Shares with varying forms of consideration,
the form of consideration for such Shares shall be either cash or the form
used to acquire the largest number of Shares previously acquired by it,
except to the extent that the Shareholders otherwise elect.
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(iii) After the Determination Date and prior to the consummation of
such Business Combination:
(A) There shall have been no failure to declare and pay at the
regular date therefor (if applicable) any full periodic distributions
(whether or not cumulative) on any outstanding Shares;
(B) There shall have been:
(1) No reduction in the annual rate of distributions made with
respect to the Shares; and
(2) An increase in such annual rate of distributions as
necessary to reflect any reclassification, recapitalization,
reorganization or any similar transaction which has the effect of
reducing the number of outstanding Shares; and
(C) The Interested Party did not become the Beneficial Owner of any
additional Shares except as part of the transaction which resulted in
such Interested Party becoming an Interested Party or by virtue of
proportionate Share splits or distributions.
The provisions of items (A) and (B) of this subsection (b)(iii) do
not apply if (I) no Interested Party or Affiliate or Associate of the
Interested Party voted as a member of the Board of Directors of the
Company in a manner inconsistent with such items (A) and (B) and (II)
the Interested Party, within 10 days after any act or failure to act
inconsistent with such items, notifies the Board of Directors of the
Company in writing that the Interested Party disapproves thereof and
requests in good faith that the Board of Directors rectify such act or
failure to act.
(c) The provisions of Section 12.2 do not apply to any Business Combination
of the Company with an Interested Party that became an Interested Party
inadvertently, if the Interested Party:
(i) As soon as practicable (but not more than 10 days after the
Interested Party knew or should have known it had become an Interested
Party) divests itself of a sufficient amount of Shares to avoid being an
Interested Party; and
(ii) Would not at any time within the five-year period preceding the
Announcement Date with respect to the Business Combinations have been an
Interested Party except by inadvertence.
12.4. Amendment. Notwithstanding any other provisions of this Agreement,
this Article 12 may be amended or repealed only by a vote of 80% in interest of
all Shareholders, excluding Shares held by any Interested Party or any Affiliate
of an Interested Party.
12.5. Certain Determinations with Respect to this Article 12. The Board
of Directors shall have the power to determine for the purposes of this Article
12, on the basis of information known to the Directors: (i) the number of Shares
of which any Person is the Beneficial Owner, (ii) whether a Person is an
Affiliate or Associate of another, (iii) whether a Person has an agreement,
arrangement or understanding with another as to the matters referred to in the
definition of "Beneficial Owner" as hereinabove defined, (iv) whether two or
more transactions constitute a "series of transactions," and (v) such other
matters with respect to which a determination is required under this Article 12.
ARTICLE 13
Voting Rights of Certain Control Shares
13.1 Definitions. For purposes of this Article 13, the following
definitions shall apply:
"Acquiring Person" means a Person who makes or proposes to make a
Control Shares Acquisition, or such Person's Affiliate or Associate.
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"Associate" when used to indicate a relationship with any Person
means:
(a) An "Associate" as defined in Section 12.1; or
(b) A Person that:
(i) Directly or indirectly controls, or is controlled by, or is
under common control with, the Person specified; or
(ii) Is acting or intends to act jointly or in concert with the
Person specified.
"CONTROL SHARES" means Shares that, except for this Article 13, would,
if aggregated with all other Shares (including Shares the acquisition of
which is excluded from the definition "Control Shares Acquisition" below)
owned by a Person or in respect of which that Person is entitled to
exercise or direct the exercise of voting power, except solely by virtue of
a revocable proxy, entitle that Person, directly or indirectly, to exercise
or direct the exercise of the voting power of Shares within any of the
following ranges of voting power:
(a) One-fifth or more, but less than one-third of all voting power;
(b) One-third or more, but less than a majority of all voting
power; or
(c) A majority or more of all voting power.
but such definition includes Shares only to the extent that the Acquiring
Person, following the acquisition of the Shares, is entitled, directly or
indirectly, to exercise or direct the exercise of voting power within any
level of voting power set forth in this section for which approval has not
been obtained previously under Section 13.2.
"CONTROL SHARES ACQUISITION" means the acquisition, directly or
indirectly, by any Person (other than the Company and any Subsidiary of the
Company), of ownership of, or the power to direct the exercise of voting
power with respect to, issued and outstanding Control Shares. Control
Shares Acquisition does not include the acquisition of Control Shares:
(a) Under the laws of descent and distribution;
(b) Under the satisfaction of a pledge or other security interest
created in good faith and not for the purpose of circumventing this
Article 13; or
(c) Under a merger, consolidation or exchange of interests if the
Company is a party to the merger, consolidation or exchange of
interests.
Unless the acquisition entitles any Person, directly or indirectly, to
exercise or direct the exercise of voting power of Shares in excess of the range
of voting power previously authorized or attained under an acquisition that is
exempt under items (a), (b), or (c) of this definition, "Control Shares
Acquisition" does not include the acquisition of Shares in good faith and not
for the purpose of circumventing this Article 13, by or from any Person whose
voting rights have previously been authorized by the Shareholders in compliance
with this Article 13 or any Person whose previous acquisition of Shares would
have constituted a Control Shares Acquisition but for the exclusions in items
(a) through (c) of this definition.
"INTERESTED SHARES" means Shares in respect of which an Acquiring
Person is entitled to exercise or direct the exercise of the voting power
of Shares in the election of Directors or otherwise.
B. Voting Rights.
1. Control Shares acquired in a Control Shares Acquisition have no voting
rights except to the extent approved by the Shareholders at a meeting held under
Section 13.4 by the affirmative vote of two-thirds in interest of all
Shareholders, excluding any votes cast with respect to Interested Shares.
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2. For purposes of this Section 13.2:
a. Shares acquired within 180 days of Shares acquired under a plan to
make a Control Shares Acquisition are considered to have been acquired in
the same acquisition; and
b. A Person may be deemed to be entitled to exercise or direct the
exercise of voting power with respect to Shares held for the benefit of
others if the Person:
(1) Is acting in the ordinary course of business, in good faith and
not for the purpose of circumventing the provisions of this Section of
the Agreement; and
(2) Is not entitled to exercise or to direct the exercise of the
voting power of the Shares unless the Person first seeks to obtain the
instruction of another Person.
C. Acquiring Person Statement.
Any Person who proposes to make or who has made a Control Shares
Acquisition may deliver an Acquiring Person statement to the Company at the
Company's principal office. The Acquiring Person statement shall set forth all
of the following:
1. The identity of the Acquiring Person and each other member of any
group of which the Person is a part for purposes of determining Control
Shares;
2. A statement that the Acquiring Person statement is given under this
Article 13;
3. The number of Shares owned (directly or indirectly) by the
Acquiring Person and each other member of any group;
4. The applicable range of voting power as set forth in the definition
of "Control Shares"; and
5. If the Control Shares Acquisition has not occurred:
a. A description in reasonable detail of the terms of the proposed
Control Shares Acquisition; and
b. Representations of the Acquiring Person, together with a
statement in reasonable detail of the facts on which they are based,
that:
(1) The proposed Control Shares Acquisition, if consummated,
will not be contrary to law; and
(2) The Acquiring Person has the financial capacity, through
financing to be provided by the Acquiring Person, and any additional
specified sources of financing required under Section 13.5, to make
the proposed Control Shares Acquisition.
D. Special Meeting.
1. Except as provided in Section 13.5, if the Acquiring Person requests, at
the time of delivery of an Acquiring Person statement, and gives a written
undertaking to pay the Company's expenses of a special meeting, except the
expenses of opposing approval of the voting rights, within ten days after the
day on which the Company receives both the request and undertaking, the Board of
Directors of the Company shall call a special meeting of the Shareholders, to be
held within 50 days after receipt of the Acquiring Person statement and
undertaking, for the purpose of considering the voting rights to be accorded the
Shares acquired in the Control Shares Acquisition.
2. The Board of Directors may require the Acquiring Person to give bond,
with sufficient surety, to reasonably assure the Company that this undertaking
will be satisfied.
3. Unless the Acquiring Person agrees in writing to another date, the
special meeting of Shareholders shall be held within 50 days after the day on
which the Company has received the Acquiring Person statement.
B-25
4. If no request is made under subsection (a) of this Section 13.4, the
issue of the voting rights to be accorded the Shares acquired in the Control
Shares Acquisition may, at the option of the Company, be presented for
consideration at any meeting of the Shareholders. If no request is made under
subsection (a) of this Section 13.4 and the Company proposes to present the
issue of the voting rights to be accorded the Shares acquired in a Control
Shares Acquisition for consideration at any meeting of the Shareholders, the
Company shall provide the Acquiring Person with written notice of the proposal
not less than 20 days before the date on which notice of the meeting is given.
E. Calls.
1. A call of a special meeting of the Shareholders is not required to be
made under Section 13.4 unless, at the time of delivery of an Acquiring Person
statement an Acquiring Person has:
a. Entered into a definitive financing agreement or agreements with
one or more responsible financial institutions or other entities that have
the necessary financial capacity, providing for any amount of financing of
the Control Shares Acquisition not provided by the Acquiring Person; and
b. Delivered a copy of the agreements to the Company.
F. Notice of Meeting.
1. If a special meeting of the Shareholders is requested, notice of the
special meeting shall be given as promptly as reasonably practicable by the
Company to all Shareholders of record as of the record date set for the meeting,
whether or not such Shareholder is entitled to vote at the meeting.
2. Notice of the special or annual meeting at which the voting rights are
to be considered shall include or be accompanied by the following:
a. A copy of the Acquiring Person statement delivered to the Company
under Section 13.3; and
b. A statement by the Board of Directors setting forth its position or
recommendation, or stating that it is taking no position or making no
recommendation, with respect to the issue of voting rights to be accorded
the Control Shares.
G. Redemption Rights.
1. If an Acquiring Person statement has been delivered on or before the
10th day after the Control Shares Acquisition, the Company may, at its option,
redeem any or all Control Shares, except Control Shares for which voting rights
have been previously approved under Section 13.2, at any time during a 60-day
period commencing on the day of a meeting at which voting rights are considered
under Section 13.4 and are not approved.
2. In addition to the redemption rights authorized under subsection (a) of
this Section 13.7, if an Acquiring Person statement has not been delivered on or
before the 10th day after the Control Shares Acquisition, the Company may, at
its option, redeem any or all Control Shares for which voting rights have been
previously approved under Section 13.2, at any time during a period commencing
on the 11th day after the Control Shares Acquisition and ending 60 days after
the Acquiring Person statement has been delivered.
3. Any redemption of Control Shares under this Section shall be at the fair
value of the Control Shares. For purposes of this section, "fair value" shall be
determined:
a. As of the date of the last acquisition of Control Shares by the
Acquiring Person in a Control Shares Acquisition or, if a meeting is held
under Section 13.4, as of the date of the meeting; and
b. Without regard to the absence of voting rights for the Control
Shares.
H. Amendment. Notwithstanding any other provision of this Agreement, this
Article 13 may only be amended or repealed by a vote of 80% in interest of all
Shareholders, excluding any votes cast with respect to Interested Shares.
B-26
ARTICLE 14
Miscellaneous Provisions
A. Notices.
1. Except as otherwise provided in this Agreement or in the Bylaws, any and
all notices, consents, offers, elections and other communications required or
permitted under this Agreement shall be deemed adequately given only if in
writing and the same shall be delivered either in hand, by telecopy, or by mail
or Federal Express or similar expedited commercial carrier, addressed to the
recipient of the notice, postage prepaid and registered or certified with return
receipt requested (if by mail), or with all freight charges prepaid (if by
Federal Express or similar carrier).
2. All notices, demands, and requests to be sent hereunder shall be deemed
to have been given for all purposes of this Agreement upon the date of receipt
or refusal.
3. All such notices, demands and requests shall be addressed as follows:
(i) if to the Company, to its principal place of business, as set forth in
Article 2 hereof and (ii) if to a Shareholder, to the address of such
Shareholder listed on the Company's Shareholder register.
4. By giving to the other parties written notice thereof, parties hereto
and their respective successors and assigns shall have the right from time to
time and at any time during the term of this Agreement to change their
respective addresses effective upon receipt by the other parties of such notice
and each shall have the right to specify as its address any other address.
B. Word Meanings. The words such as "herein", "hereinafter", "hereof" and
"hereunder" refer to this Agreement as a whole and not merely to the subdivision
in which such words appear unless the context otherwise requires. The singular
shall include the plural and the masculine gender shall include the feminine and
neuter, and vice versa, unless the context otherwise requires.
C. Binding Provisions. The covenants and agreements contained herein shall
be binding upon, and insure to the benefit of, the heirs, legal representatives,
successors and assigns of the respective parties hereto.
D. Amendment and Modification. Unless otherwise specifically provided in
this Agreement, this Agreement may be amended, modified or supplemented only by
the vote, at a duly held meeting, of more than 50% in interest of the
then-outstanding Shares (or, in the case of a written Consent without a meeting,
more than 50% in interest of the aggregate then-outstanding Shares) voting or
acting as one class (and not as separate classes, notwithstanding the fact that
there may be Shareholders of more than one class voting); provided, however,
that Article 8 shall not be amended, modified or supplemented, unless such
amendment, modification or supplement receives the Consent of at least 80% in
interest of the holders of then-outstanding Shares. Notwithstanding anything to
the contrary contained herein, the Bylaws may be amended by the affirmative vote
of a majority of all members of the Board of Directors as provided in the Bylaws
without any further vote, consent or approval of any Shareholder or other
Person.
E. Waiver. The waiver by any party hereto of a breach of any provisions
contained herein shall be in writing, signed by the waiving party, and shall in
no way be construed as a waiver of any succeeding breach of such provision or
the waiver of the provision itself.
F. Applicable Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Delaware, without regard to such
state's laws concerning conflicts of laws. In the event of a conflict between
any provisions of this Agreement and any nonmandatory provisions of the Act, the
provision of this Agreement shall control and take precedence.
G. Severability of Provisions. Each provision of this Agreement shall be
deemed severable, and if any part of any provision is held to be illegal, void,
voidable, invalid, nonbinding or unenforceable in its entirety or partially or
as to any party, for any reason, such provision may be changed, consistent with
the intent of the parties hereto, to the extent reasonably necessary to make the
provision, as so changed, legal, valid, binding and enforceable. If any
provision of this Agreement is held to be illegal, void, voidable, invalid,
nonbinding or unenforceable in its entirety or partially or as to any party, for
any reason, and if such provision cannot be
B-27
changed consistent with the intent of the parties hereto to make it fully legal,
valid, binding and enforceable, then such provision shall be stricken from this
Agreement, and the remaining provisions of this Agreement shall not in any way
be affected or impaired, but shall remain in full force and effect.
H. Headings. The headings contained in this Agreement have been inserted
for the convenience of reference only, and neither such headings nor the
placement of any term hereof under any particular heading shall in any way
restrict or modify any of the terms or provisions hereof.
I. Further Assurances. The Shareholders shall execute and deliver such
further instruments and do such further acts and things as may be required to
carry out the intent and purposes of this Agreement.
J. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, and all of which taken
together shall constitute one and the same instrument.
K. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto with respect to the transactions contemplated herein,
and supersedes all prior understandings or agreements, oral or written, between
the parties.
IN WITNESS WHEREOF, the parties hereto, being the sole current Members of
the Company, have executed and delivered this Amended and Restated Limited
Liability Company Agreement as of the day and year first-above written.
W. P. CAREY & CO. LLC
By: CAREY MANAGEMENT LLC,
Managing Member
By: /s/ GORDON F. DUGAN
------------------------------------
Name: Gordon F. DuGan
Title: President and CEO
MEMBERS
All Members now admitted as
members of the limited liability
company pursuant to powers of
attorney in favor of and granted
and delivered to the Managing
Member in accordance with Section
11.1 hereof:
By:
CAREY
MANAGEMENT
LLC
Attorney-in-Fact
By: /s/ GORDON F. DUGAN
------------------------------------
Name: Gordon F. DuGan
Title: President and CEO
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W. P. CAREY & CO. LLC
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF SHAREHOLDERS
JUNE 8, 2005
The shareholder(s) hereby appoint(s) John J. Park and Claude Fernandez, and each
of them, with full power of substitution, as proxy to vote all listed shares of
W. P. Carey & Co. LLC that the shareholder(s) is/are entitled to vote at the
2005 Annual Meeting of Shareholders of W. P. Carey & Co. LLC to be held at The
Waldorf-Astoria Hotel, 301 Park Avenue, New York, New York on Wednesday, June 8,
2005 at 2:00 p.m., and any adjournment or postponement thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED BY THE
SHAREHOLDER(S). IF NO SUCH DIRECTIONS ARE MADE, THIS PROXY WILL BE VOTED FOR THE
ELECTION OF THE NOMINEES LISTED ON THE REVERSE SIDE FOR THE BOARD OF DIRECTORS
AND FOR PROPOSAL 2 AS STATED ON THE REVERSE SIDE.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD
PROMPTLY USING THE ENCLOSED REPLY ENVELOPE
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COMMENTS:
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(If you noted any Comments above, please mark
corresponding box on the reverse side.)
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
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MELLON INVESTORS SERVICES
85 CHALLENGER ROAD
RIDGEFIELD, NJ 07663
VOTE BY INTERNET - WWW.PROXYVOTE.COM
Use the Internet to transmit your voting instructions and for electronic
delivery of information up until 11:59 P.M. Eastern Time the day before the
cut-off date or meeting date. Have your proxy card in hand when you access the
web site and follow the instructions to obtain your records and to create an
electronic voting instruction form.
ELECTRONIC DELIVERY OF FUTURE SHAREHOLDER COMMUNICATIONS
If you would like to reduce the costs incurred by W. P. Carey & Co. LLC in
mailing proxy materials, you can consent to receiving all future proxy
statements, proxy cards and annual reports electronically via e-mail or the
Internet. To sign up for electronic delivery, please follow the instructions
above to vote using the Internet and, when prompted, indicate that you agree to
receive or access shareholder communications electronically in future years.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59
P.M. Eastern Time the day before the cut-off date or meeting date. Have your
proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid
envelope we have provided or return it to W. P. Carey & Co. LLC, c/o ADP, 51
Mercedes Way, Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
WPCRY1 KEEP THIS PORTION FOR YOUR RECORDS
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DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
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W. P. CAREY & CO. LLC
VOTE ON DIRECTORS
1. To elect four Class II directors, each to hold office for a three-year
term and until their respective successors are elected and qualified.
Nominee: 01) Francis J. Carey
02) Eberhard Faber IV
03) George E. Stoddard
04) Karsten von Koller
FOR WITHHOLD FOR ALL
ALL ALL EXCEPT
( ) ( ) ( )
To withhold authority to vote, mark "For All Except"
and write the nominee's number on the line below.
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2. To amend and restate the W. P. Carey & Co. LLC Amended and Restated
Limited Liability Company Agreement to eliminate the classified board
structure and provide for the election of directors annually.
FOR AGAINST ABSTAIN
( ) ( ) ( )
To transact such other business as may properly come before the meeting.
For comments, please check this box and write the changes on the back where
indicated. ( )
Please indicate if you plan to attend this meeting ( ) ( )
YES NO
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Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owner) Date
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