-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NwyJ4LMMip/Akq1ZsebqXv7l2SqcaRFVZDBx7noZ0p4zjmCJCKk4C3hq+X+LflQ1 gQR/IGs1tL+ZS8xa+/svlA== 0000889697-00-000080.txt : 20000505 0000889697-00-000080.hdr.sgml : 20000505 ACCESSION NUMBER: 0000889697-00-000080 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000504 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AGREE REALTY CORP CENTRAL INDEX KEY: 0000917251 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 383148187 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-12928 FILM NUMBER: 618857 BUSINESS ADDRESS: STREET 1: 31850 NORTHWESTERN HGWY CITY: FARMINGTON HILLS STATE: MI ZIP: 48334 BUSINESS PHONE: 8107374190 MAIL ADDRESS: STREET 1: 31850 NORTHWESTERN HIGHWAY CITY: FARMINGTON HILLS STATE: MI ZIP: 48334 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q |X| Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 2000 OR |_| Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from __________ to __________ Commission File Number 1-12928 Agree Realty Corporation - ----------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Maryland 38-3148187 - ----------------------------------------------------------------------------- (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 31850 Northwestern Highway, Farmington Hills, Michigan 48334 - ----------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, included area code: (248) 737-4190 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No |X| |_| 4,394,669 Shares of Common Stock, $.0001 par value, were outstanding as of May 4, 2000 Agree Realty Corporation Form 10-Q Index - ----------------------------------------------------------------------------- Page Part I: Financial Information Item 1. Interim Consolidated Financial Statements 3 Consolidated Balance Sheets as of March 31, 2000 and December 31, 1999 4-5 Consolidated Statements of Income for the three months ended March 31, 2000 and 1999 6 Consolidated Statement of Stockholders' Equity for the three months ended March 31, 2000 7 Consolidated Statements of Cash Flows for the three months ended March 31, 2000 and 1999 8 Notes to Consolidated Financial Statements 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10-15 Item 3. Quantitative and Qualitative Disclosures About Market Risk 16 Part II: Other Information Item 1. Legal Proceedings 17 Item 2. Changes in Securities 17 Item 3. Defaults Upon Senior Securities 17 Item 4. Submission of Matters to a Vote of Security Holders 17 Item 5 Other Information 17 Item 6. Exhibits and Reports on Form 8-K 17 Signatures 18 2 Agree Realty Corporation Part I: Financial Information ITEM 1. INTERIM CONSOLIDATED FINANCIAL STATEMENTS 3
Agree Realty Corporation Consolidated Balance Sheets (Unaudited) March 31, December 31, 2000 1999 - ----------------------------------------------------------------------------- Assets Real Estate Investments Land $ 40,274,374 $ 40,270,367 Buildings 137,846,136 135,709,128 Property under development 2,565,532 3,878,611 ------------- ------------- 180,686,042 179,858,106 Less accumulated depreciation (27,212,478) (26,342,296) ------------- ------------- Net Real Estate Investments 153,473,564 153,515,810 Cash and Cash Equivalents 257,755 1,064,241 Accounts Receivable - Tenants 398,685 565,133 Investments In and Advances To Unconsolidated Entities 274,885 449,676 Unamortized Deferred Expenses Financing 1,499,397 1,587,397 Leasing costs 278,572 282,629 Other Assets 849,937 730,651 ------------- ------------- $ 157,032,795 $ 158,195,537 ============= ============= See accompanying notes to consolidated financial statements.
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Agree Realty Corporation Consolidated Balance Sheets (Unaudited) March 31, December 31, 2000 1999 - ------------------------------------------------------------------------------ Liabilities and Stockholders' Equity Mortgage Payable $ 52,615,801 $ 52,936,571 Construction Loans 15,810,637 15,322,071 Notes Payable 27,158,232 27,158,232 Dividends and Distributions Payable 2,333,219 2,317,670 Accrued Interest Payable 346,317 344,875 Accounts Payable Operating 456,848 855,886 Capital expenditures 569,935 1,315,597 Tenant Deposits 52,177 52,073 ------------ ------------ Total Liabilities 99,343,166 100,302,975 ------------ ------------ Minority Interest 5,797,222 5,859,012 ------------ ------------ Stockholders' Equity Common stock, $.0001 par value; 20,000,000 shares authorized, 4,398,669 and 4,364,867 shares issued and outstanding 440 436 Additional paid-in capital 63,688,433 63,217,235 Deficit (11,076,999) (10,673,302) ------------ ------------ 52,611,874 52,544,369 Less: unearned compensation - restricted stock (719,467) (510,819) ------------ ------------ Total Stockholders' Equity 51,892,407 52,033,550 ------------ ------------ $157,032,795 $158,195,537 ============ ============ See accompanying notes to consolidated financial statements.
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Agree Realty Corporation Consolidated Statements of Income (Unaudited) Three Months Ended Three Months Ended March 31, 2000 March 31, 1999 - ----------------------------------------------------------------------------- Revenues Rental income $ 5,152,382 $ 4,716,423 Operating cost reimbursement 648,524 656,532 Management fees and other 11,982 9,263 ----------- ----------- Total Revenues 5,812,888 5,382,218 ----------- ----------- Operating Expenses Real estate taxes 445,620 422,412 Property operating expenses 410,413 446,303 Land lease payments 140,665 136,915 General and administrative 391,895 316,045 Depreciation and amortization 899,642 848,896 ----------- ----------- Total Operating Expenses 2,288,235 2,170,571 ----------- ----------- Income From Operations 3,524,653 3,211,647 ----------- ----------- Other Income (Expense) Interest expense, net (1,658,520) (1,386,685) Equity in net income of unconsolidated entities 1,600 6,934 ----------- ----------- Total Other Expense (1,656,920) (1,379,751) ----------- ----------- Income Before Minority Interest 1,867,733 1,831,896 Minority Interest 248,042 244,897 ----------- ----------- Net Income $ 1,619,691 $ 1,586,999 ============ =========== Earnings Per Share $ .37 $ .36 ============ =========== Weighted Average Number of Common Shares Outstanding 4,398,669 4,364,867 ============ =========== See accompanying notes to consolidated financial statements.
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Agree Realty Corporation Consolidated Statement of Stockholders' Equity (Unaudited) - ----------------------------------------------------------------------------- Unearned Common Stock Additional Compensation- ---------------------- Paid-In Restricted Shares Amount Capital Deficit Stock --------------------------------------------------------------------- Balance, January 1, 2000 4,364,867 $ 436 $63,217,235 $(10,673,302) $ (510,819) Issuance of shares under Stock Incentive Plan 33,802 4 471,198 -- (267,648) Vesting of restricted stock -- -- -- -- 59,000 Dividends declared for the period January 1, 2000 to March 31, 2000 -- -- -- (2,023,388) -- Net income for the period January 1, 2000 to March 31, 2000 -- -- -- 1,619,691 -- --------- ---------- ----------- ------------ ------------ Balance, March 31, 2000 4,398,669 $ 440 $63,688,433 $(11,076,999) $ (719,467) ========= ========== =========== ============ ============ See accompanying notes to consolidated financial statements.
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Agree Realty Corporation Consolidated Statements of Cash Flows (Unaudited) Three Months Ended Three Months Ended March 31, 2000 March 31, 1999 - ------------------------------------------------------------------------------------------------------------ Cash Flows From Operating Activities Net income $ 1,619,691 $ 1,586,999 Adjustments to reconcile net income to net cash provided by operating activities Depreciation 879,268 827,588 Amortization 108,374 111,308 Stock-based compensation 59,000 48,500 Equity in net income of unconsolidated entities (1,600) (6,934) Minority interests 248,042 244,897 Decrease in accounts receivable 166,448 323,158 Increase in other assets (128,842) (101,755) Decrease in accounts payable (399,038) (274,135) Increase in accrued interest 1,442 37,953 Increase (decrease) in tenant deposits 104 (2,333) ------------- ------------- Net Cash Provided By Operating Activities 2,552,889 2,795,246 ------------- ------------- Cash Flows From Investing Activities Acquisition of real estate investments (including capitalized interest of $59,000 in 2000 and $147,000 in 1999) (258,001) (519,953) Investments in and advances to unconsolidated entities - net 173,580 124,150 ------------- ------------- Net Cash Used In Investing Activities (84,421) (395,803) ------------- ------------- Cash Flows From Financing Activities Dividends and limited partners' distributions paid (2,317,670) (2,309,136) Payments of payables for capital expenditures (1,112,044) (1,429,019) Construction loan proceeds 488,566 40,707 Payments of mortgages payable (320,770) (26,398) Payment of leasing costs (13,036) (18,000) Line-of-credit proceeds - 900,000 Payment of financing costs - (297,950) ------------- ------------- Net Cash Used In Financing Activities (3,274,954) (3,139,796) ------------- ------------- Net Decrease In Cash and Cash Equivalents (806,486) (740,353) Cash and Cash Equivalents, beginning of period 1,064,241 994,159 ------------- ------------- Cash and Cash Equivalents, end of period $ 257,755 $ 253,806 ============= ============= Supplemental Disclosure of Cash flow Information Cash paid for interest (net of amounts capitalized) $ 1,573,989 $ 1,263,185 ============= ============= Supplemental Disclosure of Non-Cash Transactions Dividends and limited partners' distributions declared and unpaid $ 2,333,219 $ 2,317,670 Real estate investments financed with accounts payable $ 569,935 $ 340,695 Shares issued under Stock Incentive Plan $ 471,202 $ 343,249 ============= ============= See accompanying notes to consolidated financial statements.
8 Agree Realty Corporation Notes to Consolidated Financial Statements 1. Basis of The accompanying unaudited 2000 consolidated Presentation financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The consolidated balance sheet at December 31, 1999 has been derived from the audited consolidated financial statements at that date. Operating results for the three months ended March 31, 2000 are not necessarily indicative of the results that may be expected for the year ending December 31, 2000, or for any other interim period. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report for the year ended December 31, 1999. 2. Earnings Per Share Earnings per share has been computed by dividing the income by the weighted average number of common shares outstanding. The per share amounts reflected in the consolidated statements of income are presented in accordance with Statement of Financial Accounting Standards (SFAS) No. 128 "Earnings per Share"; the amounts of the Company's "basic" and "diluted" earnings per share (as defined in SFAS No. 128) are the same. 3. Reclassifications Certain amounts in the 1999 financial statements have been reclassified to conform with the 2000 presentation. 9 Agree Realty Corporation Part I ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OEPRATIONS - ----------------------------------------------------------------------------- Overview The Company was established to continue to operate and expand the retail property business of its Predecessors. The Company commenced its operations on April 22, 1994 with the sale of 2,500,000 shares of common stock in an initial public offering. The net cash proceeds to the Company from the completion of this offering were approximately $45.4 million, which were used primarily to reduce outstanding indebtedness, pay stock issuance costs and establish a working capital reserve. On May 21, 1997, the Company completed an offering of 1,625,000 shares of common stock at $20.625 per share; on June 18, 1997 the underwriters exercised their overallotment option for an additional 28,850 shares at the same per share price (collectively, "the 1997 Offering"). The net proceeds from the 1997 Offering of approximately $31.9 million were used to repay amounts outstanding under the Company's Credit Facility. The assets of the Company are held by, and all operations are conducted through, Agree Limited Partnership (the "Operating Partnership"), of which the Company is the sole general partner and held an 86.72% interest as of March 31, 2000. The Company is operating so as to qualify as a real estate investment trust ("REIT") for federal income tax purposes. The following should be read in conjunction with the Consolidated Financial Statements of Agree Realty Corporation, including the respective notes thereto, which are included in this Form 10-Q. Comparison of Three Months Ended March 31, 2000 to Three Months Ended March 31, 1999 Rental income increased $436,000, or 9%, to $5,152,000 in 2000, compared to $4,716,000 in 1999. The increase was the result of the development of four properties in 1999 and one property in 2000. Operating cost reimbursement, which represents additional rent required by substantially all of the Company's leases to cover the tenants' proportionate share of real estate taxes and property operating expenses, decreased $8,000, or 1%, to $648,000 in 2000, compared to $656,000 in 1999. Operating cost reimbursement decreased due to the net decrease in real estate taxes and property operating expenses. Management fees and other income remained relatively constant at $12,000 in 2000 compared to $9,000 in 1999. Real estate taxes increased 24,000, or 5%, to $446,000 in 2000 compared to $422,000 in 1999. The increase is the result of general assessment increases on the Company's properties. Property operating expenses (shopping center maintenance, insurance and utilities) decreased $36,000, or 8%, to $410,000 in 2000 compared $446,000 in 1999. The decrease was the result of decreased snow removal costs of $55,000; an increase in shopping center maintenance costs of $18,000 and an increase in insurance cost of $1,000. 10 Land lease payments remained relatively constant at $141,000 in 2000 compared to $137,000 in 1999. General and administrative expenses increased $76,000, or 24%, to $392,000 in 2000 compared to $316,000 in 1999. The increase was primarily the result of an increase in compensation-related expenses as a result of the addition of an employee. General and administrative expenses as a percentage of rental income increased from 6.7% for 1999 to 7.6% for 2000. Depreciation and amortization increased $51,000, or 6%, to $900,000 in 2000 compared to $849,000 in 1999. The increase was the result of the development and acquisition of four properties in 1999 and one property in 2000. Interest expense increased $272,000, or 20%, to $1,659,000 in 2000, from $1,387,000 in 1999. The increase in interest expense was the result of the Company's additional borrowing to finance its development projects. Equity in net income of unconsolidated entities decreased $5,000 to $2,000 in 2000 compared to $7,000 in 1999 as a result of increased depreciation expense in 2000 related to certain of the Joint Venture Properties in which the Company holds interests ranging from 8% to 20%. The Company's income before minority interest increased $36,000 as a result of the foregoing factors. 11 Funds from Operations Management considers Funds from Operations ("FFO") to be a supplemental measure of the Company's operating performance. FFO is defined by the National Association of Real Estate Investments Trusts, Inc. ("NAREIT") to mean net income computed in accordance with generally accepted accounting principles ("GAAP"), excluding gains (or losses) from debt restructuring and sales of property, plus real estate related depreciation and amortization, and after adjustments for unconsolidated entities in which the REIT holds an interest. FFO does not represent cash generated from operating activities in accordance with GAAP and is not necessarily indicative of cash available to fund cash needs. FFO should not be considered as an alternative to net income as the primary indicator of the Company's operating performance or as an alternative to cash flow as a measure of liquidity. The following tables illustrate the calculation of FFO for the three months ended March 31, 2000 and 1999: Three Months Ended March 31, 2000 1999 - ---------------------------------------------------------------------------- Net income before minority interest $1,867,733 $1,831,896 Depreciation of real estate assets 876,274 827,525 Amortization of leasing costs 17,093 16,686 Amortization of stock awards 59,000 48,500 Depreciation of real estate assets held in unconsolidated entities 171,980 166,645 ---------- ---------- Funds from Operations $2,992,080 $2,891,252 ========== ========== Weighted Average Shares and OP Units Outstanding 5,072,216 5,038,414 ========== ========== FFO increased $101,000, or 3%, for the three months ended March 31, 2000, to $2,992,000. The increase in FFO is primarily the result of the development of four properties in 1999 and one property in 2000. 12 Forward-Looking Statements Management has included herein certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended. When used, statements which are not historical in nature including the words "anticipate," "estimate," "should," "expect," "believe," "intend" and similar expressions are intended to identify forward-looking statements. Such statements are, by their nature, subject to certain risks and uncertainties. Risks and other factors that might cause such a difference include, but are not limited to, the effect of economic and market conditions; risks that the Company's acquisition and development projects will fail to perform as expected; financing risks, such as the inability to obtain debt or equity financing on favorable terms; the level and volatility of interest rates; loss or bankruptcy of one or more of the Company's major retail tenants; and failure of the Company's properties to generate additional income to offset increases in operating expenses. Liquidity and Capital Resources The Company's principal demands for liquidity are distributions to its stockholders, debt repayment, development of new properties and future property acquisitions. During the quarter ended March 31, 2000, the Company declared a quarterly dividend of $.46 per share. The dividend was paid on April 13, 2000, to holders of record on March 31, 2000. As of March 31, 2000, the Company had total mortgage indebtedness of $52,615,801 with a weighted average interest rate of 6.92%. Future scheduled annual maturities of mortgages payable for the years ending March 31 are as follows: 2001 - $1,320,140; 2002 - $1,433,456; 2003 - $1,535,387; 2004 - $1,644,572; and 2005 - $1,761,523. This mortgage debt is all fixed rate debt. In addition, the Operating Partnership has in place a $50 million line of Credit Facility (the "Credit Facility") which is guaranteed by the Company. The loan matures in August 2000 and can be extended by the Company for an additional three years. Advances under the Credit Facility bear interest within a range of one-month to six-month LIBOR plus 150 basis points to 213 basis points or the bank's prime rate less 50 basis points to plus 13 basis points, at the option of the Company, based on certain factors such as debt to property value and debt service coverage. The Credit Facility is used to fund property acquisitions and development activities and is secured by most of the Company's Properties which are not otherwise encumbered and properties to be acquired or developed. As of March 31, 2000, $27,158,232 was outstanding under the Credit Facility. 13 The Company also has in place a $5 million line of credit (the "Line of Credit"), which matures on December 19, 2000, and which the Company expects to renew for an additional 12-month period. The Line of Credit bears interest at the bank's prime rate less 50 basis points or 175 basis points in excess of the one-month LIBOR rate, at the option of the Company. The purpose of the Line of Credit is to provide working capital to the Company and fund land options and start-up costs associated with new projects. As of March 31, 2000, there were no outstanding borrowings under the Line of Credit. The Company's wholly-owned subsidiaries have obtained construction financing of approximately $16,100,000 to fund the development of four retail properties. The notes require quarterly interest payments, based on a weighted average interest rate based on LIBOR, computed by the lender. The notes mature on October 16, 2002 and are secured by the underlying land and buildings. As of March 31, 2000, $14,080,147 was outstanding under these notes. The Company has received funding from an unaffiliated third party for the construction of certain of its Properties. Advances under this agreement bear no interest and are required to be repaid within sixty (60) days after the date construction has been completed. The advances are secured by the specific land and buildings being developed. As of March 31, 2000, $1,730,490 was outstanding under this arrangement. The Company has one development project under construction that will add an additional 14,000 square feet of retail space to the Company's portfolio. The project is expected to be completed during the second quarter of 2000. Additional Company funding required for this project is estimated to be $200,000 and will come from the Credit Facility. Management expects the development of this project to have a positive effect on cash generated by operating activities and Funds from Operations. The Company intends to meet its short-term liquidity requirements, including capital expenditures related to the leasing and improvement of the Properties, through its cash flow provided by operations and the Line of Credit. Management believes that adequate cash flow will be available to fund the Company's operations and pay dividends in accordance with REIT requirements. The Company may obtain additional funds for future development or acquisitions through other borrowings or the issuance of additional shares of capital stock. The Company intends to incur additional debt in a manner consistent with its policy of maintaining a ratio of total debt (including construction and acquisition financing) to total market capitalization of 65% or less. 14 The Company plans to begin construction of additional pre-leased developments and may acquire additional properties, which will initially be financed by the Credit Facility and Line of Credit. Management intends to periodically refinance short-term construction and acquisition financing with long-term debt and/or equity. Upon completion of refinancing, the Company intends to lower the ratio of total debt to market capitalization to 50% or less. Nevertheless, the Company may operate with debt levels or ratios which are in excess of 50% for extended periods of time prior to such refinancing. Inflation The Company's leases generally contain provisions designed to mitigate the adverse impact of inflation on net income. These provisions include clauses enabling the Company to pass through to tenants certain operating costs, including real estate taxes, common area maintenance, utilities and insurance, thereby reducing the Company's exposure to increases in costs and operating expenses resulting from inflation. Certain of the Company's leases contain clauses enabling the Company to receive percentage rents based on tenants' gross sales, which generally increase as prices rise, and, in certain cases, escalation clauses, which generally increase rental rates during the terms of the leases. In addition, expiring tenant leases permit the Company to seek increased rents upon re-lease at market rates if rents are below the then existing market rates. 15 ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is exposed to interest rate risk primarily through its borrowing activities. There is inherent rollover risk for borrowings as they mature and are renewed at current market rates. The extent of this risk is not quantifiable or predictable because of the variability of future interest rates and the Company's future financing requirements. Mortgages payable - As of March 31, 2000 the Company had three mortgages outstanding. The first mortgage in the amount of $32,990,741 bears interest at 7.00%. The mortgage matures on November 15, 2005. The second mortgage in the amount of $7,488,937 bears interest at 7.00%. The mortgage matures on April 1, 2013 and is subject to a rate review after the 7th year (April 1, 2006). The third mortgage in the amount of $12,136,123 bears interest at 6.63%. The mortgage matures on February 5, 2017. Construction loans - As of March 31, 2000 the Company had Construction loans outstanding of $14,080,147. Under the terms of the construction loans the Company bears no interest rate risk. Notes Payable - As of March 31, 2000 the Company had $27,158,232 outstanding on its Lines-of Credit which were subject to interest at a variable interest rate based on LIBOR. The Company does not enter into financial instrument transactions for trading or other speculative purposes or to manage interest rate exposure. A 10% adverse change in interest rates on the portion of the Company's debt bearing interest at variable rates would result in an annual increase in interest expense of approximately $200,000. 16 Agree Realty Corporation Part II Other Information Item 1. Legal Proceedings None Item 2. Changes in Securities None Item 3. Defaults Upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders None Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 3.1 Articles of Incorporation and Articles of Amendment of the Company (incorporated by reference to Exhibit 3.1 to the Company's Registration Statement on Form S-11 (Registration Statement No. 33-73858, as amended ("Agree S-11")) 3.2 Bylaws of the Company (incorporated by reference to Exhibit 3.3 to Agree S-11) 10.1 Employment Agreement, dated January 10, 2000, by and between the Company, and David J. Prueter 27.1 Financial Data Schedule (b) Reports on Form 8-K None 17 Agree Realty Corporation Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has fully caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Agree Realty Corporation /s/ RICHARD AGREE - ------------------------------------------- Richard Agree President and Chief Executive Officer /s/ KENNETH R. HOWE - -------------------------------------------- Kenneth R. Howe Vice-President - Finance and Secretary (Principal Financial Officer) Date: May 4, 2000 - -------------------------------------------- 18 EX-10.1 2 EMPLOYMENT AGREEMENT This EMPLOYMENT AGREEMENT made this 10th day of January, 2000, by and between AGREE REALTY CORPORATION, a Maryland corporation (the "Company"), and DAVID PRUETER (the "Executive"). W I T N E S S E T H : WHEREAS, the Executive is expected to make certain contributions to the financial strength of the Company WHEREAS, the Company desires to assure itself of the continuity of management and desires to establish certain compensation rights of certain of its key senior executive officers, including the Executive; and WHEREAS, the Company desires to employ the Executive and the Executive desires to accept such employment on the terms and conditions hereinafter set forth. NOW, THEREFORE, in consideration of the mutual covenants hereinafter contained, the parties hereto hereby agree as follows: 1. Employment; Term. The Company hereby employs the Executive as Vice President of the Company and the Executive agrees to serve the Company in such capacity for the period commencing the date 1 hereof (the "Effective Date") and ending on the fifth anniversary of the Effective Date (the "Initial Term"). 2. Termination. Subject to the terms and conditions set forth herein, the Executive's employment may be terminated by either party hereto upon thirty (30) days' written notice to the other party hereto. 3. Duties. The Executive shall be responsible for the supervision, control and conduct of the development and leasing affairs business of the Company and shall have such additional duties and any additional responsibilities as are normally assigned to a Vice President which may from time to time be reasonably designated by the Board of Directors of the Company (the "Board"), provided that in no event shall the scope of his duties and the extent of his responsibilities be substantially different from the duties and responsibilities usually associated with those positions in a corporation similar in size and function to the Company. At all times, the Executive shall be subject to the direction of the Board. During the period the Executive is employed by the Company (the "Employment Period"), the Executive shall devote his full business time and best efforts to the business and affairs of the Company and its subsidiaries. 4. Compensation. The Company shall pay the Executive a salary at the rate of one hundred forty thousand dollars ($140,000.00) per annum during the first year of this contract. The annual salary for the balance of the contract is as follows: year two - $150,000; year 2 three - $160,000; years four and five - $160,000 minimum. Such compensation shall be shall be payable in accordance with the usual payroll practices of the Company, as compensation to the Executive for the services rendered by the Executive hereunder, including, but not limited to, all services rendered by the Executive as an officer of the Company and its subsidiaries. 5. Benefits. (a) The Company agrees to reimburse the Executive for all reasonable and necessary travel, business entertainment and other business expenses incurred by the Executive in connection with the performance of his duties under this Employment Agreement. Such reimbursements shall be made by the Company on a timely basis upon submission by the Executive of vouchers, in accordance with the Company's standard procedures. All such reimbursements shall be subject to limitations, which may from time to time be prescribed by the Board. (b) The Executive shall be entitled to participate in any and all life insurance , medical insurance group health, disability insurance, and other benefit plans which are made generally available during the Employment Period by the Company to executives of the Company, including, but not limited to, the Company's Stock Incentive Plan, Profit Sharing Plan and performance Bonus Plan (to the extent that the Executive qualifies under the eligibility provisions of such plan or plans). 3 Additionally, the Executive shall be entitled to receive annual paid vacation and paid holidays made available pursuant to Company policy to all of the senior executives of the Company. (c) In the event of the death or disability of the Executive, the Executive's employment hereunder shall terminate and in addition to any amounts payable at such time and in accordance with the terms of Paragraph 4 hereof (appropriately pro-rated), the Company shall, for the longer of (i) the remainder of the calendar year in which the Executive dies or becomes disabled or (ii) six (6) months, but in no event longer than the remainder of the Initial Term, pay to the Executive or the Executive's personal representative, as the case may be, the Executive's salary at the date of such death or disability. For the purposes hereof, the term "disability" shall mean the absence of the Executive, due to physical or mental illness, on a full time basis for one hundred twenty (120) consecutive business days or for shorter periods which aggregate more than four months during any consecutive twelve (12) month period. (d) In the event the employment of the Executive is terminated by the Company for any reason other than for cause (as defined below), the Executive shall be entitled to all amounts payable during the Initial Term (including, but not limited to, salary at the then applicable rate) within ten (10) days of such termination and the Executive shall have the right to continue to participate in all benefits plans made generally available by the Company to its executives during the Initial Term. For 4 purposes of this Section 5(d) the term "cause" shall mean: (i) the Executive's willful failure or refusal to perform specific reasonable written directives of the Board, which directives are consistent with the scope and nature of the Executive's duties and responsibilities under this Employment Agreement, and which are not remedied by the Executive within sixty (60) days after being notified, in writing, of his failure by the Board; (ii) the Executive's conviction of a felony; (iii) any act of dishonesty involving the Company which results in an unjust gain or enrichment to the Executive at the expense of the Company; (iv) any act involving moral turpitude of the Executive which adversely affects the business of the Company; or (v) a material breach by the Executive of his obligations under Section 7 hereof. (e) In the event this Employment Agreement is terminated by the Company for "cause," the Executive shall forfeit his right to any and all benefits (other than any previously vested benefits, including, without limitation, the Executive's salary through the date of termination) which the Executive would otherwise have been entitled to receive pursuant to the terms of this Employment Agreement. 6. Change in Control of the Company If a Change in Control (as hereinafter defined) of the Company occurs prior to the scheduled expiration of the Term and within three years after the Change in Control of the Company, Executive is terminated by the Company for reasons other than Death, Disability, or Cause, the 5 Company or any successor thereto, within 30 days of Executive's termination of employment, will pay to Executive, an amount equal to the greater of (i) 3 times Executive's compensation, or (ii) the Executive's compensation due over the Initial Term of this agreement which, for purposes of this Section, Executive Compensation shall mean an amount equal to the highest annualized rate of Executive's Salary prior to the date of termination. For purposes of this Agreement, a "Change in Control" shall have occurred if at any time during the Term any of the following events occurs: (a) The Company is merged, consolidated or reorganized into or with another corporation or other legal person and as a result of such merger, consolidation or reorganization less than a majority of the combined voting power of the then-outstanding securities of such corporation or person immediately after such transaction are held in the aggregate by the holders of Voting Stock (as hereinafter defined) of the Company immediately prior to such transaction; (b) The Company sells all or substantially all of its assets to any other corporation or other legal person, less than a majority of the combined voting power of the then-outstanding voting securities of which are held in the aggregate by the holders of Voting Stock of the Company immediately prior to such sale; 6 (c) There is a report filed on Schedule 13D or Schedule 14D-1 (or any successor schedule, form or report), each as promulgated pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act"), disclosing that any person (as the term "person" is used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) has become the beneficial owner (as the term "beneficial owner" is defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) of securities representing 25% or more of the combined voting power of the then-outstanding securities of the Company entitled to vote generally in the election of directors of the Company ("Voting Stock"). (d) The Company files a report or proxy statement with the Securities and Exchange Commission pursuant to the Exchange Act disclosing in response to Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) that a change in control of the Company has or may have occurred or will or may occur in the future pursuant to any then-existing contract or transaction; or (e) If during any period of two consecutive years, individuals who at the beginning of any such period constitute the directors of the Company cease for any reason to constitute at least a majority thereof unless the election, or the nomination for election by the Company's stockholders, of each director of the Company first elected during such period was approved by a vote of at least two-thirds of the directors of the 7 Company then still in office who were directors of the Company at the beginning of any such period. Notwithstanding the foregoing provision of Section 6(c) or 6(d) hereof, a "Change in Control" shall not be deemed to have occurred for purposes of this Agreement solely because the Company, an entity in which the Company directly or indirectly beneficially owns 50% or more of the voting securities of such entity, any Company-sponsored employee stock ownership plan or any other employee benefit plan of the Company either files or becomes obligated to file a report or a proxy statement under or in response to Schedule 13D, Schedule 14D-1, Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) under the Exchange Act, disclosing beneficial ownership by it of shares of voting securities of the Company, whether in excess of 25% or otherwise, or because the Company, reports that a change in control of the Company has or may have occurred or will or may occur in the future by reason of such beneficial ownership. 7. Non-Competition. The Executive agrees that (a) at all times during the Initial Term, if the Executive is terminated for "cause" or voluntarily terminates his employment hereunder and (b) at all times during the Employment Period, the Executive shall not engage in any business which is competitive with the then current business of the Company or any of its subsidiaries. For the purposes of this Paragraph 8 7, a business shall be deemed competitive if it consists of or includes any type or line of business engaged in by the Company or any of its subsidiaries at the time of such terminations and which is conducted in whole or in part, within those states where the Company then conducts business. The executive shall be deemed, directly or indirectly, to engage in a business if he participates in such business as a director, officer, stockholder, employee, salesman, partner or individual proprietor, or if he participates in such business as an investor who has made advances on loan, contributions to capital or expenditures for the purchase of stock, permits his name to be used by, acts as a paid consultant or paid advisor to, or if the Executive exerts a controlling influence over such business, provided that nothing herein contained shall be deemed to preclude the purchase of securities of publicly owned companies which securities are listed on a national securities exchange, but the total holding of any such securities so listed shall be limited to five percent (5%) of the amount of such securities outstanding. 8. Confidentiality. The Executive shall not at any time use or divulge, furnish or make accessible to anyone (other then in the regular course of the business of the Company or any of its subsidiaries) any knowledge or information of trade secrets and proprietary information which has not otherwise become publicly available (including, but not limited to, any information concerning customers or accounts) with respect to the business affairs of the Company or any of its subsidiaries. 9 9. Notices. All notices relating to this Employment Agreement shall be in writing and shall be deemed to have been given at the time when delivered personally or sent in the United States by registered or certified mail, return receipt requested, in a postpaid envelope, addressed to the other party at the address set forth below, or to such changed address as the other party may have fixed by notice; provided, however, that any notice of change of address shall be effective only upon receipt: To the Company Agree Realty Corporation 31850 Northwestern Highway Farmington Hills, MI 48334 To the Executive 38982 Plumbrook Drive Farmington Hills, MI 48331 10. Assignability, Binding Effect and Survival. This Employment Agreement shall inure to the benefit of and be binding upon the Company, its successors and assigns, including without limitation any corporation which may acquire all or substantially all of the Company's assets and business or with or into which the Company may be consolidated or merged, and shall inure to the benefit of and be binding upon the Executive, his heirs, executors, administrators and legal representatives, provided that the obligations of the Executive hereunder may not be delegated. 11. Complete Understanding; Amendment; Waiver. This Employment Agreement constitutes the complete understanding between the parties with respect to the employment of the Executive hereunder, 10 and no statement, representation, warranty or covenant has been made by either party with respect thereto except as expressly set forth herein. This Employment Agreement shall not be altered, modified, amended or terminated except by written instrument signed by each of the parties hereto. Waiver by either party hereto of any breach hereunder by the other party shall not operate as a waiver of any other breach, whether similar to or different from the breach waived. No delay on the part of the Company or the Executive in the exercise of any of their respective rights or remedies shall operate as a waiver thereof, and no single or partial exercise by the Company or the Executive of any such right or remedy shall preclude other or further exercise thereof. 12. Severability. If any provision of this Employment Agreement or the application of any such provision to any party or circumstances shall be determined by any court of competent jurisdiction to be invalid and unenforceable to any extent, the remainder of this Employment Agreement or the application of such provision to such person or circumstances other than those to which it is so determined to be invalid and unenforceable, shall not be affected thereby, and each provision hereof shall be enforced to the fullest extent permitted by law. 13. Governing Law. This Employment Agreement shall be governed and construed in accordance with the internal laws of the State of Michigan without regard to conflict of laws provisions. 11 14. Indemnification. The Company shall indemnify the Executive against judgments, fines, amounts paid in settlement and reasonable expenses, including attorneys' fees actually and necessarily incurred, in any action or proceeding to which the Executive is made a party by reason of the fact that he is or was an officer or director of the Company, to the fullest extent permitted by law, the By-laws of the Company and the Articles of Incorporation of the Company. 15. Counterparts. This Employment Agreement may be executed in counterparts, all of which together shall constitute one agreement binding on all parties hereto. 16. Titles and Captions. All paragraph, article or section titles or captions in this Employment Agreement are for convenience only and in no way define, limit, extend or describe the scope or intent of any provisions hereof. IN WITNESS WHEREOF, each of the parties hereto has duly executed this Employment Agreement as of the date first above written. AGREE REALTY CORPORATION By: /s/ RICHARD AGREE -------------------- Name: Richard Agree Title: President /s/ DAVID PRUETER -------------------- David Prueter 12 ADDENDUM TO EMPLOYMENT AGREEMENT DATED JANUARY 10, 2000 David Prueter (Executive) to receive the following compensation in addition to that which is in the above referenced Employment Agreement. 1. $50,000.00 moving allowance 2. Reimbursement or payment for car lease and insurance expense. 3. 2,500 shares of Agree Realty Corporation stock as an annual bonus per the attached Restricted Stock Agreement 4. 2,500 shares of Agree Realty Corporation stock for each deal (anchor type tenant) developed due to his efforts per the attached Restricted Stock Agreement. These shares are deemed to be earned at the time of lease commencement. 5. At the expiration of the Employment Agreement, the Company shall have the right to either 1) have all Restricted Shares immediately vest and the restrictions shall lapse entirely or 2) purchase those Restricted Shares which have not vested from the Executive at the fair market value of said shares. The fair market value shall be based on the average stock price for the thirty (30) days preceding the expiration of the Employment Agreement. 6. In the event the employment of the Executive is terminated by the Company for any reason other than cause (as defined in the Employment Agreement) all restricted shares of the Executive, as defined in the Restricted Stock Agreement, shall immediately vest and the restrictions shall lapse. Page 2 - Addendum to Employment Agreement 7. The restrictions set forth in Section 2.1 of the Restricted Stock Agreement shall lapse entirely in the event of the death or disability of the Executive as defined in 5(C) of the Employment Agreement. AGREE REALTY CORPORATION By: /s/ RICHARD AGREE -------------------- Richard Agree Its: President /S/ DAVID PRUETER ----------------- David Prueter RESTRICTED STOCK AGREEMENT RESTRICTED STOCK AGREEMENT (the "Agreement") dated January 1, 2000 between AGREE REALTY CORPORATION, a Maryland Corporation (the "Company"), and David Prueter, an employee of the Company (the "Grantee"). The Company's Board of Directors has determined that the Company's objectives will be furthered by the grant to the Grantee of ______ shares (the "Restricted Shares") of Common Stock of the Company, par value $.0001 per share, subject to the restrictions set out in this agreement, consideration for the issuance of which is based on services heretofore rendered to the Corporation by the Grantee, the Board of Directors having determined that such services represent at least $_______ per share. The Grantee delivers herewith a stock power duly endorsed in blank. The stock power will be returned to the Grantee when all restrictions on the Restricted Shares have expired as provided in Section 2. In consideration of the foregoing and of the mutual undertakings set forth in this Agreement, the Company and the Grantee hereby agree as follows: SECTION 1. Issuance of Restricted Shares. As soon as practicable after receipt from the Grantee of this executed Agreement, the 1 Company shall issue in the name of the Grantee five stock certificates each representing one-fifth of the total number of Restricted Shares, each of which certificates shall remain in the possession of the Company until the Restricted Shares represented thereby are free of the restrictions set forth in Section 2. Upon the issuance of such certificates, the Grantee shall have all the rights of a stockholder with respect to the Restricted Shares, subject to the restrictions set forth in Section 2. SECTION 2. Restrictions. 2.1 Restricted Shares may not be sold, assigned, transferred, pledged or otherwise encumbered or disposed of prior to the applicable Expiration Date as provided in Section 2.2. These restrictions shall apply as well to any shares of common stock or other securities of the Company which may be acquired by the Grantee in respect of the Restricted Shares as a result of any stock split, stock divided, combination of shares or other change, or any exchange, reclassification or conversion of securities. 2.2 Unless terminated sooner pursuant to Section 2.3, the restrictions set forth in Section 2.1 shall expire with respect to one-fifth of the total number of Restricted Shares on each of the first, second, third, fourth and fifth anniversaries of the date of this Agreement (the "Expiration Dates"). As soon as practicable after each Expiration Date, the Company shall deliver to the Grantee, subject to the provisions of 2 Sections 4 and 5, the stock certificate representing the shares which became free of restrictions on such Expiration Date. 2.3 The restrictions set forth in Section 2.1 shall lapse entirely in the event that the stockholders of the Company approve an agreement to merge, consolidate, liquidate or sell all or substantially all of the assets of the Company, and the date of such approval shall be deemed an Expiration Date for purposes of Section 2.2. SECTION 3. Termination. During the 120 days following termination of the Grantee's employment with the Company for any reason, the Company shall have the right to cancel the stock certificate(s) representing any restricted Shares on which the restrictions have not expired as of the date of such termination. For purposes of this Agreement, an individual's "employment" shall include any and all periods during which such individual is an employee of the Company or serves as an officer or director of or consultant to the Company, but is not otherwise an employee. If the Board of Directors determines that the termination of the Grantee's employment is a dismissal for cause, it may in its discretion retroactively deem the Grantee's date of termination to be the date of the action that is the cause for dismissal. The Board of Directors may in its discretion determine whether any leave of absence constitutes a termination of employment within the meaning of this Agreement. 3 SECTION 4. Consents. 4.1 Notwithstanding anything to the contrary contained herein, if the Company shall at any time determine that any Consent (as hereinafter defined) is necessary or desirable as a condition to, or in connection with, the issuance or transfer of shares of Common Stock or the taking of any other action in connection with this Agreement, then such action shall not be taken, in whole or in part, unless and until such Consent shall have been effected or obtained to the full satisfaction of the Company, or the Company may require that such action be taken only in such manner as to make such Consent unnecessary. For purposes of Section 4.1, the term "Consent" means (a) any and all listings, registrations or qualifications in respect thereof upon any securities exchange or under any federal, state or local law, rule or regulation, (b) any and all written agreements and representations by the Grantee with respect to the acquisition or disposition of shares of Common Stock, or with respect to any other matter, which the Company shall deem necessary or desirable to comply with the terms of any such listing, registration or qualification or to obtain an exemption from the requirement that any such listing, qualification or registration be made and (c) any and all consents, clearances and approvals by any governmental or other regulatory bodies. SECTION 5. Investment Representation. The Grantee understands that the shares of Common Stock which he is 4 acquiring are not registered under the Securities Act of 1933, as amended, or under state securities laws and will not necessarily become registered in the future, and that, consequently, even after expiration of the restrictions set forth in Section 2 he may be unable to sell such shares without either registration under such Act and compliance with applicable state securities laws or the availability of an exemption therefrom. The Grantee represents and warrants the Company that all shares of Common Stock which he is acquiring are acquired for his own account for investment and the Grantee agrees that he will not sell or otherwise dispose of any such shares except in compliance with all applicable federal and state securities laws. The Grantee agrees that the Company may place a legend upon each certificate representing shares acquired by him under the Plan, which legend will refer to the restrictions on transferability contained, or referred to, herein. SECTION 6. Right of Discharge Reserved. Nothing in the Plan or in this Agreement shall confer upon the Grantee the right to continue in the employ or service of the Company or affect any right, which the Company may have to terminate the employment or service of the Grantee. SECTION 7. Section Headings. The Section headings contained herein are for purposes of convenience only and are not intended to define or limit the contents of said Sections. 5 SECTION 8. Notices. Any notice to be given to the Company hereunder shall be in writing and shall be addressed to the Company at 31850 Northwestern Highway, Farmington Hills, MI 48334, attention: President, or at such other address as the Company may hereafter designate to the Grantee by notice as provided herein. Any notice to be given to the Grantee hereunder shall be addressed to the Grantee at the address set forth beneath his signature hereto, or at such other address as he may hereafter designate to the Company by notice as provided herein. Notices hereunder shall be deemed to have been duly given when personally delivered or three (3) days after having been mailed by registered or certified mail to the party entitled to receive the same. SECTION 9. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and the successors and assigns of the Company and the Grantee's heirs and representatives of his estate. SECTION 10. Other Payments or Awards. Nothing contained in this Agreement shall be deemed in any way to limit or restrict the Company from making any award or payment to the Grantee under any other plan, arrangement or understanding, whether now existing or hereafter in effect. SECTION 11. Governing Law. This Agreement shall be deemed to be a contract made under the laws of the State of New 6 York and for all purposes shall be governed by, construed and enforced in accordance with the internal laws of said State, without reference to principles of conflict of laws IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date and year first above written. AGREE REALTY CORPORATION By:______________________________ ATTEST:__________________ Title____________________________ GRANTEE__________________________ _________________________________ _________________________________ EX-27.1 3
5 3-MOS DEC-31-2000 MAR-31-2000 257,755 0 398,685 0 0 0 180,686,042 27,212,478 157,032,795 0 95,584,670 440 0 0 51,892,407 157,032,795 0 5,812,888 0 2,288,235 0 0 1,658,520 0 0 0 0 0 0 1,619,691 0.37 0.37
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